India Markets Monday Wrap-Up: Largely Rangebound Day

Although well into the positive, Indian markets largely traded in a range throughout the trading session today. While the BSE Sensex closed higher by around 49 points (up 0.3%), the NSE Nifty gained around 15 points (up 0.3%). Midcap and small cap stocks did better to notch gains of 1% each. While metals and banking stocks traded firm, oil& gas and auto stocks were at the receiving end.

As regards global markets, Asian indices closed mixed today. Most European indices have opened on a firm note. The rupee was trading at Rs 44.36 to the dollar at the time of writing.

Private banking stocks closed mixed today. While Axis Bank and HDFC Bank found favour, ICICI Bank closed in the red. Selling activity in the stock could be attributed to subdued results declared by ICICI Bank for FY10. Interest income fell by 17% YoY, while advances dropped by 17% YoY. Net interest margin (NIM) improved due to higher CASA proportion (42% of deposits). Operating costs dropped with cost to income ratio being at 38% in FY10 (44% in FY09). Capital adequacy ratio was healthy at 19.4% at the end of FY10. Net NPAs improved marginally to 1.9% of advances in FY10 (2% in FY09). Bottomline grew by 7% YoY due to lower operating costs. The company declared dividend of Rs 12 per share (dividend yield 1.2%).

Sun Pharma closed lower by 5% today. This could be attributed to the company announcing the US District Court’s decision of declaring the patent on Nycomed’s drug ‘Protonix’ (generic name is ‘Pantoprazole’) as valid. It must be noted that Sun Pharma had launched this product at risk in the US market in FY08 and had generated strong revenues and profits from this drug. Consequently, the overall performance in that fiscal was also enhanced. Now that the patent on ‘Protonix’ has been declared valid, there is a possibility that Sun Pharma may have to dole out damages although nothing has been divulged at present.

As per a leading business daily, India is not expected to meet its FY11 target of building roads as was originally envisaged. The original target was to build 20 km of road a day in FY11. It now appears that the country is likely build only 12-13 km of road a day. The reasons cited are problems in acquiring land and awarding contracts. In FY11, the transport minister Kamal Nath expects to build around 3,000 km of road. For this the investment required will be US$ 45 bn annually, 60% of which will come from the private sector. According to the government, India needs to spend US$ 500 bn in the five years to 2012 to overhaul its congested ports and airports, fix its potholed roads and generate more power to sustain an 8-9% growth in GDP. However, while the intention to improve infrastructure is there, execution will remain the key.