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Decline witnessed in banking stocks owing to NPA woes; Coal India OFS successful…

Benchmark share indices ended the week marginally lower after the sharp fall on Friday following India's biggest ever equity offering from Coal India while rise in non-performing assets of ICICI Bank and Bank of Baroda weighed on bank stocks. In a big boost for the Modi government’s divestment drive, the Coal India offer-for-sale (OFS) was fully subscribed. The OFS comprised a divestment of 5 percent stake in the company, with a green-shoe option of an additional 5 percent. The government had set Rs 358 per share as the floor price which could turn out to be India’s largest capital market issue to date.
In the truncated week ended January 30, 2015, the 30-share Sensex ended down 96 points at 29,183 and the 50-share Nifty closed 27 points lower at 8,809.

Meanwhile, the BSE Mid-cap index ended up 0.4% at 10,739 and the BSE Small-cap index ended lower 0.3% at 11,329.

On Monday, markets were closed on account of Republic Day.

Tuesday saw markets ending at record closing highs led by financials and ITC while capital goods shares gained on hopes of order inflows after the breakthrough in the Indo-US treaty for civilian nuclear projects.

On Wednesday, markets ended flat amid a volatile trading session, as investors booked profits ahead of the expiry of January derivative contracts.

Thursday saw indices ending at record closing highs with the broader Nifty gaining for the 10th straight session, the longest rally since April 2014, following the expiry of January 2015 derivative contracts.

A sharp drop in banking stocks following weak results and Coal India's mega offering saw the markets post their biggest drop in three weeks on Friday.

On the sectoral front, BSE Realty index surged over 8%. However, BSE Metal, PSU and Bankex indices slipped between 1-3%.

Coal India was the top Sensex loser during the week. The stock fell over 8% due to the government’s offer for sale (OFS), which opened for subscription. The Rs 22,000-crore worth Coal India offer for sale (OFS) the biggest-ever in Indian capital market -- was fully subscribed on Friday.

Private sector banking leader ICICI Bank dipped over 2.5% after the bank said that its net non performing assets (NPA) for the quarter ended December 2014 (Q3) stood at 1.27% against 1.09% in September quarter.

Among PSU, Bank of Baroda slumped over 13% after reporting a sharp 68% year on year (yoy) drop in net profit at Rs 334 crore for the third quarter ended December 31, 2014 (Q3), due to higher provisions for stressed loans and tax provisions.

Dr Reddy’s Laboratories slipped over 3% after reporting a 7.1% decline in consolidated net profit to Rs 574.5 crore for the quarter ended December on the back of higher operational costs and subdued revenue growth particularly in the most profitable US market.

On the gaining side, ITC surged over 5.5%. It was the top Sensex gainer last week.

BHEL gained by nearly 5%. The company has announced commissioning of 600 MW thermal power project in Odisha.

Week Ahead

Market participants would be eyeing RBI’s monetary policy review, which is scheduled to be unveiled on 3 February.

Some of the major companies that will announce their third quarter earnings include, ACC, JSPL, Lupin, Bharti Airtel, Hero Moto, Tata Power.

On the global front, PMIs, the Bank of England announcement and non-farm payrolls are the major events of the week.

Our Outlook

We are cautiously positive on selected stocks in the field of Capital goods, Infrastructure, Pharma and Banking.

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"Forum Views" Magazine Published by Brokers Forum of India. (April 2014)
Your friendly advisor since 1986,
Ashoka Ajmera

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