Asian Economic News

(RTTNews) - Wednesday, reports about robust advance tax payments by top firms and a signal from the central bank that interest rates will not be hiked in the near-term helped the Indian market extend its previous session's rally. Firm Asian cues on the back of larger-than-expected rise in U.S. retail sales in August also boosted sentiment. The BSE Sensex opened stronger at 16,499 and rose further to a high of 16,642 thus far during the day before paring some of its initial gains.

The Sensex is now trading at 16,585, up 131 points or 0.80% and the S&P CNX Nifty is trading at 4,932, up 0.82%.On the BSE, the mid-cap index is moving up 0.83% and the small-cap index is advancing 0.93%. The market breadth is extremely positive, with 1413 gainers versus 728 losers. Sector-wise, metal, realty, banking and auto stocks are leading the rally. Among the top gainers, Tata Steel is up nearly 4%, Sterlite Industries and Jaiprakash Associates are up over 2% each, Reliance Communication is gaining 1.85% and DLF is adding 1.60%.

Mahindra & Mahindra, SBI, ICICI Bank, ACC, Hero Honda Motors, Bharti Airtel, Larsen & Toubro, Tata Power, Hindustan Unilever and ITC are the other prominent gainers. Twenty-eight out of 30 Sensex stocks are currently trading in positive territory. Wipro is down 0.35% and Hindalco is trading flat. National Aluminum is rising 1.54% on reports it plans to set up a nuclear power plant. Tata Power is up around 1% after rating agency Standard & Poor's revised its outlook on the company's corporate credit ratings to positive from stable.

NTPC is up a modest 0.43% on reports it is evaluating an offer to buy a coal mine in South Africa. Elder Pharmaceuticals is gaining over 2% on reports it will sell a minority stake to U.S-based private equity firm TA Associates.Fortis Healthcare is down 0.36% on reports it will raise Rs.1,000 crore via a rights issue by October. LIC Housing Finance is surging up 5.63% on reports it will raise up to $136 million through a share sale to institutional investors.

State-run oil-marketing firms are trading firm after the government issued them Rs.103.06 billion of bonds as partial compensation for selling fuel at subsidized rates. BPCL is rising 0.64%, HPCL is up 0.98% and IOC is adding 1.27%.Dr Reddy's Laboratories is up 1.43% even as reports said that U.S-based drug discovery firm Albany Molecular Research Inc. has filed a patent infringement lawsuit against the company. Mahindra & Mahindra is adding 1.64% after it tied up with Punjab National Bank and UCO Bank for vehicle financing.

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Sensex remains positive; RComm up 6% at 14:17 hrs

Amid alternate bouts of buying and selling in blue chip stocks, the market holds on in the positive territory this afternoon. Though a host of stocks from metal, realty, information technology and banking sectors are trading in the positive territory, gains posted by them are not highly pronounced as investors are seen opting to get out of counters at every small rise in prices. Pharma stocks are mostly subdued today.

Automobile stocks, which shrugged off a weak start and rallied higher, have drifted down due to lack of support. Oil and power stocks are trading mixed. The Sensex, which had surged to 15,598.18 earlier in the day, is up by 45.39 points or 0.29% at 15,512.85 at present. The Nifty index of the National Stock Exchange has posted a gain of 18.40 points or 0.4% at 4626.75. Buying continues unabated at the Reliance Communications counter for the second successive session.

The stock, which had moved up sharply on Wednesday after the company prepaid a portion of its debt, is seen attracting attention once again. With investors thronging the counter right from the opening bell, the stock is trading firm with a strong gain of 6% at Rs 292.70 now. Suzlon Energy has gained 4.7%. GAIL India is up by around 4.65%. Sterlite Industries, BPCL, Unitech, Sun Pharmaceuticals, Axis Bank, Tata Steel, Infosys Technologies, Tata Consultancy Services, Reliance Capital, SAIL, Hindustan Unilever, Ambuja Cements, ICICI Bank and State Bank of India have also posted impressive gains.

Tata Power, Bharti Airtel, Mahindra & Mahindra, Reliance Industries and Maruti Suzuki have lost 0.5% - 1.5%. Hero Honda, Larsen & Toubro, HDFC Bank, Tata Motors, Wipro and Grasim Industries are also down in the red, albeit with marginal losses.

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ICICI Bank net zooms 21% in Q1 to Rs 878 cr

Extreme cost-cutting and treasury profits enabled the country’s largest private lender, ICICI Bank, beat analyst estimates and post a 21% rise in net profit in the first quarter of FY10 (Apr-Mar), the bank said on Saturday. Net profit stood at Rs 878 cr for the quarter-ended June ‘09 against Rs 728 cr in the year-earlier quarter.

The average net profit forecast by various banking analysts was around Rs 820cr.Besides profits from trading in government securities and equity, the bank was helped by a write-back of provisions made on credit derivatives as sentiment improved on Indian paper. Profits rose even as the bank continued to shrink its balance sheet, avoiding high-cost deposits and unsecured advances.

One reason for the higher profit was the Rs 367-cr savings in operating expenses during the quarter with overall operating expenses dropping 19.22% to Rs 1546 from Rs 1913 cr in the corresponding quarter of the previous fiscal. “Instead of balance sheet size, we will focus on bringing down unsecured personal loans. We will however grow home, car and commercial vehicle loans on the retail side and working capital and infrastructure loans on the corporate side,” said Chanda Kochhar, MD & CEO, ICICI Bank.

The bank’s advances declined by 9.2% while deposits came down by 10.3%.With the reduction in outstanding loans, net interest income, which is the difference between income from loan and interest paid on deposit, dropped 5% to Rs 1985.28 cr. However, this decline was more than made up by the 35.86% rise in other income to Rs 2089.88 cr. Of this, treasury income was Rs 714 crore compared with a loss of Rs 594 crore in the year-ago quarter.

Despite slowdown in M&A and capital market activity, the bank reported a flat fee income of Rs 1,319 crore. Ms Kochhar said the bank would cut costs further and look at increasing productivity from new branches.Provisioning rose by 67% to Rs 1323.65 cr but this was due to a one-time restructuring exercise, she added. In a conference call with analysts, NS Kannan, CFO, said that except life insurance none of the bank’s subsidiaries would require capital infusion during the current fiscal. ICICI’s life insurance subsidiary, ICICI Prudential, is expected to break even towards the end of the next fiscal.

“Even though net interest income was slightly lower and provision coverage declined to 51%, we see these as minor negatives. Our main expectations were regarding execution of the bank’s present strategy, which continues to be commendable,” said Vaibhav Agrawal, vice-president, research (banking) Angel Broking. Fall in depositsMore branches, lower operating expenses and ratio of low- cost deposits improving to 30.4% are quite favorable.

We believe by 2010, the bank will be very well positioned to benefit from the improving economic environment,” said Vaibhav Agrawal, vice-president , research (banking) Angel Broking. On Friday, the ICICI Bank scrip closed down 1% at Rs 766.85 on BSE.The net interest margin was maintained at 2.4%. The decrease in net interest income was mainly due to a decrease in advances by 11.6%.

Advances dropped to Rs 1,98,101 cr from Rs 2,24,145.9 cr in the corresponding quarter and Rs 2,18,310.8 cr in the first quarter. Advances on retail loans fell to 47% against 55% in Q1 FY09 as the bank looks at running down its unsecured loans.Ms Kochhar said that corporate and international advances rose both in absolute and percentage terms to 40% from 35% a year ago.

Deposits fell to Rs 2,10,236 crore from Rs 2,34,460 cr in the year-ago quarter and Rs 2,18,348 crore in the preceding quarter. Ms Kochhar said that savings accounts grew by Rs 3,500 cr from the previous quarter while current accounts dropped by Rs 2000 cr. She added that the bank had taken high costs deposits in the third quarter of the previous fiscal which it will allow to run down when they mature in the third quarter of the current fiscal. Current account and savings accounts ratio improved to 30.4% from 27.6% last year and 28.7% in the preceding quarter. Capital adequacy ratio stood at 17.38% against 13.42% last year.

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