Jul 26, 2013, 06.50 PM | Source: Moneycontrol.com

Sensex falls for 3rd day; metals tank 3.5%, PSU banks drag

Disappointing earnings continued to hurt the market sentiment with the asset quality concerns impacting public sector lenders and reduction in discretionary spending pinching FMCG companies.

Moneycontrol Bureau

It was a bad start to the August series with the Nifty falling for the third consecutive session Friday, weighed down by PSU banks on rising bad loans and metals stocks.

The BSE Sensex was down 56.57 points to close at 19748.19, and the Nifty fell 21.30 points to end at 5886.20, but the cut was deeper in broader markets. The BSE Midcap and Smallcap indices were down nearly one percent.

For the week, both benchmarks were down two percent while midcaps and Smallcaps fell 3-4 percent.

Disappointing earnings continued to hurt the market sentiment with the asset quality concerns impacting public sector lenders and reduction in discretionary spending pinching FMCG companies.

While explaining earnings season so far, Ambareesh Baliga of Edelweiss said, "With the economy going more towards being in doldrums and your discretionary spends also reducing and expected to reduce going ahead, stocks like HUL would come under pressure."

"In case of banks, non-performing assets (NPAs) are growing and are again expected to grow going ahead looking at the sort of news coming in from CRISIL that there could be more downgrades," Baliga added.
Ratings agency Crisil, in its report, said, "A third of the 11,500 companies it rates may not be in a position to service debt this fiscal as the Reserve Bank of India's liquidity tightening to shore up the rupee stretches payment cycles."

"Stress will increase in sectors such as power, construction, engineering and steel, and lead to higher non-performing assets in the banking system," said Roopa Kudva, managing director and chief executive officer of Crisil.

"Credit quality of corporates is likely to be weakened by slow growth in GDP, heightened currency volatility, and higher-than-expected interest rates."

Hindustan Unilever shares lost more than 3 percent on top of previous day’s 3 percent fall after slower sales and volume growth in first quarter today. The FMCG major’s CFO R Sridhar said, "We continue to see slowdown in the market. Discretionary spends are under pressure. As far as competition goes, the environment remains challenging and intense.” Meanwhile, ITC bounced back with 2.7 percent gains today; it was down 4.6 percent in previous session due to lower-than-expected sales growth.

Meanwhile, public sector banks dragged the BSE Bankex 1.4 percent down after weak earnings from Punjab National Bank (down 5 percent), Bank of India (down 4.5 percent) and State Bank of Travancore (fall 0.5 percent).

Deteriorating asset quality has been the major concern for PSU banks. Punjab National Bank (PNB) reported a muted rise of 2.3 percent year-on-year in its first quarter net profit at Rs 1,275 crore, but its gross NPAs shot up 51 percent to Rs 15,091 crore while net NPAs ballooned 84 percent to Rs 9,060 crore .

The BSE Metal Index crashed 3.5 percent. Sterlite Industries fell 4.6 percent post June quarter earnings while Coal India and Hindalco were down 4 percent and 7.6 percent.

Among others, Tata Motors dropped over 3 percent while Sun Pharma and Hero MotoCorp gained 2 percent. Ambuja Cements also gained 4 percent after seeing 10.5 percent fall in previous session due to Holcim deal.

Dish TV shares lost more than 8 percent after it reported higher-than-expected loss in first quarter net profit at Rs 30.4 crore as against loss of Rs 32.3 crore in a year ago period and analysts’ forecast of Rs 27 crore, impacted by higher market costs.

SKS Microfinance, Tata Coffee, Biocon and Sterlite Technologies rallied 5-7 percent after strong earnings in April-June quarter. Jet Airways gained 17.4 percent.

The August series started off on a subdued note. The nifty ended a choppy day marginally in the red at 5886.20, down 21.30 points. The sensex also closed the day on an almost flat note down 56.57 points at 19748.19.

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Indian equity benchmarks are directionless in afternoon trade with the Sensex hovering around 19800 level and the Nifty around 5900.

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The Nifty has fallen below 5900. The Sensex is down 66.69 points at 19738.07, and the Nifty is down 30.05 at 5877.45. About 701 shares have advanced, 1337 shares declined, and 158 shares are unchanged.

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The market is completely listless in noon trade today with the Nifty hovering around the 5900 level. Public sector lender Punjab National Bank (PNB) disappointed the street with the non-performing asset rising further during April-June quarter.

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The market kicks off the August series on a quiet note. The Nifty holds above 5900 led by capital goods and select rate sensitives. The Nifty is up 5.20 points at 5912.70 and the Sensex is up 24.59 points at 19829.35.

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Hindustan Unilever dropped 3 percent again, ahead of first quarter earnings today. The result will be closely watched by the street after its parent company Unilever PLC said growth was slowing in emerging markets like India.

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The market has opened August series on a stable note. The Sensex is up 96.00 points at 19900.76 while the Nifty is up 30.45 points or 0.52% at 5937.95. About 208 shares have advanced, 61 shares declined, and 19 shares are unchanged.

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