Banking stocks lead the rally

During the previous two hours of trade, the indices surged upwards as buying activity intensified amongst the index heavyweights. Currently stocks from the banking and capital goods space are leading the pack of gainers, while stocks from the IT and FMCG space are trading marginally lower. The overall advance to decline ratio is poised at 1.8 to 1 on the BSE. The BSE Sensex and the NSE Nifty are trading higher by 170 points and 50 points respectively. The BSE Midcap and Smallcap indices are trading higher, up by 1.5% and 1.75 respectively. The rupee is trading at 49.76 to the dollar. As per a leading business daily, on account of rise in tobacco prices by nearly 50% YoY, ITC has increased its cigarettes prices. The prices of Delhi tobacco increased from Rs 1,200 to Rs 1,400 per 20 kg to Rs 1,300 to Rs 2,000 currently. The company has increased price of its largest selling Gold Flake brand from Rs 40 to Rs 44 per pack. However, the company has not taken a hike in its other brands. ITC generates nearly 64% of its revenues from cigarettes division. While the price hike would aid the company in offsetting the higher input costs to some extent, pressure on volume growth will remain. The stock of ITC is trading flat on the bourses currently.
Banking stocks are trading firm led by Axis Bank, Yes Bank and HDFC Bank. HDFC Bank announced its 4QFY09 and FY09 results yesterday. The bank’s interest income has increased by 62% YoY on back of 48% YoY growth in the advances during FY09. The advances were mainly higher on account of integration with Centurion Bank of Punjab. Net interest margin marginally dropped to 4.2% (down 0.2%) due to fall in proportion of current and savings account. During the end of the year, the net non-performing assets (NPA’s) have increased to 0.6% compared to 0.2% a year earlier. This has resulted in lower growth of net profit by 41% YoY during FY09.