Relentless selling pressure in the index heavyweights led the benchmark BSE Sensex to close the session below the dotted line despite sporadic attempts of recovery during the day. The pessimism was however, not to be seen in the BSE Mid and Smallcap indices that closed the day 0.7% and 0.9% higher. While the BSE Sensex ended the day down around 88 points (0.5%), the NSE Nifty edged lower by around 28 points (0.6%). The BSE Midcap and Smallcap indices also registered gains of around 1.5% and 1.4% during this week while BSE Sensex maintained a status quo.
While most Asian indices closed lower today, the European indices are also trading in the negative currently. The rupee was trading at 48.02 to the dollar at the time of writing.
The RBI, touted as one of the best central banks to preside over the financial markets during the recent turmoil, has sounded a note of caution. It has one again warned banks on their real estate exposure, particularly to builders and developers. The move comes at a time when activity in the real estate space is picking up with builders launching new projects. In a circular issued this evening, the regulator has asked banks to assess financial viability of a group with interests in the real estate space and not just on a company given the presence of subsidiaries, related parties and special purpose vehicles through which they operate. The RBI thus wants to leave no stone unturned to ensure that Indian banks remain free of subprime exposures. Stocks from Indian banking sector particularly HDFC Bank and ICICI Bank shed gains today.
Meanwhile,
Union Bank of India (UBI) has approached the government for capital infusion to the tune of Rs 18 bn to fuel its expansion plans. The bank expects SEBI approval for its proposed asset management company (AMC) in the next few days and needs enhaced capital adequacy for its investment in the AMC. Also, with industrial activities picking up, the bank has seen a pick-up in credit in the past quarter, which it expects to sustain. While the PSU bank has not seen any significant increase in its non-performing assets (NPAs) in the last few quarters (net NPAs 0.2% of advancesin 1QFY10), we believe that an aggressive approach to lending could be risky in the current times.
As per a business daily, software major Wipro Technologies has said that it would decide on the future of its design centre in France only after the ongoing talks with the employee representatives are concluded. It may be noted that the semiconductor design centre at Sophia Antipolis that came to Wipro through the acquisition of Austrian firm New Logic in 2005 employs 61 engineers. The centre builds components and connectivity-based semiconductor intellectual property (IPs) in wireless and wire line segments.
Weak market conditions have have forced Wipro to take a relook at its semiconductor IP portfolio and as a result, Wipro has started exploring options to shut down or sell off the design centre. However, the French Industry Minister has criticised Wipro's move to close the centre after taking a € 5 m research tax credit from the government. Given that New Logic (France) currently comprises a very marginal proportion of Wipro's sales the decision is not likely to have any significant impact on the company's future. The stock of Wipro closed nearly 3% lower today.
