The BSE Capital Goods, Realty and Bankex indices have lost between 11%-17% in the past three months’ period against a 6% fall registered by the benchmark indices.
The BSE Capital Goods Index currently stands at 12,488.65 points and has lost 2,457.46 points since November nearly 16.44%.
One of the major contributors to the fall in this sector include Larsen & Tubro (L&T), which fell nearly 20% amid weak order inflows for three successive quarters. Domestic brokerage Kotak Institutional Equities (KIE) said in a note to investors that the near- to medium-term prospects of L&T continue to look negative. “Weak inflows in FY2016 can have medium-term repercussions on sales growth and margins… however near-term stable margin and working capital should provide partial succour in a very weak inflow environment,” it said in the report.
Higher provisioning amid an extended non performing assets (NPA) cycle continues to drag performance of banking shares. Sectoral index for banks on BSE has lost 12.22% in the last three months as shares of major banks including ICICI, State Bank of India (SBI) and Punjab National Bank (PNB) have declined more than 20%. Shares of SBI, India’s largest public sector bank have lost more than 27% since November 2015 while PNB shares have dived 29.83%. Shares of ICICI, India’s biggest private sector bank have fallen 21.61%. In fact, shares of ICICI have lost close to 9% in the last three sessions after the private lender announced its earning results for quarter ending December.
Foreign brokerage and investment banking firm Deutsche expects tepid earnings for the banking sector during the 2016-17 financial year on the back of higher credit cost and lower net interest margin.
High inventory and weak demand continues to impact the real estate sector. The BSE Realty index lost 11.68% as index heavy weights like DLF, Unitech and Oberoi Realty have declined 15-27%. Expectations of limited interest rate moves on the benchmark by the Reserve Bank of India have also capped the momentum of real estate stocks. According to KIE, on account of partial or full monetisation of projects and operations, debt may come down for most developers in the September-December quarter, barring Prestige. The domestic brokerage house expects collections to improve across developers.