Markets witness correction during the week

Markets ended on a weak note during the week, amidst sessions marked by volatility. The Sensex and Nifty closed lower by 2.2% each. BSE mid-cap and small-cap indices, after positively outperforming the large-cap indices in the previous weeks, lost ground during the week to their large-cap counterparts and ended lower by 2.4% each. The benchmark Sensex closed below the important psychological level of 18,000 for the first time since July 30, 2010. The decline in the index can mainly be attributed to the underperformance of financial, technology, realty, auto, capital goods and power stocks. Volatility in the Indian bourses was primarily witnessed due to negative global cues during the week. On the sectoral front, all sectoral indices ended in red, with the BSE realty index and BSE metal index losing the maximum by 8.5% and 3.3%, respectively.

Realty index down 8.5%
The realty index fell 8.5% during the week, widely underperforming the Sensex, which was down by 2.2%. The top losers in the sector were Sobha Developers (down 12.6%), HDIL (down 11.3%), Unitech (down 9.5%), DLF (down 8.1%) and Anant Raj Industries (down 8.1%). The underperformance of the index can primarily be attributed to profit-booking after a sharp run-up in the realty sector as a whole in the last two weeks. Also, there were news reports of an exercise of put option held by Lehman Brothers' realty fund in Unitech's reality project in Mumbai. However, Unitech has denied receiving any communication from Lehman Brothers to that effect.

PTC India - Event Update: PTC India Financial Services (PFS), a subsidiary of PTC India, has been given the infrastructure financial company (IFC) status by the Reserve Bank of India (RBI). Post this development, PFS would be allowed to have a higher exposure to lending and investment to a single borrower or a group of borrowers. Further, PFS would have better access to resources as the exposure limit for banks' funding to IFCs has been improved. As of 1QFY2011, PFS had sanctioned Rs1,953cr under debt and Rs500cr under equity, while the disbursements under these heads stood at Rs480cr and Rs398cr, respectively. PFS had a net worth of Rs650cr as of 1QFY2011. We maintain our Buy rating on the stock with a Target Price of Rs136.

Mphasis - 3QFY2010 Result Update : For 3QFY2010, Mphasis reported top-line growth of 4.8% qoq to Rs1,279cr. The company registered impressive volume growth of 7.6% qoq in the application segment and ~20% qoq growth in the ITO segment. EBITDA margin declined by 110bp because of the new rate card pricing model with HP, which brought down realizations by 9.6% in the application business. Net profit increased to Rs271.3cr despite flat EBIT due to tax write-back with retreatment of profits under Section 10AA related to SEZ. We maintain our Buy rating on the stock with a Target Price of Rs872.