The BSE Sensex and NSE Nifty are likely to open on negative note on Thursday tracking SGX Nifty and Asian markets. (Express Photo)

The BSE Sensex and NSE Nifty are likely to open on negative note on Thursday tracking SGX Nifty and Asian markets. However, markets are expected to remain volatile on account of F&O expiry, as traders may roll over their position from October month contract to November month contract.

At 8.31 am, SGX Nifty was down 33 points, or 0.41 per cent at 8,146.

Asian shares edged lower and the dollar stood tall on Thursday, after the US Federal Reserve rekindled market expectations that it might still be on track to raise interest rates by year-end.

Hang Seng, Nikkei and Shanghai were down 0.40 per cent, 0.09 per cent and 0.05 per cent at 22864.15, 18885.84 and 3374.50, respectively.

Bharat Electronics, Bharat Forge, Crompton Greaves, Dishman Pharmaceuticals, Dr Reddy’s Labs and Emami are some of companies which may announce their earnings on Thursday.

Benchmark indices fell for the third straight day on Wednesday as traders awaited FOMC rate decision. Banking stocks led by Axis Bank and ICICI bank took a beating on the expiry day on reports of Axis Bank selling its loans to asset reconstruction companies at around 65 per cent discount. Sensex closed 213.68 points down at 27,039.76 on Wednesday while Nifty closed 61.70 points down at 8,171.

Sundaram BNP Paribas Home Finance, a subsidiary of Sundaram Finance, has registered a 27% increase in its net profit at Rs 40.52 crore for Q2 as compared to Rs 31.95 crore registered in the same period last year.

Income from operations stood at R242 crore as compared to R238 crore, registering a growth of 1.68% while loans under management stood at R7535 crore as on September 30, 2015.

The company registered home loan disbursements of R450 crore in Q2 as compared to R537 crore in the corresponding quarter last year.

Srinivas Acharya, MD, Sundaram BNP Paribas Home Finance said: “The real estate sector continues to be sluggish. Recovery has been delayed and still seems at least a few months away. We are continuing to witness stiff resistance from buyers and the quantum of unsold stock remains a concern. Improvement in hiring sentiments, especially in the IT sector, could trigger a recovery in the home buying space later this year.’

In the first week of October, the company had lowered its PLR for home loans by 25 basis points to 9.65%. The company recently cut its deposit rates by 25 basis points to 8% per annum for 12, 18, 48 and 60 months and 8.25% for 24 and 36 month deposits (additional 0.50% for senior citizens). Deposit base was increased to R958 crore as at the end of September 2015. Sundaram BNP Paribas Home Finance is a 50.1%-49.9% JV between Sundaram Finance and BNP Paribas of France.

SKS Microfinance on Wednesday said it has received a loan of Rs 100 crore from Micro Units Development and Refinance Agency (Mudra), a government initiative to help micro-entrepreneurs.

The Hyderabad-based microfinance firm said that the Mudra loan, which comes at a 10% annual rate of interest, is cheaper than loans from financial institutions. This would help it bring down the cost of interest-bearing liabilities, the company said.

The development helped the company’s shares move up by 6.37% to R425.65 on BSE on Tuesday.

Microfinance firms such as SKS typically borrows from banks and financial institutions and provide small loans for individuals and small businesses. The company said it has brought down its interest rates by 3.8% to 20.75%. The interest-bearing liabilities have come down to 11.9% in the first quarter this fiscal year from 13.6% in FY14 because of downward adjustments in risk premium. Since October 2014, interest rates have dropped thrice.

“At a rate of 10%, this is lower than regular term loans from conventional lenders, and reinforces our assertion in the recent past that the non banking financial company – micro finance institution (NBFC-MFI) structure does not preclude us from availing dedicated refinance lines at a lower rate of interest. We are already the lowest cost lender in the MFI segment, and will pass on this benefit to our microfinance borrowers,” said Dilli Raj, president, SKS Microfinance. “This is the first refinance line availed by us,” Raj said.

According to Digant Haria of Antique Stock Broking, SKS is the lowest cost micro lender, has the best liability profile, operates mostly in rural areas and follows the most rigorous customer interaction process.

“The next 18 months would be the transition phase for MFIs who have been awarded small bank licenses as they comply with RBI’s cap on inter-bank lending limits, CRR and SLR. This could potentially provide opportunity to a formidable player like of SKS, who is well capitalised. Business momentum was exceptionally strong with gross portfolio growing 14% QoQ. The strong growth was achieved through a combination of higher ticket sizes (9% sequential growth) and newer customer acquisition (4% sequential growth). Growth was uniformly spread across the states where it operates,” he said.

Mudra from its inception earlier this year has financed a host of MFIs including Ujjivan Microfinance, Equitas Holdings, Satin Creditcare and Aarohan Financial Services.

STEEL Authority of India (SAIL) is understood to have deferred its five-year bond issue because the company is not comfortable with the rate at which bids are coming in. The lowest bid so far has been 8 basis points higher than the steelmaker’s expectations, according to bond arrangers.

Ajay Manglunia, executive vice-president at Edelweiss Securities, confirms that SAIL deferred its five-year bond issue two days back since the lowest yield offered to the company stood at 8.18% while SAIL was looking to issue bonds at a better pricing.

“The company had made a counter-offer at 8.10%. Even at 8.18%, SAIL received bid for a small quantum against the R500 crore it was planning to raise. This is why it deferred the bond issue,” said Manglunia.

Corporate bond yields in October are at comparatively softer levels from what were seen in September. Bloomberg data show that on September 22, Rural Electrification Corporation (REC) issued five-year bonds at 8.36%. A few days later, in a surprise move on September 29, the RBI cut the repo rate by 50 bps that pushed yields on corporate bonds down.

It became evident when REC was able to issue 10-year bonds at a yield as low as 8.11% on October 7.

The yield on a five-year public sector unit paper currently stands close to 8.15%. However, SAIL was offered a bid of 8.18% because of the present conditions in the steel sector, market participants said.

“SAIL is always seen demanding a better price for its bond issue compared to prevalent market rates. The yield on a five-year PSU paper stands at 8.15% as of now. For SAIL, the yield offered was 8.18% with the premium of a few basis points taking into account the sluggishness prevailing in the steel sector,” Manglunia added.

Amid a crash in global commodity prices, metal producers, especially domestic steel makers, are facing a very difficult business environment. At a time when global benchmarks are trading at multi-year lows, slowdown in domestic demand and onslaught of imports have led to every second large-to-medium size steel producer reporting losses in the first quarter of this fiscal.

The stress on the sector is evident with the number of rating downgrades that have taken place in FY16 so far. Of the 11 metals producers that saw rating downgrades, seven are steel producers of which four are now graded “D”. Among the bigger players, Vedanta, Hindalco and Jindal Steel and Power have also seen a demotion in their credit ratings.

Analysts expect many companies from the sector to report negative cash flow for FY16 even as an imposition of a safeguard duty is likely to bring some respite in terms of higher domestic prices.

The future does not look great either. On Wednesday, Bloomberg quoted the deputy head of the China Iron and Steel Association, Zhu Jimin, saying that production cuts are slower than the contraction in demand and, therefore, oversupply is worsening.

We retain ‘sell’ rating on TVS Motor and earnings estimates but marginally increase our SOTP-based target price to R248 (earlier R245 per share), implying 14x October 2017 earnings for the core standalone business. The stock currently trades at 17.7x FY17e net earnings. Significant benefits from BMW tie-up (not factored in our estimates).

TVS Motor’s Q2FY16 results were ahead of our expectations, driven by stronger-than-expected Ebitda margin for the quarter. Revenues (including other operating income) increased 7% y-o-y, 10% q-o-q and were 3% ahead of our estimates (due to higher-than-expected realisation per vehicle). Raw material costs as a percentage of sales declined by 71 bps q-o-q and were 48 bps lower than our expectations. As a result, gross profit and gross margin were 5% and 48 bps higher than our expectations.

Two-wheeler demand remains subdued mainly in rural areas due to the weaker than expected monsoon. This has particularly impacted the demand for mopeds and motorcycles. Any expectation of demand improvement going forward is dependent on how the north-east monsoon pans out. The company continues to witness healthy demand for its scooters (primarily Jupiter) including during the recent Dussehra festival. It continues to target market share expansion of 15% in domestic two-wheelers (its market share in H1FY16 was 13.1%) on the back of new launches in motorcycles and sustained strong demand for its scooter Jupiter.