- Todays Market
- Indian Stock Market News April 29, 2010
Markets cheer fiscal sops
Closing
Amidst the gloom in global markets on the back of the debt crisis in Europe, Indian markets managed to stay resilient and ended the day in the positive. The key reason for the same was the Finance Minister hinting at some fiscal sops for select sectors. Stocks from the banking, auto and commodity sectors added to the strength in the indices. Most other key Asian markets closed weak today, led by China (down 1%) and Japan (down 2%).
The BSE Sensex and NSE Nifty closed with gains of around 124 points (0.7%) and 39 points (0.7%) respectively. Mid and small cap stocks followed suit. Both the BSE Midcap and BSE Smallcap indices closed 1% higher.
Pharma major Biocon recently announced its FY10 results. The company grew its revenues in FY10 by a robust 50% YoY, led by the strong performance of biopharmaceuticals, AxiCorp and contract research businesses. However, its EBDITA margins fell marginally by 0.6% during the year on the back of a rise in raw material costs (as percentage of sales). While the bottomline grew at a stupendous pace during the year, the same was largely due to the forex loss incurred in FY09, which is not present this year. On excluding the same, growth in bottomline stands at 22% YoY. Besides statins and immunosuppressants, Biocon has considerably ramped up its branded formulations business which crossed the Rs 1 bn mark in this fiscal. Biocon has also been increasingly focusing on enhancing its research capabilities by entering into partnerships with global innovators and consequently boosting its licensing income.
As per the latest data, India's annual food price inflation has eased in April. However, fuel prices maintained a faster rise and kept pressure on the wholesale price index (WPI). This is expected to prompt further monetary tightening by the central bank. The food price index rose 16.6% YoY in April, lower than 17.7% in the previous week. The WPI on the other hand touched a 17-month high of 9.9%, prompting the RBI to raise rates in April for the second time in as many months. The RBI governer earlier attributed rising prices for food, fuel and wages to demand-led inflation. As against this, much of the country's inflationary pressures were initially on the supply-side as a result of the 2009 monsoon failure that pushed up food prices.
In a move that can make funds for infrastructure building cheaper, the government is set to allow them to refinance part of their domestic debt through overseas borrowings. The overseas borrowings will bring in cheaper loans as interest rates head higher in India because of the monetary tightening.
It may be noted that India will need over US$ 1 trillion of funds over the 12th Plan period for the infrastructure sector. A greater access to overseas funds will help raise cheaper funds for executing infrastructure projects. Currently, companies can borrow overseas at an average rate of around 9 to 10% including currency hedging costs, which is still lower than domestic credit. The concession thus bodes well in terms of financing the economy’s infrastructure needs on time. Companies like IDFC, PFC and REC are set to be the key beneficiaries of this.
Realty rallies markets
01:30 pm
In the last 2 hours of trade the markets saw an increase in buying activity, particularly in the index heavy weights, as investors returned to the markets. While stocks in the realty and consumer durables space saw investor interest, profit booking was seen in stocks from the IT and FMCG space.
The BSE-Sensex is trading higher by 75 points while the NSE-Nifty is trading 25 points above the dotted line. The BSE-Midcap Index is up by 0.8% while the BSE-Smallcap index is trading 1.3% above yesterday's closing. The rupee is trading at 44.62 to the US dollar.
As per a leading daily, NTPC plans to set up at least three 4,000 MW power projects through tie-ups with state governments. As of now the three plants will be built at Chhattisgarh, Karnataka and Madhya Pradesh. NTPC has already placed bulk orders for equipment for the Chhattisgarh and Karnataka plants while it is conducting feasibility studies for the Madhya Pradesh plant. The company in fact plans to start construction of the Madhya Pradesh plant by the end of the year. These three plants will require 60 MT of coal annually. Coal linkages are already in place for the Chhattisgarh and Karnataka plants and the company has asked the power ministry for coal linkage for the Madhya Pradesh plants. NTPC currently has a capacity of 31,704 MW and plans to take this up to 75,000 MW by the end of the 12th plan. Even with these new plants, the company will have to grow aggressively to achieving its target by 2017.
Petronet LNG announced its 4QFY10 results yesterday. The company's topline fell by 10% YoY on the back of lower realizations in spite of higher volume sales. Petronet's bottomline declined by 52% YoY on the back of lower operating income as a result of higher raw material costs as a percentage of sales and increase in interest and depreciation costs. While domestic supply of natural gas is increasing and imported LNG is a more expensive option compared to domestic natural gas, there is still demand for LNG. The reason being, the timing and quantum of new supplies are spread out over the next few years which will give the domestic demand scope to catch up. Furthermore, going forward, Petronet only plans to import gas if it has back-to-back sell agreements.
IT, FMCG lead the losers' pack
11:30 am
Although trading firm, the Indian markets did witness some volatility as they shed a portion of their gains during the previous two hours of trade. However, the broader market breadth remains positive with the gainers outnumbering the losers by 2.6 to 1 on the BSE. Buying activity is being witnessed in stocks from the realty, metal and banking spaces. IT and FMCG stocks are the top losers at present.
The BSE-Sensex is trading higher by about 40 points, while the NSE-Nifty is trading higher by about 15 points. Small and midcap stocks however seem to have garnered investors' interest as the BSE-Midcap and the Smallcap indices are trading higher by about 0.9% and 1.3% respectively. The rupee is trading at 44.56 to the dollar.
FMCG stocks are trading weak with HUL, Colgate Marico and Godrej Consumer Products being the key losers. Marico announced its 4QFY10 and FY10 numbers yesterday. During the quarter the company reported a topline growth of about 6% YoY. This growth was largely led by a strong volume growth during the quarter. As operating expenses increased at a slower pace as compared to revenues, the company saw an increase in operating margins, which expanded by 0.8% YoY to 14.1%. This expansion was mainly due to lower raw material costs (as a percentage of sales). However at the same time, employee, advertisement and sales promotion expense and higher other expenditure increased as a percentage of sales. Net profit during the quarter increased by 15% YoY. The strong growth in net profits was aided by higher other income, lower interest costs and a lower extraordinary loss. For the full year, revenues and net profits increased by 11% YoY and 23% YoY respectively.
IT Stocks are currently trading weak led by Wipro, TCS and Infosys. According to research and advisory firm Gartner, IT spending in India is likely to rise by 14% YoY to about US$ 67 bn. As per the firm, this will mainly be due to higher investments by retail and utility firms and government departments. Further, it expects the IT market (which includes hardware, software, IT services and telecoms) to grow at a compounded rate of 11% by 2013. Gartner believes the Indian market to grow at a steady pace on the back of an expansion and maturity of the final customers and clients. With clients understanding the benefits of IT, its acceptance will increase going forward. Apart from the hardware manufacturers, IT biggies such as TCS, Infosys and Wipro, which have renewed their focus on Indian markets, will be the major beneficiaries of the same going forward. However, at the same time one should not ignore that fact the global IT majors have also increased their focus on India over the past few years.
Markets begin on a strong note
09:30 am
The Indian markets have started today's session on a positive note. The benchmark indices opened at the breakeven mark but soon darted into the positive. They have managed to hold on to their gains since then. Other key Asian markets are trading strong with Singapore (up 0.7%) leading the pack. The US markets closed higher by 0.5% yesterday.
Currently in India, heavyweights from the BSE-Sensex are trading strong with banking and auto majors finding investors' favour. The BSE-Sensex is trading higher by around 80 points, while the NSE-Nifty is up by about 25 points. Buying interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 1% and 1.3% respectively. The rupee is trading at 44.63 to the US dollar.
Energy stocks have opened the day on a positive note. Gainers here include Gujarat Gas and Indraprastha Gas. As per a leading business daily, Reliance Industries has discovered oil in an onshore block in the Cambay basin, Gujarat. The block covers an area of 635 square km. The discovery has been dubbed 'Dhirubhai-47'. It has been notified to the Director General of Hydrocarbons and the size of the discovery is currently being studied. This discovery is significant because it indicates the presence of more oil pool areas. This is the company's fourth oil discovery in the region, the first being in November 2009. It may be noted that production of oil onshore is generally cheaper than offshore. The technical difficulties and the equipment required for handling sea conditions make the process more expensive. Besides Reliance Industries, Gujarat State Petroleum Corporation in also present in the Cambay basin and holds interests in 15 producing fields.
FMCG stocks have opened the day on a positive note. Gainers here include Paper products and Dabur. Dabur announced its FY10 results yesterday. The company's consolidated net sales for 4QFY10 grew by 17% YoY on the back of strong performance by its domestic business and the amalgamation of the financials of Fem Care. Key categories such as hair care, oral care, skin care, health supplements and digestives registered healthy growth. Operating margins improved by 1.8% to 20% for 4QFY10. This increase comes on the back of lower raw material costs and other expenditure as a percentage of sales. However, growth of operating profit was capped due to higher advertisement expenditure and higher staff costs as a percentage of sales. Net profit for 4QFY10 grew by 30% YoY.
India's biggest weak link
Pre-Open
Almost everyone agrees that infrastructure is perhaps India's biggest weak link. Be it power, ports or roads. But despite the broad consensus, we can't really get out act together. As per a leading business daily, of the 230 projects completed by the National Highways Authority of India (NHAI) so far, about 172 were delayed. Yes, 75% of all NHAI projects couldn't be finished on time. It is true that land acquisition is major hurdle. So are shifting of utilities, clearances from environment, forest and railway authorities. It is also true that as Indians we aren't exactly sticklers for getting things done in time. But surely a 75% delay rate is sub-par by any standard. Especially when the delays shoot up the project's cost. In fact, 123 road projects under implementation are also delayed.
Against a target for developing about 3,165 km length of national highways under the NHDP (National Highways Development Programme) in FY10, the achievement till November 2009 has been only about 1,490 km. The pace of awarding new road projects also has been poor. Only 13% of the targeted road length for FY10 have been awarded in the first 8 months.
Ironically, the government has approved road projects to the tune of Rs 73 bn in Naxal affected areas. It involves more than 1,200 km of national highways and about 4,400 km of state roads. No one can quarrel with their need. But the government plans to implement them over the next three years. Given the NHAI's track record, that is a tad ambitious in our view. We wonder if such a track record would be tolerated by the management of any private business. But when it comes to governance, everyone seems to be far more accommodating. It is high time the Indian governing class learnt about building good quality infrastructure in time and within budget.