Indian indices sustain buoyancy

Thu, 3 Feb Closing

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After a cautious start in the morning, the indices gained momentum in the ensuing hours. Sustained buying activity throughout the day across index heavyweights ensured that the markets closed well above the dotted line. While the BSE-Sensex closed higher by around 359 points (up 2%), the NSE-Nifty closed higher by around 95 points (up 2%). The BSE Midcap and the BSE Small cap also did well to notch gains of 1% each. Gains were largely seen in metals, banking and oil & gas stocks.

As regards global markets, Asian indices closed mixed today while European indices have also opened on a mixed note. The rupee was trading at Rs 45.58 to the dollar at the time of writing.

Auto stocks closed mixed today. While Tata Motors and Hero Honda found favour, Ashok Leyland closed in the red. Hero Honda announced its 3QFY11 results. Revenues grew by 34% YoY during the quarter led by a 29% YoY increase in sales volumes. The company sold over 1.4 m units during the quarter (1.3 m during the preceding quarter). Operating margins fell by 6% YoY to 11.2%, on the back of higher raw material costs. Operating profits declined by 13% YoY during 3QFY11. Net profits declined by 20% YoY on the back of a poor operating performance and an exceptional item of Rs 798 m. On excluding the one-time item, profits came in lower by 5% YoY. During 9mFY11, revenues rose by 19% YoY on the back of a 16% YoY increase in volumes. Profits during the period declined by 13% YoY (8% YoY on adjusting for extraordinary items).

Hotels stocks closed mixed today. While EIH and Taj GVK led the pack of gainers, Oriental Hotels and Indian Hotels were at the receiving end. Taj GVK also announced its 3QFY11 results. Net sales of the company for 3QFY11 increased by 5.9% YoY. Operating (EBITDA) margins fell by 1% during the quarter. This was a result of higher cost of goods sold and higher other expenditure. Net profit increased by 5.9% YoY. This increase came on the back of lower interest costs and lower depreciation charges. Net profit for 9mFY11 increased by 26.4% YoY, while the net profit margin increased by 1.4% to stand at 15.9%. This performance came on the back of strong operating income growth and fall in interest costs and effective tax rates.

Food prices in India are expected to ease in the coming months with the supply of vegetables including onions expected to pick up. The arrivals of the winter sown crop that will start from March are also expected to cool food inflation. It must be noted that the country's food inflation rate surged to more than 18% in December as vegetable prices, particularly those of onions, spiked after unseasonal rain damaged crops. With food inflation remaining stubbornly high, overall inflation has also been difficult to bring under control, which in turn has compelled the RBI to continue hiking interest rates. Whether inflation will come down within the comfort levels of the RBI by the end of March remains to be seen.