Realty stocks continue to bleed

Wed, 9 Feb 09:30 am

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Asian markets have opened mixed today. While modest gains are seen in Japan, selling pressure persists in China, Hong Kong, and Singapore. As for the Indian markets, these have yet again opened in the negative. The selling is currently being led by stocks from the realty and auto sectors.

The BSE-Sensex is trading lower by around 95 points (0.5%), while the NSE-Nifty is down about 25 points (0.5%). Mid and small cap stocks are also trading weak, with the BSE Midcap and BSE Small cap indices trading down by 1% and 0.7% respectively. The rupee is trading at 45.28 to the US dollar.

Power stocks have opened today largely in the red. Key losers include GVK Power and CESC. Power Grid and NTPC are however witnessing some buying interest. Power Grid announced its 3QFY11 results yesterday. The company has reported a 21% YoY growth in net sales. This was led by a 25% YoY growth in the company's power transmission business. The other small business of consultancy saw its revenues decline by around 16% YoY. The company was also able to improve its operating margins slightly to 84.2%. The improvement was brought about by a decline in operational costs. Anyways, Power Grid's tax expenses multiplied almost 7 times during 3QFY11, as compared to the tax expenses of 3QFY10. This impacted the net profit growth that stood at 21% YoY during the quarter (despite the 61% YoY growth in profit before tax). As for the nine-month period ended December 2010, sales and net profits grew by 21% YoY and 30% YoY respectively. The company has declared an interim dividend of Rs 0.5 per share.

FMCG stocks have opened on a mixed note. While gains are seen in Godrej Consumer and Colgate, selling pressure marks trading in Dabur and P&G. Adhesives and construction material major Pidilite announced its 3QFY11 results yesterday. On a consolidated basis, the company reported a 26% YoY growth in net sales. This was led by a 25% YoY growth in sales from the company's largest business segment of 'consumer and bazaar products'. Its second business segment of 'industrial products' grew at a higher rate of 33% YoY during the quarter. As for the operating margins, the same stood at 17.9% during the quarter, higher than 17.2% earned in 3QFY10. The improvement in margins was largely due to lost cost on purchase of traded goods. These costs came down from 11.5% of sales in 3QFY10 to just 5.7% in 3QFY11. However, this was countered by a rise in raw material costs, from 30.9% of sales in 3QFY10 to 37.4% in 3QFY11. Given that the company's chief raw material (vinyl acetate monomer, or VAM) is a derivative of crude oil, the rise in global oil prices impacted its material costs.