Energy stocks lead the gains

Tue, 15 Feb 09:30 am

   Previous Close   

   Pre-Open   

   11:30 am   

   01:30 pm   

   Closing   

Asian markets have opened mixed today. While modest gains are seen in China, selling pressure marks trading in Hong Kong and Singapore. As for the Indian markets, these have opened marginally in the positive. The buying is currently being led by stocks from the energy and engineering sectors.

The BSE-Sensex is trading higher by around 70 points (0.4%), while the NSE-Nifty is up about 15 points (0.3%). Mid and small cap stocks are also trading with gains, with the BSE Midcap and BSE Small cap indices trading up by 0.6% and 0.8% respectively. The rupee is trading at 45.47 to the US dollar.

Telecom stocks have opened mixed today. While gains are being seen in Tata Teleservices Maharashtra and Bharti Airtel, selling mars Tata Comm. Reliance Communications (RCOM) announced its 3QFY11 results late yesterday evening. The company has recorded a 6% YoY decline in its consolidated net sales during the quarter. This is the company's sixth consecutive decline in quarterly sales, and speaks volumes about its aggressiveness in targeting growth by paying huge costs. As for the average revenue per user (ARPU), it fell by 26% YoY (and 9% from the previous quarter, 2QFY11). The company also suffered damage on the second key metric of minutes of usage per subscriber (MoU). This number was down 24% YoY during 3QFY11. Further, while the company managed to maintain some sanity on the operating margins front (that declined by 1%, to 31%), its net profits crashed by 57% YoY during the quarter. Apart from the decline in sales, profits were impacted by higher interest charges. RCOM has a huge debt on its books at present (net debt of around Rs 324 bn), and interest on the same has impacted its performance.

GE Shipping (GES), India's largest private sector shipping company, announced its 3QFY11 results late last week. The company has reported a 21% YoY decline in its consolidated sales during the quarter. This is largely due to a 13% YoY fall in the number of revenue days for the shipping business. Sales of the shipping business declined 34% YoY during the quarter. The company also suffered on account of weak freight rates, especially those for the product tankers and dry bulk carriers. While rates for the former were down 19% YoY during the quarter, those for the latter were down 4% YoY. Freight rates for crude carriers however witnessed a slight improvement of 1% YoY. The decline in freight rates for the product tankers was largely due to weak demand for heating oil in the US. Also, the return of ships from floating storages (used by oil companies to store oil) added to the supply, thereby adding to the pressure on rates. Anyways, GES' operating margins improved to 36.6% during 3QFY11, led by decline in most cost heads. The company also reported Rs 551 m gain on sale of ships. This helped it grow its net profits by 25% YoY during the quarter. Excluding this one-time gain, net profits fell by 34% YoY. The company has withdrawn the proposed IPO of its offshore subsidiary Greatship India Ltd. The management has indicated that this has been done ‘in light of the prevailing market conditions'!