Mkts continue to trade firm

Mon, 22 Feb 01:30 pm

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The Indian markets have managed to firmly hold on to all of their gains from the morning session during the previous two hours of trade. Stocks across sectors, as indicated by their respective sectoral indices, are seeing gains with those from the metal, IT, and telecom spaces leading the pack of gainers. Stocks from the healthcare and power spaces are amongst the lower gainers at present.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 180 points (1.2%) and 50 points (1.2%) respectively. The BSE-Midcap and BSE-Smallcap are also trading firm, up by around 0.6% and 0.3% respectively. The rupee is trading at 46.13 to the dollar.

A leading business daily has reported that auto major, Mahindra and Mahindra (M&M) is looking at aggressively expanding its second hand car business, which runs under the banner of Mahindra FirstChoice (MFC). As per MFC's management, it has set a target of selling nearly 100,000 vehicles by the year 2015. This target is way higher than the actual numbers of about 10,200 pre-owned cars that it sold in FY09. MFC is looking at selling nearly 18,000 odd units during the current fiscal and is expecting to double the same during the next fiscal.

The company plans on achieving its target by a gradual ramp up in outlets. At present, it is believed to have about 114 outlets. The target set for 2015 is 500 outlets. As per the company, nearly 1.4 m pre-owned cars were sold last year. This takes MFC's market share to levels of about a miniscule 0.7%. However, if the company's strategy goes as planned, it is expecting to enjoy as market share of about less than 5% by 2015. While it definitely is an aggressive target, it must be noted that there are very few organised pre-owned cars sellers in India, which does give companies such as MFC a certain edge. Auto stocks are trading mixed with the stock of M&M trading lower currently.

Nestle announced its 4QCY09 and CY09 results over the weekend. The company's top line for the quarter grew by 24.2% YoY. The growth came on the back of strong domestic sales. Operating (EBITDA) margins disappointed as they fell by 4.5% and consequently stood at 14.7% of sales. Its net profit fell by 6.7% YoY during the quarter on the back of lower operating income and lower other income, partially offset by a fall in tax expense. Net profit for the full year CY09 improved by 22.6% YoY while net profit margins improved by 0.4% to stand at 12.7%. This performance was aided by strong operating income growth and fall in effective tax rate during the full year. While the company has shown a robust top line growth during the quarter, the increase in raw material costs depressed margins and bottom line. Further, due to rising food prices resulting in demand destruction, the company has to advertise more heavily to maintain top line growth. Going forward the key to further growth will be how effectively the company is able to pass on the rise in raw material costs. The stock of Nestle is currently trading lower.