Crude oil dampens sentiment!

Tue, 22 Feb Closing

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Although the indices came off the day's lows, they couldn't recover enough during the closing hours and thus, closed the day significantly in the negative. BSE-Sensex edged lower by around 140 points today whereas NSE-Nifty lost in the region of 50 points (down 0.9%). BSE Midcap and BSE Small cap indices also toed the line of their large cap counterparts and were down in the vicinity of 1%. Only one stock gained for every five that lost value on the Sensex today.

Situation in other major Asian as well as European indices wasn't all that good either as while almost all of the former closed in the red today, majority of the latter are also trading in the negative currently. The rupee was seen trading at Rs 45.3 to the dollar at the time of writing.

It is the commodity crude oil that India can't get enough of that proved to be the market's nemesis yet again. Intensified protests in the Middle East are putting pressure on crude oil prices and with the Indian economy highly dependent on the same, investors seem to be taking a dim view of things. Thus, today's decline could mostly be attributed to persistent strength in crude oil prices.

PSU oil refining and marketing companies continued their downward slide today. IOC, HPCL and BPCL closed lower by around 3%-4% each. With crude prices on the boil yet again, investors are coming to the conclusion that under recoveries would mount still further for these players and thus hurt their earnings. It should be noted that although prices of petrol have been freed, fuels like diesel, LPG and kerosene, that still account for over 60% of petro products consumption in India, are regulated and have not been increased since June 2010. With problems in the Middle East showing no signs of easing up any time soon, troubles would continue to mount for state owned refiners we believe.

Domestic pharma major Ranbaxy was yet another casualty today. The stock closed lower in the region of around 4%. The company announced its full year results today. The company reported an 18% YoY growth in the topline during the year led by the US business and the emerging markets. Sales from the US grew by a robust 80% YoY despite the challenging conditions that the company is witnessing there. Growth was robust largely on account of 'Valacyclovir' which continued to enjoy a healthy market share of approx. 36%, even after loss of exclusivity. Further, the company also benefitted from the launch of its FTF product 'Donepezil Hydrochloride' in the strengths of 5 mg and 10 mg with 180 days exclusivity in the fourth quarter of the year. As far as the emerging markets are concerned, growth was led by the CIS region, Africa and Latin America. Sales from India grew by 8% YoY. Because of the launch of products with exclusivity window, operating margins substantially jumped from 7.7% in CY09 to 20.5% in CY10. Growth in bottomline stood at 459% YoY. However, this was largely due to extraordinary income and forex gains. Excluding the impact of these during both the periods, the company reported a profit of Rs 11 bn in CY10 as against a loss of Rs 2 bn in CY09.