Dull start to FY12

Fri, 1 Apr Closing

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The Indian stock markets had a dull opening to the new fiscal (FY12) today. The benchmark indices were marginally in the red at the time of writing this. Today's selling was largely led by stocks from the banking and IT sectors. The overall market breadth was however positive, with the number of gainers outnumbering losers by a ratio of 3 to 1.

The BSE-Sensex closed with losses of around 25 points (0.1%), while the NSE-Nifty was down around 6 points (0.1%). Mid and smallcap stocks however bucked the trend, as the BSE Midcap and BSE Small cap indices closed with gains of around 1.6% and 2.2% respectively. The rupee was trading at 44.53 against the US dollar at the time of writing this.

Auto stocks closed today on a mixed note. While gains were seen in TVS Motor and Hero Honda, selling pressure marked trading in Tata Motors and Bajaj Auto. India's largest passenger car company Maruti today announced its sales numbers for the month of March 2011. The performance has been excellent to say the least, with its volumes growing by 28% YoY during the month. For the entire year FY11 (April 2010 to March 2011), the company's volumes grew by 25% YoY. The key reason for Maruti's sterling performance during March was its domestic business. The company sold 39% more vehicles in India during the month as compared to March 2010. Its exports however took a hit, with volumes dropping by 26% YoY. This suggests the clear divergence between the economic recovery in India as compared to the western world. Overall, FY11 ended being a good year for the company, which benefited from rising demand led by low interest rates and higher disposable incomes.

Engineering stocks also closed mixed. While Suzlon and Punj Lloyd closed strong, Voltas and ABB closed in the red. Crompton Greaves, which is reportedly looking for its sixth acquisition in the past five years, closed with marginal gains. As per reports, the company is eyeing the Europe based Landis+Gyr, which manufactures smart gears. The report also pegs Landis's valuations at over US$ 1 bn. Crompton Greaves has been pretty successful in the past in its acquisition strategy. Be it the acquisition of the Belgium based Pauwels in FY06 or that of Hungary based Ganz in FY07, the company has made good progress after adding these companies to its fold.

As per a leading business daily, Glenmark has announced the discovery of a new molecule for oncology. This has been called GBR 401 and the company is looking to file an application for Phase I trials in the fourth quarter of FY12. The molecule is being developed in its Switzerland based research centre and is a biotech drug for treating blood cancer. Although the possible launch of the molecule is a long way off, this news comes as a positive especially since oncology is one of the fastest growing therapeutic areas with more and more companies focusing on improving cancer treatments. Further, if this molecule reaches a certain stage in clinical trials, Glenmark has the potential to find a partner to whom it can out-license the molecule for milestone payments. It must be noted that Glenmark in the past has been successful in garnering some good alliances with global pharma majors for out-licensing various molecules. That said, the company received a setback in FY09 as some of its molecules failed to move ahead in clinical trials and also because the global crisis saw global players slowing down their appetite for such alliances. Biotech is also becoming an area which is beginning to generate a lot of interest and a success here will be profitable for Glenmark in the longer term.