IT stocks buck the trend

Mon, 5 Apr 01:30 pm

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The Indian markets continued their upwards journey steadily during the previous two hours of trade. Buying activity continued in stocks across sectors. Stocks from the realty, auto, oil & gas and metal spaces are currently amongst the top gainers. However, those forming part of the BSE-Capital Goods and BSE-IT indices are seeing some pressure as the indices are trading lower.

The BSE-Sensex is trading higher by 150 points (up 0.8%), while the NSE-Nifty is trading higher by 45 points (up 0.9%). The BSE-Midcap and BSE-Smallcap indices are trading higher by 1.1% and 1.7% respectively. The rupee is trading at 44.68 to the US dollar.

Healthcare stocks are currently trading firm led by Biocon, Piramal Healthcare, Cipla and Ranbaxy. Gains in Biocon are seen on the back of an agreement between the company, CIMAB S.A. (a Cuban company) and Biocon S.A (Biocon's arm). Biocon S.A. is reportedly acquiring the 49% stake held by CIMAB in Biocon Biopharmaceuticals Pvt. Ltd (BBPL). Post this acquisition, BBPL will become a wholly owned subsidiary of the company. BBPL is a joint venture engaged in manufacturing products based on the monoclonal antibodies in their facility in Bangalore.

As per the company's management, this deal will help the company to expand the development of bio-similars. Bio-similars are cheaper generic versions of branded biotech (drugs made from microorganisms) products. It must be noted that BBPL recorded revenues of Rs 186 m during FY09. At the bottomline level, it recorded a loss of Rs 51 m.

Bajaj Auto is currently leading among the auto stocks on the back of it setting a strong sales target for the next fiscal year. The company has earmarked its sales volume target of 4 m vehicles for the next fiscal. This indirectly translates into a 40% YoY growth. During FY10, the company recorded sales volumes of 2.9 m vehicles. Although, majority of sales for the company were contributed from its two brands - Discover and Pulsar. Of this target, the company is estimating export business to grow by only 11% YoY. Exports formed around 35% to its total revenues during FY09. Indirectly, this means that the company’s management is expecting majority of incremental growth to come from the domestic segment. Given that the company does not have a very strong presence in the rural areas as compared to industry leader Hero Honda, this volume target may be a tad too ambitious.