Markets shed early gains

Wed, 27 Apr 11:30 am

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Indian stock market indices shed most of the early morning gains and are now trading flat. Stocks from the consumer durables and auto space are trading in the green and those from the consumer goods and banking space are trading in the red.

The BSE-Sensex is down by 6 points while NSE-Nifty is trading 8 points below yesterday's closing. However, BSE Midcap and BSE Small cap indices are up by 0.3% and 0.7% respectively. The rupee is trading at 44.39 to the US dollar.

Cement stocks are trading mixed with Chettinad Cement and Shree Cement leading the gains, while Ambuja Cement and Heidelberg Cement are trading weak. As per a leading financial daily, UltraTech Cement plans to invest Rs 110 bn over the next 3 years for capacity expansion. The company intends to set up plants in various parts of India. These include setting up of additional clinkerisation plants in Chhattisgarh and Karnataka, grinding units, bulk packaging terminals and ready mix concrete plants. The cement company is foreseeing a growth of 8.5% in the sector in the next year and orders have already been placed for equipments required for expansion plan. However, the company management feels that pricing may pose a challenge and margins may continue to remain under pressure. With the new addition, the company is expected to increase its existing total production capacity of 52 m tonnes per annum (MTPA) by 9.2 MT. It may be noted that the company presently has 11 integrated plants, 15 grinding units and 5 terminals.

Paper stocks are trading weak led by Ballarpur Industries Limited (BILT) and AP Papers. BILT declared its 3QFY11 results (June ending company). The company's top line grew by 12.5% YoY during the quarter. This was on the back of the BILT's pulp business which posted a growth of 35.5% YoY. Top line growth was restricted as a result of disappointing performance by the company's paper products business and other business which fell by 2.8% YoY and 19% YoY respectively. Operating profit margin grew by 0.3% to stand at 19.3% (as a percentage of sales). This improvement came on the back of fall in raw material costs from 37.5% YoY in 3QFY10 to 36.6% in 3QFY11. Fall in staff costs by 0.8% to 5.6% (as a percentage of sales) also helped boost operating margins. However, increase in costs of power and stores and spares capped operation margin growth. Net profit grew by 11% YoY. This was slower than the 32% YoY growth in PBT due to a sharp increase in effective tax rates. Effective tax rate increased from 2.1% in 3QFY10 to 18.4% in 3QFY11.