FMCG, pharma stocks buck the trend

Wed, 28 Apr 11:30 am

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The Indian markets continued to trade well below the dotted line during the previous two hours of trade. Pressure is seen in the index heavy weights as currently there are 4 losers for every gainer on the bourses. On an overall basis, stocks from the realty, metal and energy spaces are amongst the key losers. On the other hand, FMCG and healthcare stocks are seeing some buying activity.

While the BSE-Sensex is trading lower by 145 points, the NSE-Nifty is trading 40 points below the dotted line. Stocks from the midcap and smallcap spaces are also seeing some pressure as the BSE-Midcap and BSE-Smallcap indices are trading lower by about 0.9% each. The rupee is trading at 44.56 to the US dollar.

Healthcare stocks are currently trading mixed with Sun Pharmaceuticals and Biocon trading firm, while Cadila Healthcare and Dr. Reddy's are trading weak. As per a leading financial daily, Cipla has tied up with Stempeutics Research, a Manipal group to market stem cell based therapies. As per the agreement, Cipla will invest Rs 500 m for clinical trials and to further develop two products being researched by Stempeutics Research. This investment by Cipla will take place within the next 2 years. Other than this, Cipla will further invest to develop new products and will get the marketing rights on a transfer pricing basis during commercialization. In the last 4-5 years, Stempeutics Research has invested Rs 650 m for research and expects to invest Rs 500 m for clinical trials as well for registering products. The first product is likely to reach the market by 2013.The stem cell therapy market in India is estimated at about Rs 23 bn and is expected to grow rapidly. This tie-up will boost Cipla's R&D and help it launch new products.

Telecom stocks are currently trading weak led by MTNL, Idea Cellular and Bharti Airtel. Telecom major Bharti announced its full year FY10 and 4QFY10 results this morning. During the year, the company's consolidated sales grew by 12% YoY. Growth for the full year was led by a 38% YoY rise in revenues from the passive infrastructure segment. Revenues from the mobile services segment, the company's largest revenue contributor (nearly 63% of sales) increased by 7% YoY during the year. Bharti's operating profits grew at a marginally slower rate of 11% YoY on the back of a faster growth in expenses. The company's operating margins declined by 0.5% YoY on the back of higher network operating costs (as a percentage of sales). The profit growth during the year stood at 17% YoY. This was mainly due to interest income earned this year (as compared to interest expenses last year). As for the quarter ending March 2010, revenues were higher by 5% YoY while profits came in lower by 1% YoY. At the end of the year, the company's mobile subscriber base stood at about 128 m, an increase of about 36% YoY as compared to the same month last year. In addition, the company's board recommended a dividend of Re 1 per share, translating to a yield of 0.3%.