Realty, IT stocks weigh on markets

Thu, 28 Apr 11:30 am

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Indian stock markets continue to flounder in the red on the back of profit booking in heavy weights over the last two hours of trade. Stocks from the realty and IT space are trading weak while stocks from the consumer durable and pharma space are trading firm.

The BSE-Sensex is down by 44 points while NSE-Nifty is trading 16 points below the dotted line. BSE Midcap and BSE Small cap indices are both trading lower by 0.1%. The rupee is trading at 44.32 to the US dollar.

Auto stocks are trading in the red led by Escorts and Hero Honda. As per a leading financial daily, Mahindra and Mahindra has launched a minivan. With this, the company wants to target the market of small towns and cities. This vehicle will compete with Tata Motor's Magic and Maruti Suzuki's Omni. It may be noted that the market for minivans is 0.14 m units per year and Tata's Magic is the leader in the segment at present. However, Mahindra has decided to price its vehicle Rs 1,500 higher as compared to Tata Motor's Magic. The automaker has spent Rs 1.3 bn on this initiative and is expected to produce the minivans at the company's factory in Chakan near Pune. The minivans will be available to dealers across the country by June. A CNG (compressed natural gas) variant of the vehicle is also being planned. The company also intends to export these to Bangladesh and Sri Lanka in future.

FMCG companies are trading mixed with Paper Products Limited (PPL) and Henkel India trading firm while Camlin Limited and Godrej Consumer are trading weak. PPL declared its 1QCY11 results yesterday. The company's top line grew by 25.3% YoY on the back of strong demand from FMCG companies. Operating profit for the company grew by 35% YoY. This is on the back of moderate growth in staff costs and other expenditure as compared to sales. While staff costs increased by 7% YoY, other expenditure grew by 1% YoY. Operating profit would have been higher but for higher commodity costs prevailing during the quarter resulting in sharp increase in raw material costs. Raw material increased by 30% YoY during the quarter. Net profit fell by 27.4% YoY during 1QCY11. The reason for this is a onetime profit recorded from the sale of the company's Nagpur factory in 1QCY10. On the other hand, higher operating income, fall in depreciation expense and lower effective tax rate helped prop up net profits. Depreciation expense fell by 5.5% YoY during the quarter while effective tax rate fell from 56.5% in 1QCY10 to 24.6% in 1QCY11. When adjusted for profit from sale of the Nagpur factory, net profit grew by 141% YoY while net profit margin improved by 3.5% to stand at 7.2%.