Heavy selling hits Indian indices

Tue, 8 May Closing

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Indian stock markets languished in the red throughout the trading session today on the back of relentless selling pressure across index heavyweights. There was no respite in the final trading hour either and the indices closed well below the dotted line. While the BSE-Sensex closed lower by around 367 points (down 2%), the NSE-Nifty closed lower by around 114 points (down 2%). The BSE Mid Cap and the BSE Small Cap were not spared either as they closed lower by 1% each. Losses were largely seen in IT and banking stocks.

As regards global markets, Asian indices closed mixed today while European indices have opened in the red. The rupee was trading at Rs 53.19 to the dollar at the time of writing.

Barring Aventis Pharma, all MNC pharma stocks closed in the red today. Aventis Pharma declared results for the first quarter ended March 2012. The clocked 16.4% YoY growth in sales during 1QCY12 mainly led by growth in its domestic business. Operating margins decreased by 70 bps to 20.9% during the quarter. This was largely due to the increase in employee costs which rose by 50 bps. Net profits fell by 20% YoY on account of lower other income and higher depreciation charges. The other income decreased by 67% YoY and depreciation increased by 238% YoY. This was on account of acquisition of Universal brands which used the excess cash and increased the depreciation/amortization costs. This goodwill created after the acquisition will be amortized over a period of 10 years.

Bosch Ltd also announced results for the first quarter ended March 2012. The company reported a 10% YoY growth in sales, while profits grew by 22% YoY. According to the management the business conditions have quite challenging particularly for the auto industry due to varying levels of performance in different segments. Being an auto ancillary, Bosch's performance hinges on how the auto sector performs, which in our view, is cyclical. While the Indian auto market has grown significantly in the recent past, the near term outlook remains uncertain. Bosch has been focusing on the non-automotive business as well. But this does not account for more than 10% of its total revenues, which means that the automotive business plays a larger role in determining the performance of the company. The company, however, expects to do well in 2012 led by the prediction of normal monsoon combined with expectation of falling inflation and declining interest rates. The stock closed higher today.