Volatility plagues Indian indices

Wed, 12 May Closing

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Indian stockmarkets had a rather volatile trading session today. After opening in the green, markets oscillated to either side of yesterday's close for the larger part of the day. However, renewed buying activity in the afternoon session ensured that the indices closed above the dotted line. While the BSE Sensex closed higher by around 39 points (up 0.2%), the NSE Nifty gained around 21 points (up 0.4%). While the BSE Midcap barely managed to keep its head above water, the BSE Smallcap closed in the red. Gains were largely seen in FMCG and healthcare stocks.

As regards global markets, Asian indices closed mixed today while most European indices have opened in the green. The rupee was trading at Rs 45.14 to the dollar at the time of writing.

Hindalco has announced its FY10 results. For 4QFY10, the company's standalone revenues grew by 43% YoY led by a better product mix and higher realisations. What also contributed to sales growth is the increased production from the brownfield expansion which resulted in higher volumes. While the aluminium business recorded a 31% YoY growth in sales, the copper business grew by 52% YoY. The benefit of higher prices on the LME also played its part in enhancing sales. Net profits increased almost fivefold due to strong performance at the operating level, lower interest costs and depreciation charges. The stock closed marginally lower today.

Pharma stocks closed mixed today. While Dr.Reddy's, Glenmark and Sun Pharma led the pack of gainers, Piramal Healthcare closed into the red. Glenmark and US drugmaker Merck & Co. have settled their patent dispute off court with respect to the latter's cholesterol control drug 'Zetia'. As per the terms of the agreement Merck will refund all litigation costs estimated at up to US$ 20 m. Further, Merck will allow Glenmark to launch the generic version of the drug in 2016, around 134 days before rivals. In that period, Glenmark would be able to maximize revenues and profits from the drug. Merck earns annual revenues to the tune of US$ 2 bn from 'Zetia' and its combinations. The patent on the drug is scheduled to expire in April 2017. It must be noted that many Indian pharma companies in recent times have been settling their patent challenge suits outside of court. This obviates the need to incur more costs and provides some semblance of certainty with respect to revenues.

The month of March 2010 saw India's industrial output grow by a lower than expected 13.5% YoY. There were several reasons for this. One was the partial withdrawal of the stimulus measures by the government during the budget. Second was a slow but steady increase in monetary tightening by the RBI. Both of these seem to have taken their toll on industrial production. However, there may also be a positive side to this. It takes away from the RBI's reasons to increase interest rates, as the IIP numbers are also seen as a proxy for demand led inflation pressure in the economy.