Mid, smallcaps in the limelight

Thu, 12 May 11:30 am

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   09:30 am   

   01:30 pm   

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Over the last two hour of trade, the indices in the Indian stock markets pared their opening losses and are trading flat. Stocks from the realty and auto space are trading firm while stocks from the metals and IT space are trading weak.

The BSE-Sensex and NSE-Nifty are trading flat. BSE Midcap index is up by 0.2% while BSE Small cap index is trading 0.3% above yesterday's closing. The rupee is trading at 44.74 to the US dollar.

Engineering stocks are trading mixed with AIA Engineering and Shanthi Gears trading firm while Sanghvi Movers and Welspun Corp are trading weak. ABB released its 1QCY11 results. The top line of the company grew by 22% YoY during the quarter. This was on the back of strong growth in the power systems, power automation and low voltage product businesses. power system business grew by an impressive 50% YoY, Low voltage products business turned in a robust growth of 33% YoY. Power automation business grew by a strong 15% YoY.

Operating profit margin of ABB expanded by 4.1% to stand at 5.7% for the quarter. This growth came on the back of fall in staff costs and other expenditure (as a percentage of sales). While staff costs fell by 1% to stand at 7% of sales, other expenditure fell by 5.5% to stand at 12% of sales. However, the company faced raw material pressure during the quarter which capped operating income growth. Raw material costs increased from 73.1% in 1QCY10 to 75.5% (as a percentage of sales) in 1QCY11.

On a segmental basis, power products and process automation businesses saw their margins slipping by 3.5% and 4% to stand at 4.9% and 6.6% respectively. However, discrete automation segment saw it margins grow by 11.9% to stand at 14.6%. Operating margins for power system business and low voltage business turned positive this quarter. Margins for power system stood at 0.3% while that for low voltage products stood at 8%. Net profit for the company increased by almost 800% YoY during the quarter. This was on the back of strong operating profit growth. ABB received orders worth Rs 16.9 bn during the quarter while its order backlog stood at Rs 83.2 bn.

Metal stocks are trading weak led by Hindalco and Ispat Industries. As per a leading financial daily, Hindalco Industries has received the final forest clearance for its proposed alumina refinery project in Rayagada district of Orissa. This Rs 60 bn Aditya alumina project is slated to go on stream in 2014. As per management they have got the 2-stage clearance and are now working on the financial closure. The first stage of the project involves aluminium smelter plant in Orissa. The second leg of the project will have an alumina refinery with a capacity of 1.5 m tonnes. For the project to take off, stage 2 clearance was needed. For the said project, the company had earlier raised money through QIP (Qualified Institutional Placement) and is now looking at other types of funding sources. It may be noted here that Hindalco has been investing funds in new projects. In 2010-11, it has spent Rs 65 bn on projects including Utkal (Orissa), Mahan (Madhya Pradesh) and on the existing Aditya project.