Banking, power stocks pull markets lower

Mon, 14 May 01:30 pm

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The Indian stock markets shed their morning gains and slipped further into the red during the previous two hours of trade. Barring selected stocks from the healthcare, consumer durables and FMCG spaces, all sectoral indices are trading weak led by those from the banking, power and Oil and gas spaces.

The BSE-Sensex is trading down by about 110 points (0.7%), while the NSE-Nifty is down by about 50 points or 1%. Stocks from the mid and small cap spaces are witnessing pressure as well with the BSE Mid cap and BSE Small cap indices down by about 0.9% and 0.7% respectively. The Rupee is trading at Rs 53.74 to the US dollar.

Stocks of pharmaceutical companies are trading firm as the BSE-Healthcare index is trading higher by 0.5%. Stocks seeing the highest gains at the moment include Lupin, Glenmark Pharmaceuticals, Ranbaxy and Sun Pharmaceuticals. Dr. Reddy's announced its results for the quarter and year ended March 2012 recently. During the quarter, the company's consolidated revenues grew by 32% YoY, while profits increase by a marginal 3% YoY. The latter was despite a whopping 83% YoY increase in operating expenses. The company's operating margins expanded to 28.4% from 20.5% during 4QFY11 on the back of a decline in R&D, SG&A and other expenses (as percentage of sales). The profits would have been much higher on excluding the extraordinary expense of over Rs 1 bn (a non-cash impairment charge related to product intangibles) during the quarter.

As for the full year FY12, the company's revenues and profits increased by about 29% each. The company performed well at the operating level as operating profits grew by about 65% YoY. On excluding the extraordinary items during both the years, growth in net profits stood at 43% YoY. Growth during the year came largely from the company's global generics business which forms about 69% of total revenues. Other business segments - 'Pharma Services & Active ingredients' and 'Proprietary products' grew strongly as well.

Stocks from the oil & gas sector are trading weak led by Essar Oil, Cairn India, Oil and Natural Gas Corporation Ltd. (ONGC) and Reliance Industries. As per a leading financial daily, the Oil Ministry has refused to grant permission to public sector unit (PSU) oil companies for the acquisition of Asian Development Bank's 5.2% stake in Petronet LNG Ltd (PLL). Four PSU companies namely Gas authiority of India Ltd. (GAIL), Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), Oil and Natural Gas Corp (ONGC) each have 12.5% stake in PLL and have a first right of refusal. As public sector enterprises already hold 50% stake in PLL, cash buyout of ADB's stake would raise their participation above the limit of 50% of paid-up capital, bringing it under the scrutiny of Comptroller & Auditor General of India. As the government wants to provide operational freedom and flexibility to PLL, it has asked the four PSU promoter companies to offer the ADB stake to a strategic investor such as an LNG supplier.