Cons. durables, energy lead a strong day

Mon, 27 May Closing

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Buying activity intensified in the Indian equity markets during the closing stages of the day and consequently, the indices closed the day significantly in the positive. While BSE-Sensex edged higher by around 325 points (up 1.7%), gains on the NSE-Nifty came in at around 100 points. BSE Mid Cap and BSE Small Cap indices also closed in the green, gaining 1% and 0.8% respectively. With the exception of 2-3 stocks, most of the Sensex stocks closed higher today.

While other Asian indices closed mixed today, Europe was seen trading mostly in the positive. The rupee was trading at Rs 55.6 to the dollar at the time of writing.

With the Sensex ending lower by around 3% during the previous week, today's gains of around 1.7% would have come as really encouraging. However, the gains seemed mostly a factor of liquidity coming in from the west rather than any strong economic data. Thus, rather than getting carried away with the same, efforts should be made to analyse the fundamental strength of the company and investments should be made only if the stock is available at valuations that aren't too excessive.

Crompton Greaves, one of India's leading engineering companies, closed weak on the bourses today. The weakness could be due to the company's poor performance during the March quarter where consolidated profits tumbled 75% YoY on the back of a decent 10% growth in topline. The decline in net profits could be attributed to the poor operating performance as margins fell more than 4% on the back of a greater other expenses and also higher cost of traded goods. For the full year, net profits were in the red by about Rs 360 m. This despite an 8% growth in topline. Here too, operating margins fell more than 4% and along with exceptional loss to the tune of Rs 1.2 bn, led the bottomline into the red.

Bajaj Electricals, another engineering and consumer durables major announced results for the quarter ended March 2013. And here too, the results did not make for a good reading. The company suffered a huge 99% fall in net profits on the back of a 5% increase in topline, both on a YoY basis during the quarter. The decline was led mainly by the poor operating performance where already low margins of around 8% tumbled to just 1%. As far as the full year performance is concerned, profits fell around 57% despite a 9% increase in topline. This was again led by poor performance at the operating level. The stock closed lower by 1% on the bourses today.