Metal, realty stocks lead the gains

Fri, 28 May 01:30 pm

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Although trading well above the dotted line, the Indian indices saw a volatile trading session as alternate bouts of buying and selling were seen during the previous two hours of trade. Stocks across sectors are trading firm led by those from the metals, realty and consumer durables sectors. Stocks from the banking and engineering spaces are currently amongst the lowest gainers.

The BSE-Sensex is trading higher by 130 points, while the NSE-Nifty is trading higher by 40 points above the dotted line. The BSE-Midcap and BSE=-Smallcap indices are trading higher by 1.2% each. The rupee is trading at 46.61 to the US dollar.

FMCG stocks are currently trading firm led by Colgate, Dabur and Marico Industries. India's largest biscuit manufacturer Britannia Industries announced its results recently. The company has reported a topline growth of 9% YoY for the full year. This is seemingly on the back of higher sales volumes. However, as expenses grew at a faster pace Britannia's operating profits declined by 36% YoY. Operating margins stood at 5.1% as compared to 8.7% last year. This sharp 3.6% YoY is on the back of higher raw material costs as well as higher advertisement spending (as a percentage of sales). The company's other expenditure was higher as compared to the previous year. While higher other income, lower interest costs and a modest increase in depreciation did help the company reduce it's the fall in profits to a certain extent, higher extraordinary losses (amortization of VRS and provision for other claims) added to the woes. During FY09, the company recorded an extraordinary loss as well. Profits for the full year decline by 35% YoY. Lower tax outgo did help matters at the bottom line level for the company.

Increased competition coupled with higher input costs (due to high inflation levels) was the key concern for the company last year. The likelihood of input costs to come down are high, considering that the monsoon this year are expected to be at normal levels. However, given the intensity of competition, the company will feel the need to spend in brand building going forward.

Aluminium stocks are currently trading firm led by Hindalco and Nalco. The stock of Hindalco Industries is amongst the top gainers from the BSE-100 Index. Gains in the stock are on the back of a good set of numbers recorded by its US subsidiary Novelis. For the full year, the company reported a positive number at the bottom line level as against a loss during the previous year. For FY10, the company recorded a profit of US$ 405 m. During the previous year, it recorded a loss of US$ 1.9 bn. However, its performance during the latest quarter was impacted as sales declined by about 15% YoY. The key reason behind the decline in sales was lower realisations. However, the positive news is that during the latest quarter, Novelis claims that shipments to regions such as North America, South America, Asia and Europe had grown year on year basis since the economic downturn. As per the company shipment of aluminium rolled products for the full year stood at 2.71 m tonnes in FY10, lower by 2% YoY from the previous year's shipments.