IT, realty stocks take markets higher

Tue, 29 May 01:30 pm

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The Indian equity markets continued to rise steadily during the previous hour of trade as buying activity was seen in stocks across the board. Stocks from the information technology, realty and metal spaces are amongst the top gainers, while those from the FMCG and consumer durables sectors did not manage to find the interest of market participants.

The Sensex today is trading higher by about 100 points, while the NSE-Nifty is trading higher by about 28 points. The BSE Mid cap and BSE Small cap indices are trading higher by 0.3% and 0.5% respectively. The rupee is trading at 55.47 to the US dollar.

Stocks of two-wheeler manufacturers are trading firm with Hero Motocorp and Bajaj Auto trading firm. The dynamics of the two-wheeler industry have changed drastically to what they were a few years ago. In the past, the focus was on gaining market share by selling more units. At present, it is all about profitability and thus more focus on the executive (priced between Rs 40,000 to Rs 50,000) and premium (Rs 50,000 plus) segments of the industry. A leading business daily has reported that the volume growth of the entry-level bike segments (priced below Rs 40,000) is expected to grow at a slower pace as compared to the overall two-wheeler industry's growth. The key reason for the same is lesser focus on part of the original equipment manufacturers (OEMs) considering that there is limited scope of margin expansion. Also factors such as consumer susceptibility to higher interest rates play their part for this rationale. The premium segment is expected to be the fastest growing segment over the medium term given that macro factors - such as higher disposable income and favorable demographics - will play a major role in the demand for such vehicles. As you would have noticed, the major OEMs have been launching powerful vehicles at regular intervals.

The BSE-Consumer Durables Index is trading weak led by Bajaj Electricals, Blue Star and Titan Industries. Bajaj Electricals announced its results for the quarter and year ended March 2012 yesterday. During the quarter the company's revenues grew by 8% YoY. Growth was led by a 23% increase in the company's in lighting segment. The company's operating profits, however declined by 12.6% YoY as operating margins contracted by 2% YoY on the back of higher other expenses. A poor operating performance, coupled with lower other income and higher interest costs led profits to decline by 15% YoY. As for the full year FY12 performance, the company's revenues grew by 13% YoY while profits declined by 18% YoY.