Profit booking takes toll

Tue, 21 Jun Closing

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Backed by strong cues from Asian markets and buying interest in IT, banking and commodity heavyweights, the benchmark indices in the Indian stock market featured amongst the top gainers in Asia for most of the session today. However, profit booking in the final hours erased a large portion of the early gains. While the BSE-Sensex closed higher by around 54 points (up 0.3%), the NSE-Nifty closed higher by around 18 points (up 0.3%). The BSE Midcap and BSE Small cap stocks failed to garner favour as the indices closed lower by 0.3% each. Profit booking was largely seen in FMCG and banking stocks.

As regards global markets, Asian indices closed mixed today while European indices have opened in the positive. The rupee was trading at Rs 44.86 to the dollar at the time of writing.

As per a leading business daily, Cadila Healthcare's US subsidiary has acquired the assets of US-based KV Pharmaceutical's generic unit Nesher Pharmaceuticals for US$ 60 m in cash. Nesher Pharma's sales for FY11 stood at US$ 8.7 m which translates into a price to sales ratio of 6.9 times. The company had reported a net loss of $32.8 million driven by an increased cost of goods. While the deal may appear expensive, the generics business has total assets worth US$ 53.6 m, which includes fixed assets of US$ 30.2 m, intangibles worth US$ 14.4 m and inventory worth US$ 6.1 m. Overall, the acquisition adds an array of interesting opportunities to Cadila's portfolio. It, however, may be a couple of years before it begins to see benefits accruing from it. This may pressurize the company's margins in FY12.

National Aluminium Company (Nalco), one of India's leading producers and exporters of alumina and aluminium, has reduced basic price across all its product segments by Rs 5,000 per tonne. The price's has been cut by Rs 4,500 per tonne in case of 5 inch billets. Due to slow demand for products in monsoon the company has cut the prices and the reduction in prices will be implemented with immediate effect. Nalco reported a topline growth of 17.9% YoY during the financial year ended March 2011. The growth was led by the company's aluminium and electricity segment which grew by 17.9% YoY and 21.4% YoY respectively. On the other hand, the chemical business registered a modest growth of 6.4% YoY. We believe that the price cuts will have only a temporary impact on the company's margins, which will eventually recover during the course of the fiscal.