Banks, IT stocks lead gainers

Fri, 16 Jul 01:30 pm

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Indian indices crossed the dotted line as buying interest revived in heavy weights during the last two hours of trade. Stocks from IT and banking space are trading firm while stocks from the oil & gas and power space are trading weak.

The BSE-Sensex is up by 40 points while NSE-Nifty is trading 14 points above the dotted line. BSE-Midcap index is up by 0.5% while BSE-Smallcap index is trading 0.8% above yesterday's closing. The rupee is trading at 46.73to the US dollar.

Auto stocks are trading mixed with Tata Motors and TVS Motors trading firm while M&M and Bajaj Auto are trading weak. Tata Motors announced its sales numbers for June and for 1QFY11 yesterday. The global sales of the company grew by 46% YoY for the month to stand at 91,608 units. This was aided by strong commercial and passenger vehicle demand. For the quarter, the sales increased by 50% YoY to stand at 249,322 units.

Sales of commercial vehicles increased by 38% YoY to 39,975 units during June while for the first quarter of the current fiscal, sales increased by 41% YoY to 111,298 units. Total passenger car sales increased by 53% YoY to stand at 51,633 units for June while it increased by 58% YoY to 138,024 units for the first quarter. Sale of luxury sedan Jaguar increased by 59% YoY in June to stand at 6,776 units while Land Rover sales were almost double that of Jaguar at 13,413 units, an increase of 41% YoY.

Coming off a strong base in FY10 we don't expect to see such strong numbers going forward. We believe that the growth will soon revert back to the long term average of 10 - 12% YoY growth.

Energy stocks are currently trading firm led by BPCL, Castrol and HPCL. The stock of Castrol is trading firm on the back of announcing strong quarterly and half-year (CY ending company) results for the period ending June 2010. During the quarter, the company reported a 17% YoY increase in revenues and profits. The growth in revenues was driven by volumes. It is believed that the volumes were boosted on the back of its investments in marketing and branding. During 1HCY10, the company's marketing program was built around its global FIFA World Cup 2010 sponsorship. Further, Castrol's operating profits increased by 14% YoY, a tad below the revenues increase. This is on the back of a faster increase in operating expenses (which increased by 18% YoY). The key reason for the same was higher raw material costs, which increased by 29% YoY in absolute terms. However, the company did well to control the decline in margins as employee and advertising costs declined on an absolute basis during the quarter. On the back of a reduction in depreciation costs and low tax outgo, Castrol was able to improve the performance at the bottomline level.

As for the company's 1HCY10 performance, revenues and profits increased by 22% and 31% respectively. The higher increase in profitability is mainly on the back of a strong operating performance. During 1HCY10, Castrol recorded an operating margin of 29% as compared to 27.3% during 1HCY09.