Mid, smallcaps lose favour

Fri, 23 Jul Closing

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After oscillating to either side of the dotted line for most of today's session the benchmark Indian indices closed marginally in the positive. While the BSE Sensex closed higher by around 18 points (up 0.1%), the NSE Nifty gained around 7 points (up 0.1%). The Midcap and smallcap stocks, however, failed to recover. The BSE Midcap and BSE Smallcap closed lower by 0.3% and 0.5% respectively. While telecom, engineering and banking stocks found favour, energy stocks were at the receiving end.

As regards global markets, Asian indices across the board closed higher today while European indices have opened on a mixed note. The rupee was trading at Rs 46.95 to the dollar at the time of writing.

Pharma major Biocon declared a robust set of numbers for 1QFY11. The company grew its topline by 33% YoY, led by the strong performance of biopharmaceuticals business. EBDITA margins fall marginally by 0.8% during the quarter on the back of a rise in raw material costs (as percentage of sales). Strong performance on the both the topline and operating margin front percolated down to the bottomline, which also grew by a healthy 33% YoY. Biocon's Syngene business saw a topline growth of over 25%. According to the management, Biocon has hedged most of its overseas exposure and does not see a major forex impact in FY11.

Bharti Airtel has shortlisted three multinational firms and two home-grown IT majors for its billion dollar plus IT outsourcing contract in Africa, IBM, which currently handles Bharti's IT for India and Sri Lanka along with Hewlett Packard and Accenture are among the multinational vendors that have made it to the shortlist. Also, Wipro and Tech Mahindra are the Indian vendors in the running for what could be one of the largest IT deals spread across 15 geographies in Africa.

Bharti Airtel's 10-year deal with IBM was originally estimated to be worth US$ 750 m but it has already crossed US$ 3 bn. Hence this deal comes in as a huge positive to companies like Wipro and Tech Mahindra. Also Bharti is looking at replicating this outsourced model of operations in Africa as it believes that this will be the key to returning Zain to profitability.

Engineering major BHEL announced results for 1QFY11 recording growth of 16% YoY in sales during the quarter. This was aided by the performance of the power segment, where sales have grown by 18% YoY. The company's operating margins rose significantly (by 3.8% YoY) during the quarter led by decline in raw material costs (as percentage of sales). Material costs are down due to the fact that the company used up the inventory of raw materials acquired when prices were still recovering from their lows. Net profits grew by 42% YoY during the quarter due to the expansion in margins at the operating level. BHEL's order backlog stands at Rs 1,480 bn at the end of June 2010, higher by around 19% YoY.