Capital goods, power drags indices

Wed, 27 Jul 01:30 pm

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Indian stock market lost ground due to selling pressure in heavyweights over the last two hours of trade. Stocks from capital goods, power, realty and banking space are losing the most while those from consumer durables are trading firm.

The BSE-Sensex is down 136 points while NSE-Nifty is trading 45 points below yesterday's closing. The BSE Midcap and BSE Small cap indices are down by 0.3% and 0.1% respectively. The rupee is trading at 44.01 to the US dollar.

Software stocks have been trading mixed with Patni Computers, Tech Mahindra and Info Edge leading the pack of gainers. However, HCL Technologies and Wipro are trading weak. HCL Technologies has announced its results for the fourth quarter of financial year 2010-11, ended June 2011 (4QFY11). The net sales grew by 5.5% quarter on quarter (QoQ) during the quarter. This was driven by growth across all geographies and service offerings except BPO service offerings. For the year ended June 2011, sales grew by 26.2% on a year on year (YoY) basis. The operating margins improved by 1.2% QoQ to 18.5% during the quarter. This was mainly due to lower direct costs and 'Selling, General and Administration' expenses (both as a percentage of sales). However, for the full year FY11, operating margins declined to 17.1% from the 20.5% seen for the same period last year. The net profit was up 10.7% QoQ during the quarter. This was largely driven by higher margins at operating levels. For the full year FY11, net profits increased by 29.9% YoY. This was mainly driven by the growth in revenues and other income, which offset the impact of higher tax rate during the year. The attrition rate came down to 16.5% as compared to 17.0% seen at the end of the previous quarter (3QFY11). The company has proposed a final dividend of Rs 2 per share. This was 34th consecutive quarter of dividend payout. Including this, total dividend for the year is Rs 7.5 per share (yield of 1.5%).

Engineering stocks have been trading mixed with Shanthi Gears, Carborundum Universal and Opto Circuits India leading the pack of gainers. However, Bharat Heavy Electricals Ltd (BHEL) and Suzlon Energy are trading weak. BHEL has announced first quarter results of financial year 2011-2012 (1QFY12). The sales are up about 10.0% YoY in the quarter aided by a 19.1% YoY increase in the company's 'Industry' segment. However, the 'Power' segment has recorded a muted 7.6% YoY growth during the quarter. The operating margins have expanded by 0.7% YoY during the quarter owing to a fall in staff costs as a percentage of sales. The net profits have increased by 22.1% YoY during the quarter. This is mainly due to the expansion in operating margins and rise in other income partially offset by increase in interest and depreciation expenses. The company is contemplating a follow-on public offer (FPO) by the end of October. It may be noted that in the last quarter, Government (majority shareholder) had decided to divest 5% of its stake in the company through Follow-on public offer (FPO). The company plans to incur a capex of Rs 12 bn in the current fiscal.