A volatile noon session

Fri, 30 Jul 01:30 pm

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   Pre-Open   

   09:30 am   

   11:30 am   

   Closing   

The Indian indices witnessed a volatile trading session during the previous two hours of trade. While strong buying activity led the BSE-Sensex to rise above the dotted line, the positive trend was short-lived as the index nosedived into the red thereafter. Barring stocks from the consumer durables space, weakness is being witnessed in stocks across sectors led by those from the realty, IT and power spaces. However, the market sentiments seem to be positive as the overall advance to decline ratio is poised at 1.2 to 1 on the BSE.

The BSE-Sensex is trading down by around 70 points (down 0.4%), while the NSE-Nifty is down by about 20 points (down 0.3%). However, buying interest is being seen in stocks from the mid and small cap spaces as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.6% and 0.7% respectively. The rupee is trading at 46.54 to the US dollar

Cement stocks are currently trading weak led by Ambuja Cement, ACC and Dalmia Cement. The stock of cement major, UltraTech Cement is trading lower on the back it announcing poor results. The decline in revenues was mainly due to lower off take and shortage of wagons in South India, which accounts for nearly 33% of the company’s total sales. While the company’s revenues declined by 8% YoY, it took a major beating at the operating level as operating profits declined by 42% YoY. Operating expenses on the whole increased by 12% YoY leading to a sharp decline in operating margins. During the quarter ended June 2010, UltraTech’s operating margins stood at 23.5%, lower by 13.7% YoY as compared to last year. All the company’s cost heads rose as a percentage of sales during the quarter.

At the profit level, the company reported a 42% YoY decline. The decline would have been sharper had it not been for the lower interest costs, lower tax expenses and higher other income during the quarter. Further, the company has approved an additional capex spend of Rs 56 bn for adding plants in Chhattisgarh and Karnataka. The total capex plan for the next 3 years is Rs 100 bn. This will be funded through debt and internal cash accruals.

Auto stocks are trading mixed with TVS Motors and M&M trading firm and Hero Honda and Tata Motors trading weak. As per a leading financial daily, commercial vehicle major Ashok Leyland Limited (ALL), has picked up a 26% stake in Optare, a UK based bus manufacturer. ALL has the option of raising its stake in Optare in the future. The deal which is a long-term strategic co-operation will involve an investment of US$ 7.5 m in Optare.

Optare, is a specialist in low-floor, midsized buses as well as modern range of city buses. The company has a market share of almost 34% in UK and has a capacity to produce 1,100 units per annum. The company besides UK has presence in mainland Europe and North America.

This tie up is very important for ALL as it will be a critical part of ALL’s global bus programme which is currently under development. Under this tie-up the two companies are expected to share intellectual property rights in co-developed products and share components in various areas like those related to climate control or drive train systems.