Profit booking cuts Sensex's gains

Wed, 4 Aug 01:30 pm

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The Indian markets have lost some sheen as profit booking has taken its toll during the previous hour of trade. Currently stocks from the IT, capital goods and consumer durables sectors are amongst the top gainers. Those from the oil and gas and metals sectors are among the top losers.

The BSE-Sensex is trading up by around 5 points, while the NSE-Nifty is trading marginally lower. Stocks from the midcap and smallcap spaces are trading mixed with the BSE-Midcap Index trading lower by 0.1%, while the BSE-Smallcap Index trading higher by 0.4%. The rupee is trading at 46.22 to the US dollar

Auto stocks are currently trading mixed with Hero Honda and Maruti Suzuki trading firm, while Ashok Leyland and TVS Motor trading weak. Buoyed by the sales figures of its scooters in recent times, auto major M&M is now firming up its plans to enter the motorcycle market by the end of this year. The company sold over 100,000 scooters over the past 10 months. This 100,000 sales milestone was in fact a target that the company had set to achieve in a period of 18 months. Going by the sales volumes in recent times, M&M has now set itself a target of doubling sales volumes (in the scooter segment) by the year end i.e., in a period of five months. During the month of July, the company sold over 12,000 scooters, which is higher by 329% YoY as compared to last year.

Going by the current rate, its sales target does seem a bit ambitious. However, the company is making efforts such as increasing its distribution network and entering Tier-I and Tier-II cities to anticipation of a strong rise in volumes. As for its plans to enter the motorcycle segment, M&M would be assembling motorcycles at its Pithampur facility where it currently manufactures scooters. This plant has a capacity to manufacture 0.5 to 0.6 m scooters annually. A leading business daily has reported that M&M is working on the design of its motorcycles at its subsidiary, Engines Engineering‘s facility in Italy. This company was acquired by the Mahindra group in 2008.

Food and tobacco stocks are trading mixed with GSK Consumer and Tata Coffee trading firm while Tata Global Beverages trading weak. FMCG major Nestlé recently released its results for the quarter ended June 2010. The company’s sales grew by 21% YoY during the quarter. This performance came on the back of robust volume growth and selective price increases. Domestic sales grew by 20% YoY while exports were up by a healthy 36% YoY on the back of higher exports to Russia. Operating profit grew by 13.6% YoY. This was slower than sales growth due to higher costs of raw material (milk and sugar) and higher freight charges. Net profit grew faster than operating income at 20% YoY. This was due to higher other income, lower depreciation charges and lower effective tax rate.