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Markets down on profit booking
Tue, 10 Aug 01:30 pm

Indian indices continued to languish in the red on selling in heavy weights during the last two hours of trade. Stocks from oil & gas and capital goods space are trading firm while stocks from the IT and auto space are trading weak.

The BSE-Sensex is trading down 98 points while NSE-Nifty is trading 34 points below the dotted line. BSE-Midcap index and BSE-Smallcap index are both trading down by 0.4%. The rupee is trading at 46.34 to the US dollar.

Engineering stocks are trading mixed with Cummins India and AIA Engineering trading firm and Engineers India and Finolex Cables trading weak. Opto Circuits Limited declared its 1QFY11 results. The company has done well with its top line growing by 27% YoY during the quarter. This growth was aided by a 27% YoY growth in the company’s invasive segment and 71% YoY growth in the company’s non-invasive segment. Operating margins for the company remained flat inspite of higher other expenditure as a percentage of sales. This is because of lower raw material costs (as a percentage of sales) which offset this increase. Net profits of the company increased sharply by 40% YoY. This increase came on the back of higher operating income, increase in other income and lower interest costs. Net profit growth could have been higher but for increase in depreciation charges and higher effective tax rates.

Auto stocks are trading down with Tata Motors and Ashok Leyland the top losers. As per a leading financial daily, two wheeler manufacturer Bajaj Auto is planning to re-enter the high performance motorcycles segment with a range of high-end Pulsars next year. It may be noted that the company had changed its focus from high end to low capacity motorcycles to challenge Hero Honda’s dominance in that segment. Bajaj’s Pulsar has received tremendous response and the company is planning to capitalize on this. Although finer details of the new bike are not available, sources say that the new bike will have a 250 cc engine. This bike will compete with the Kawasaki Ninja in engine power but will be available at less than half the price. The market of bikes over 200 cc is not very large. Currently Bajaj sells about 54,000 units per annum of its 220 cc Pulsar. While the market for high end bikes is growing, we believe proper price positioning will be the key to the success of the new bike.

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