Midcaps in favour

Tue, 17 Aug 01:30 pm

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The Indian markets saw a volatile trading session as the BSE-Sensex witnessed alternate bouts of buying and selling during the previous two hours of trade. Currently, stocks from the banking, FMCG and oil and gas spaces are amongst the top gainers, while those from the realty, IT and metal spaces are amongst the top losers.

The BSE-Sensex is trading up by around 15 points (up 0.1%), while the NSE-Nifty is up by about 5 points (up 0.1%). Stocks from the mid and smallcaps spaces are seeing some interest as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.4% and 0.3% respectively. The rupee is trading at 46.66 to the US dollar.

Textile stocks are trading mixed with Arvind Ltd. and Welspun trading firm and Raymond and Vardhman Holdings are trading weak. Arvind recently announced its 1QFY11 results. The company's sales fell by 1.6% YoY as a result of lower denim demand. Operating margins improved marginally by 0.3% to stand at 15%. However, net profit for the quarter improved by 108% YoY on the back of profits from sale of land.

As per the management of Arvind, the company is targeting revenues of Rs 40 bn this fiscal, a 25% YoY increase over revenues in FY10. The company expects the topline to be driven by the retail business in the domestic market and its real estate sale. Arvind plans to open 100 Arvind stores in the next two years to bolster its retail presence and is targeting Rs 2 bn in sales from these stores over the next 3 years. The company also plans to capitalize its land bank in Ahmedabad and is targeting revenue of Rs 1 bn, Rs 2.5 bn and Rs 5 bn in FY11, FY12 and FY13 respectively from this business. The focus on retailing is seen as the company's effort to diversify its revenue stream.

Auto stocks are currently trading firm led by Escorts, Hero Honda and TVS Motor. Auto major Tata Motors recently announced its global sales volumes for the month of July 2010. Total volumes increased by 36% YoY to 90,646 units, with Jaguar Land Rover sales coming in at 19,386 units. Sales for the latter grew by 30% YoY. Sales for the UK brands have begun to climb on stronger sales of the newly launched new models. As for the fiscal year till date i.e. the April to July period, total vehicle sales stood at 339,824 units, up by 46% YoY. Of this lot, total passenger car sales stood at 188,094 units (up 53% YoY), commercial vehicle sales stood at 151,730 units (up 38% YoY). It may be noted that during the quarter ended June 2010, the company reported a strong 64% YoY increase in revenues and profit of Rs 20 bn at the net level (as compared to a loss during the corresponding quarter last year). This strong performance was largely driven by sales of its JLR brands. Revival in economic activity in its key markets, favourable currency movements and better product mix helped drive the robust topline growth in JLR.

In another development, the company has also reportedly shuffled the senior management of its passenger vehicle business. This is believed to be a part of a larger plan to tap in-house talent and ramp up sales.