Investors prefer largecaps over peers

Thu, 19 Aug 01:30 pm

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Although the markets retreated after touching the day's high during the previous hour of trade, they are still trading well above the dotted line. Barring stocks from the realty and PSU spaces, stocks across sectors are trading firm led by FMCG, banking and consumer durables. The market breadth is positive at the moment with there being 1.4 gainers for every loser on the overall BSE.

The BSE-Sensex is trading higher by around 160 points (up 0.9%), while the NSE-Nifty is higher by about 50 points (up 0.9%). Stocks from the mid and small cap spaces are also finding some favour with the BSE-Midcap and BSE-Smallcap indices up by 0.6% each. The rupee is trading at 46.53 to the US dollar.

FMCG stocks are trading mixed with Archies and Godrej Consumer trading firm, while P&G and Colgate are trading weak. P&G released its full year results. The company's top line grew by 17% YoY during the year. This performance came on the back of strong double digit growth in the company's feminine hygiene segment. The feminine hygiene segment grew by 22% YoY in value terms during the year. The top line was also supported by the healthcare business which grew by 11% YoY. The company's operating margins fell by 1.6% as a result of higher raw material costs. The operating margin was also affected by increase in advertisement costs as the company invested in brand building and launching new products. The company's bottomline remained flat while the net profit margins declined by 3.2% to stand at 19.9%. This was a result of fall in other income and higher depreciation charges.

Healthcare stocks are currently trading firm led by Dishman Pharma, Aurobindo Pharma and Biocon Limited. A leading business daily recently reported that pharmaceutical major Dr Reddy's is looking for partners for its expansion into the Japanese generics market. In the past few years generics in the Japanese pharma market had not really taken off. One of the possible reasons for the same was that generic drugs were perceived to be of inferior quality. The scenario has, however, been changing in recent times given that the aged population in Japan has been increasing and because the Japanese government is under pressure to reduce healthcare costs. With Dr. Reddy's tying up with a Japanese firm, the company would be able to boost sales from the region as the products would be associated with the local Japanese firm as well. It may be noted that Japan is the second largest healthcare market in the world and hence Dr. Reddy's is looking to capitalise on the same to bolster overall revenues from generics. It is believed that at present, Dr. Reddy's has a small presence in Japan through its Active Pharmaceutical Ingredients (API) business. However, the company's management has not divulged details regarding the mode of partnership that it is looking to get into.