Markets trading flat with negative bias

Fri, 20 Aug 11:30 am

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After starting today's session on a negative note Indian indices are still languishing in the red. Other key Asian markets are in the red as well with Nikkei (down 1.7%) leading the pack of losers. Currently heavyweights in the Sensex are trading flat with stocks from FMCG and IT space leading the losers. However, stocks from consumer goods and realty space are enjoying investor interest.

Currently, the BSE-Sensex is trading down by around 28 points, while the NSE-Nifty is down by about 5 points. Buying interest is also muted amongst the mid and small cap stocks as the BSE-Midcap is trading flat while BSE-Smallcap is trading higher by 0.3%. The rupee is trading at 46.58 to the US dollar.

Capital goods stocks are trading mixed with Areva T&D and Reliance Industrial Infrastructure leading the gains. Praj Industries and Suzlon are facing selling pressure. Crompton Greaves recently announced that it is looking to bridge gaps in technology and markets through acquisitions. It may buy companies based on technological ability and customer outreach. It will be willing to spend upto US$ 1 bn for a deserving buy. The company is relatively debt free with a debt/equity ratio of 0.2 times. It will be able to raise funds easily based on its balance sheet strength. The company is looking specifically at technology involved in bulk transmission of electric power called High Voltage Direct Current or HVDC. According to a leading business daily, the company expects a 15-16% growth in Indian operations. The firm's order book stood at Rs 63 bn at the end of July 2010 and sees an uptick in orders in FY11. The company also plans to invest Rs 4-4.5 bn in capex in FY11. This will be used for scaling up capacity, improving quality, and employing better technology.

Power stocks are trading mixed with GVK Power and Voltamp Transformers leading the gains. However,CESC and Tata Power are facing selling pressure. Gujarat Industrial Power Co Ltd (GIPCL) announced its 1QFY11 results recently. The company reported a flat sales performance during 1QFY11. The company's total power generation declined by 4% YoY, led by lower capacity utilization at two of its three plants – Vadodara Station II, and Surat Lignite Power Plant (SLPP). GIPCL reported an operating margin of 25.4% during 1QFY11. This was higher by 0.9% as compared to the margin in 1QFY10. This expansion in margins was brought about by lower fuel costs. These costs declined to 64.3% of sales in 1QFY11, from 66.8% in 1QFY10. Led by higher operating margins, and mainly due to a one-time tax credit, GIPCL's net profit grew by a strong 42% YoY during 1QFY11. The interest costs also came down by 26% YoY. Excluding the one-off tax credit of Rs 88 m during the quarter, the net profit growth stands at just around 12% YoY.