Indian markets maintain momentum

Tue, 14 Sep Closing

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After the strong rally witnessed yesterday, Indian markets continued to sustain this momentum in today's trading session as well. Strong buying activity across index heavyweights ensured that the markets closed well above the dotted line in the final trading hour. While the BSE Sensex closed higher by around 138 points (up 1%), the NSE Nifty gained around 36 points (up 1%). The BSE Midcap and the BSE Smallcap, however, bucked the trend as they racked up losses of 1% each. Gains were largely seen in auto, consumer durables and IT stocks.

As regards global markets, most Asian indices closed mixed today while European indices have opened in the red. The rupee was trading at Rs 46.32 to the dollar at the time of writing.

Engineering stocks closed mixed today. While ABB and BHEL found favour, Voltas and Crompton Greaves were at the receiving end. As per a leading business daily, engineering major BHEL has bagged a Rs 26.6 bn order from Dainik Bhaskar Power Ltd. This is for the supply and installation of the main plant package for the latter's 2x600 MW coal-based thermal power project at Baradarha, Chhattisgarh. The scope of the contract includes the design, engineering, supply, erection, testing and commissioning of boilers, steam turbines and turbo generators, along with state-of-the-art controls and other associated auxiliaries for the project. It must be noted that independent power producers accounted for 90% of the orders BHEL received in FY10. BHEL's order backlog stood at Rs 1,480 bn at the end of June 2010, higher by around 19% YoY. Although this provides visibility in terms of revenues in the future, execution will remain the key.

Pharma major Dr.Reddy's has envisaged generating revenues to the tune of US$ 3 bn by FY13. The company in the past three years has made certain changes to its business model. For starters, the company exited from 31 semi regulated markets and has chosen the strategy of partnering with MNCs. The company has identified global generics, pharmaceutical services and active ingredients and biosimilars as key focus areas going forward. It has managed to break into the top 10 generics companies in the world and its aim is to be among the top 5 in the future. In this regard, the US market is expected to propel growth going forward given drugs worth billions of dollars going off patent and the fact that Dr.Reddy's is targeting products having limited competition and higher revenue and profit potential. Betapharm, however, will continue to be a spoke in the wheel given the deteriorating conditions in Germany and the shift from a branded generics market to a tender based one. The stock closed higher by 1% today.

As per a leading business daily, India's WPI calculated using a new base year rose 8.5% in August. This is lower than the 9.8% increase recorded in July and has been attributed to stronger rains bolstering crop production. Having said that, the inflation rate is still way ahead of the RBI's comfort level. This means that the central bank is likely to continue with its policy tightening measures. According to government data, wholesale food price inflation rate has almost halved to 11.47% since December. However, consumer prices paid by industrial and farm workers have been rising faster than 11%. This has largely been due to an increase in wages fuelling the demand for manufactured goods.