Realty, FMCG stocks drag the markets

Fri, 22 Oct Closing

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Led by selling in stocks from the realty and FMCG sectors, the Indian markets closed the session in the red today. IT and telecom stocks however brought some respite as these closed largely in the positive. On the broader BSE, one stock lost for each one that closed in the positive.

The BSE Sensex and NSE Nifty closed with losses of around 95 points (0.5%) and 40 points (0.6%) respectively. Midcap and smallcap stocks however managed to buck the selling pressure. The BSE Midcap and BSE Smallcap indices closed up by around 0.3% each. The rupee was trading at 44.55 to the US dollar at the time of writing this.

Among other key Asian markets, while China and Hong Kong closed weaker by 0.3% and 0.6% respectively, Japan and Singapore were up 0.5% and 0.3% respectively. European markets have opened in the red.

Software stocks closed mixed today. While gains were seen in TCS and Infosys, selling pressure marked trading in Wipro and HCL Tech. Wipro was in fact the worst performer from the IT pack today. And the reason for this was the company’s poor performance for the quarter ended September 2010, which it announced earlier this morning. The company has grown its net sales by 8% QoQ during the quarter driven by a healthy growth across all its segments. Its operating margins have however declined by 0.9% QoQ due to higher employee costs and impact of foreign exchange movements. Subsequently, the company’s net profits have declined by around 3% QoQ, also impacted by higher interest and depreciation charges.

Another negative factor for the company in 2QFY11 was its attrition level, which increased to 19.4%, as compared to 15.8% in 1QFY11. Wipro’s management has indicated that business from the US continues to see higher traction especially in the healthcare, retail, banking and energy & utilities sectors. However, it has also said that demand from technology and telecom sectors (Wipro’s core competencies) is lagging behind.

Stocks of Indian pharma companies also closed mixed. Gains were seen in Indoco Remedies and Ranbaxy. On the other hand, Piramal Healthcare and Wockhardt saw selling pressure. Biopharma major Biocon announced its 2QFY11 results today. The company has grown its net sales by 17% YoY during the quarter. More importantly, its operating margins have come in higher by around 2%. These stood at 20.6% during the quarter. This helped the company grow its net profits at a faster rate of 20% YoY, as compared to the growth in net sales. The performance for the first half (1HFY11) was equally good. While sales grew by 25% YoY for the period, net profits were up 33% YoY. Today’s gains in the stock add on to the surge it has seen over the past couple of days, since it announced its deal with Pfizer. As per the deal, Pfizer will make an upfront payment of US$ 200 m to Biocon and work on the exclusive commercialization of four of its products.