IT, FMCG heavyweights take toll

Mon, 25 Oct 01:30 pm

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The Indian markets began to move towards the dotted line as selling activity intensified during the previous hour of trade. On account of selling activity in select heavyweights from the FMCG and IT packs, the respective indices are leading the pack of losers. On the other hand, the BSE-Consumer Durables and BSE-Metal indices are trading firm.

The BSE-Sensex is trading higher by about 130 points (up 0.7%), while the NSE-Nifty is trading higher by about 35 points (up 0.6%). The BSE-Midcap Index is up by 0.6%, while the BSE-Smallcap Index is up by 0.9%. The rupee is trading at 44.36 to the US dollar.

Stocks of IT majors are trading firm led by TCS, Mahindra Satyam, CMC and HCL Technologies. Gains are also seen in the stock of NIIT, seemingly on the back of the decent set of numbers announced for the quarter ended September 2010. While the company’s revenues declined by 4% YoY, its profits were higher by 11% YoY. The decline in revenues was due to the absence of one-time revenue from the schools business that was seen last year. As for its other two broader segments - corporate learning solutions and individual learning business - they recorded revenue gains of about 11% to 12% on a year on year basis. The company’s operating margins improved to 15.4% as compared to 13.8% last year as the company earned better margins from its individual learnings solutions as well as the corporate learnings solutions businesses. The increase in profits was due to the good performance at the operating level coupled with higher income from associates. During the quarter, the company added 154 employees, taking the total headcount to 3,874. As for its 1HFY10 performance, revenues and profits were higher by 14% YoY and 50% YoY.

Cement companies are trading on a mixed note with significant gains in frontline stocks such as ACC & Ambuja Cement. On the other hand, there is some selling pressure on the counter of Mangalam Cement & Ultratech Cement. ACC & Ambuja Cements have risen considerably post the declaration of their September quarter results last Thursday. While Ambuja posted a marginal decline of 3% in its topline, its net profit fell by almost 52% over the corresponding quarter of the previous year. ACC's topline declined by 15% and net profit was lower by 79% over the same period. While these results may seem poor, it must be noted that these numbers are better than the rest of the industry as this was deemed to be the worst quarter of the recent down-cycle. Sales and earnings are expected to improve starting next quarter.