Consolidating in narrow territory

Tue, 26 Oct 11:30 am

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After starting today's session on a negative note the Indian indices have recouped some losses. Other key Asian markets are trading mixed with Japan leading the gainers. Currently, heavyweights in the Sensex are trading mixed with stocks from banking and consumer goods space bearing the brunt of profit booking. However, auto and consumer durable stocks are trading firm.

Currently, the BSE-Sensex is trading up by around 4 points, while the NSE-Nifty is down by about 1 point. However, there has been some buying interest amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.3% and 0.7% respectively. The rupee is trading at 44.43 to the US dollar.

Pharma stocks are trading mixed with Indoco Remedies and IPCA labs leading the gains. However, Biocon and Ranbaxy are trading in the red. Dr Reddy's is planning to sign some in-licensing deals with a few Indian firms to expand in Russia. This would present an opportunity to explore US$ 12 bn Russian generic market. In addition, the company has also earmarked US$ 100-150 m for the next two to three years for expansion in the domestic market. It plans to have a basket of over 50 products in this year and has already launched over 24 products. Dr Reddy's is also planning to launch bio-similar products in the country and has plans to take them to emerging markets. Although, European market has seen de-growth, the company has witnessed improved success rate in recent tenders for vertically integrated products and is in the process for bidding for the next set of products.

FMCG stocks are trading mixed with Marico and Dabur trading firm while Procter & Gamble Hygiene and Health Care Ltd. (PGHH) and HUL are trading weak. PGHH declared its 1QFY11 results yesterday. The company's top line has grown by a mute 1% YoY during the quarter. This lackluster performance comes on the back of price cuts and increase in excise duty. The feminine hygiene category grew by 24% YoY in volume terms while sales growth for this category stood at 9% YoY. On the other hand, sales of the health care business grew by 12% YoY.

Operating margins of the company fell by 15% to stand at 15.8%. This was due to increase in raw material costs, higher staff costs, rise in advertisement spending and higher other expenditure (all as a percentage of sales). Net profit for the quarter fell by 39% YoY while net margins fell by 9.1% to stand at 13.7%. This performance was because of lower operating income, partially offset by higher other income, lower depreciation costs as well as lower effective tax rate.