Banking, metal stocks drag markets

Wed, 27 Oct 09:30 am

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Indian markets have opened today on a weak note. This follows the weakness in other key Asian markets like China and Hong Kong. Currently, stocks from the banking and metal sectors are trading weak. On the other hand, energy and power stocks are witnessing some buying interest.

The BSE-Sensex is trading lower by around 45 points (0.2%), while the NSE-Nifty is down about 15 points (0.2%). Mid and small cap stocks are however trading in the positive with the BSE Midcap and BSE Small cap indices trading higher by around 0.2% each. The rupee is trading at 44.64 to the US dollar.

FMCG stocks have opened the day on a mixed note. While gains are currently being seen in Colgate and Hindustan Unilever, selling pressure marks trading in Pidilite and Marico. Hair oil major Marico announced its 2QFY11 results yesterday. The company has reported a 13% YoY growth in its net sales during the quarter, which was aided by a strong 15% YoY growth in volumes. However, its operating margins declined by 0.5% during the quarter to 12.7%. This came on the back of higher raw material costs, though partly offset by lower advertisement, sales promotion expenses, and lower other expenses (all as percentage of sales). Subsequently, Marico's net profits grew by 15% YoY, also duly helped by higher other income, lower interest costs, lower depreciation charge and a fall in effective tax rate. The company, which raised its product prices (Parachute and Saffola) in August to offset high input costs, is now looking set to take additional price increases this month. As per reports, these hikes can be in a range of 6-8%. Overall, Marico continues to perform well on the back of consistent growth in its volumes. Further, it is also seeing good traction in international businesses.

Mixed interest is also seen in stocks from the software sector. Wipro and Mahindra Satyam are trading with gains currently. On the other hand, Tech Mahindra and HCL Tech are leading the losers' pack. Tech Mahindra announced its 2QFY11 results yesterday. The company's sales grew by 35% QoQ. However, sales during the quarter include one-time revenue of almost Rs 3 bn of third party hardware and software purchased for a customer. Excluding this, revenues grew by 9% QoQ. The company's net profits were up 4% QoQ during the quarter. Tech Mahindra has started consolidating the results of Mahindra Satyam from this quarter onwards. Hence, net income was impacted by the Rs 367 m loss from associates. Revenues from Europe continued to witness a decline thus underpinning the slow recovery of the telecom sector in the region. The surprise element was a decline in sales from the US as well. However, sales from the rest of the world offset the decline from other regions. The company has trimmed its employee base and has managed to improve its utilisation levels as well. It added a net of 7 new clients during the quarter.