Auto drives markets in the red

Fri, 29 Oct 11:30 am

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Indian indices continue to languish in the red on profit booking in heavy weights over the previous two hours of trade. Stocks from auto and metal space are seeing a sell off while stocks from consumer durable and oil & gas space are seeing buying interest.

The BSE-Sensex is trading down by 46 points while NSE-Nifty is trading 11 points below the dotted line. BSE-Midcap is down by 0.3% while BSE-Smallcap index is trading 0.5% below yesterday's closing. The rupee is trading at 44.53 to the US dollar.

FMCG companies are trading mixed with Pidilite Industries and Gillette India trading firm and Archies Limited and Paper products trading weak. Colgate Palmolive India Limited released its 2QFY11 results yesterday. The company's top line grew by 13.2% YoY on the back of 13% YoY volume growth. Toothpaste category grew by 12% YoY while toothbrush category saw a 24% YoY growth. Both categories grew faster than market, gaining market share. New category of mouthwash grew sharply with market share of Plax mouthwash increasing from 6.4% at the end of September 2009 to 16.3% at the end of September 2010. Toothpowder lagged market growth losing marginal market share. Operating income grew by 17.2% on the back of fall in raw material costs as a percentage of sales and fall in advertisement spending. However, rise in other expenditure capped operating income growth for the quarter. Bottom line grew slower than operating income registering growth of 11.8% YoY. This is due to higher effective tax rates as a result of Colgate exhausting some of its tax exemption benefits.

Engineering stocks are trading mixed with Elgi Equipments and Bharat Bijlee leading the gains. However, ABB and Atlas Copco are trading in the red. Elecon Engineering has announced its 2QFY11 results. Revenues grew 10% YoY. The company was able to clock this growth largely due to growth in its transmission equipment (TE) business (which recorded a 33% YoY growth during the quarter). On the other hand, its material handling equipment (MHE) business saw a fall of 3% YoY in its revenues during the period. Operating margins contracted by 0.2% YoY during the quarter. This is on account of higher staff cost and other expenses. During the quarter, the company's net profits grew by 32% YoY. One of the reasons for this robust increase was a 20% YoY fall in interest expenses during the quarter. Thus, despite a 25% YoY increase in depreciation charges, the company was able to turn in a good performance on the net profits front.