India follows a weak Asia

Fri, 29 Oct 09:30 am

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Asian stocks have opened largely weak today, seemingly on the back of caution ahead of the release of the US economic growth data. Benchmark indices of China, Hong Kong, and Japan are currently trading in the negative. As for the Indian markets, these have also opened weak today. Currently, stocks from the banking and metal sectors are trading amidst losses. On the other hand, energy and FMCG stocks are witnessing some buying interest.

The BSE-Sensex is trading lower by around 50 points (0.3%), while the NSE-Nifty is down about 15 points (0.3%). Mid and small cap stocks are also trading in the negative with the BSE-Midcap and BSE-Smallcap indices lower by around 0.1% each. The rupee is trading at 44.52 to the US dollar.

Stocks from the power sector have opened on a mixed note. While gains are being seen in Reliance Power and NTPC, selling pressure has marked trading in Tata Power and Torrent Power. Power trading major, PTC India, announced its 2QFY11 results yesterday. The company has reported a marginal 0.5% YoY growth in its net sales for the quarter. This is despite a decent 21% YoY growth in volumes traded. The lack of growth can be largely attributed to the drop in realisations (revenue per unit traded) Operating margins have however improved to 1.5%, from 1.2% in the corresponding previous quarter. The improvement in margins has been helped by lower staff costs (as percentage of sales). This was subsequently a result of reversal of employee stock option expenses. Staff costs were in fact a negative figure during the quarter. Consequently, helped by better operating margins and lower taxes, PTC's net profit has risen by 29% YoY during the quarter. Sales and profit growth for the first half (1HFY11) has come in at 8% YoY and 5% YoY respectively. The management has maintained its view that the company is poised to grow at an average annual rate of 25-30% over the next few years. This is on the back of the power purchase agreements that it has signed over the past two years.

MNC pharma stocks are also trading mixed currently. Aventis and Pfizer are trading strong. On the other hand, Abbott and GSK Pharma are trading in the red. GSK Pharma announced its 3QCY10 results yesterday. The company's sales grew by 14% YoY during the quarter. This was led by strong growth in its mass markets, mass specialities, and specialities businesses. The vaccines business also did well during the quarter. The company's new products launched in the last two years also contributed to growth. For the nine month period, growth in sales stood at 14% YoY. Anyways, GSK's operating margins dipped by 1% YoY due to higher raw material costs. As per the management, margins for the full year are expected to be in a range of 33-35%, somewhat lesser than the 2QCY10 margins. As for the net profits, these grew by 12% YoY during the quarter. Profits were aided by the growth in sales and higher other income, but partially offset by higher taxes. Going forward, the company plans to continue focusing on the priority products and increase contribution from the chronic therapy segment through in-licensing and brand acquisitions.