Mid and small-caps buck the trend

Mon, 31 Oct 01:30 pm

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The Indian stock market recouped some losses on account of buying interest in heavyweights during the last two hours of trade, but is still in the red. Stocks from the oil & gas, auto, metal and healthcare sectors are leading the pack of losers while those from banking and software space are finding investor favour.

The BSE-Sensex is trading down by 35 points while NSE-Nifty is trading 15 points below Friday's closing. However, the BSE Mid Cap and BSE Small Cap indices are trading up by 0.5% and 0.4% respectively. The rupee is trading at 48.74 to the US dollar.

Software stocks have been trading mixed with CMC Ltd, HCL Infosystems and Wipro leading the pack of gainers. However, Mahindra Satyam and Moser Baer (India) are trading weak. Wipro has announced the second quarter results of financial year 2011-2012 (2QFY12). The company has reported a 6.1% quarter on quarter (QoQ) growth in sales. The topline was largely driven by a 6.6% QoQ growth in Information Technology (IT) services business, on the back of a healthy volume growth of nearly 6.0% QoQ during the quarter. The operating margins declined by 1.2% QoQ due to higher cost of revenues (as a % of sales) which offset the positive effects of margin decline in selling & marketing as well as general and administration expenses (both as a % of sales). The bottomline of the company was down 2.5% QoQ on account of lower operating margins, lower other income and higher interest charges, which offset the positive effects of higher exchange gains and lower tax expense during the quarter. The company reported a decline in the attrition rate to 21.1 % as compared to 22.6% for the previous quarter ending June 2011).

Auto stocks have been trading mixed as well with TVS Motor, Tube Investments of India and Ashok Leyland leading the pack of gainers. However, Tata Motors and Mahindra and Mahindra (M&M) are trading weak. Maruti Suzuki has reported its results for the second quarter of financial year 2011-2012 (2QFY12). The net profit for the company slipped down by 60% year on year (YoY) during the quarter. The topline also declined by 15.7% YoY on back of volume decline of 19.6% YoY. As per the management, the company has faced a production loss of 83,000 cars, a shortfall that translates to around US$500 m. Last week, the company had resolved the labour unrest at its plant in north India that started in June. The company reported an operating margin at 3% during the quarter versus 8.1% last year. Besides a drop in vehicle sales, the margins were hit by adverse foreign exchange rates. It is in advanced talks with Italian automaker Fiat to source diesel engines and expects the deal to be finalized in 2 months. The company's board has also approved a land purchase in the western Gujarat state for expansion of manufacturing facilities in the coming times. As per the management, the company would invest nearly US$1.3 bn to set up a new plant likely in Gujarat. The stock of the company is trading flat.