Markets northbound on heavy buying

Thu, 4 Nov 11:30 am

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Indian indices continued their northbound journey on buying interest in heavy weights over the previous two hours of trade. Stocks from the metal and realty space are the maximum gainers while consumer durable and pharma stocks are the minimum gainers.

The BSE-Sensex is trading up by 336 points while NSE-Nifty is trading 94 points above the dotted line. BSE-Midcap is up by 0.4% while BSE-Smallcap index is trading 0.3% above yesterday's closing. The rupee is trading at 44.32 to the US dollar.

Pharma stocks are trading firm led by Dr. Reddy's Lab and Cipla. Aurobindo Pharma declared its 2QFY11 results. The company's topline during the quarter grew by a robust 26% YoY largely led by robust performance of its formulations business, which grew by 38% YoY. The Anti Retro Viral (ARV) and Rest of the World (ROW) markets were the key contributors to growth. The Active Pharmaceutical Ingredient (API) business' performance was lackluster as revenues grew by a mere 7% YoY. This was largely due to the poor performance of the penicillin and ARV businesses. While revenues of the former declined by 6% YoY, the ARV API business saw revenues fall by 1% YoY. Aurobindo's operating margins contracted by 0.6% during the quarter due to an increase in raw material and staff costs (as percentage of sales). Aurobindo's bottomline grew by an impressive 92% YoY during the quarter. This was largely due to forex gains of Rs 762 m during the quarter (as against forex losses of Rs 36 m in 2QFY10). Excluding this forex loss, net profit growth was much lower at 14% YoY on account of lower other income and higher tax expenses.

Packaging stocks are trading weak with Essel Propack and Ess Dee Aluminium leading the pack of losers. Essel Propack announced its 2QFY11 results recently. Topline grew 20% YoY during the quarter. Sales from Europe improved by 13% YoY, on better performance of the company in UK, Russia and Germany. AMESA and EAP regions grew by 17% YoY and 43% YoY respectively. The Indian operations of the company grew by 15% YoY during the quarter on the back of addition of new customers and product innovation. Consolidated operating profit increased by 24.3% YoY during the quarter. This was a result of fall in staff costs and lower other expenditure (both as a percentage of sales). During the quarter, lower operating loss was recorded from European regions as a result of Russia and UK units ramping up volumes and breaking even in cash terms. The company also managed to curtail losses at its Poland unit. On a consolidated basis, the company's profits grew by 160% YoY. This performance comes on the back of higher operating income, fall in interest payment as well as fall in depreciation expense.