Red marks everywhere

Fri, 19 Nov 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 realty and banking spaces are the maximum losers while stocks from the capital goods and consumer durable space are the minimum losers.

The BSE-Sensex is down by 161 points while NSE-Nifty is trading 51 points below the dotted line. The BSE-Midcap Index is down by 0.8%, while the BSE-Smallcap index trading lower by 0.5%. The rupee is trading at 45.28 to the US dollar.

Textile stocks are trading weak led by Pioneer Embroideries and Vardhaman Holdings. India's largest denim manufacturer, Arvind Limited released its 2QFY11 results recently. The company's top line grew by 7.5% YoY on the back of higher denim sales in the domestic market coupled with improvement in realization. Domestic sales improved by 24.2% YoY while average realization improved by Rs 9 per meter to stand at Rs 127 per mt. Shirting business also performed well with the domestic business growing by 6.1% YoY. Realization also improved by Rs 5 per mt to stand at Rs 130 for the quarter. The company's operating margins fell by 0.9% to 12.5% during this quarter. This was primarily because of increase in raw material costs. Prices of cotton, which is the main raw material for the company, increased from Rs 49 in 2QFY10 to Rs 79 per kg in 2QFY11, an increase of 60% YoY. The company's net profits increased by 85% YoY. This is due to higher other income and lower interest costs.

Sugar stocks are trading mixed with Dhampur Sugars and Uttam Sugars leading the gains. However, Balrampur Chini and Triveni Engineering are trading in the red. In light of credible output expected at the end of this month the government is planning to uplift ban on sugar exports. However, an exact time frame is yet to be decided. It may be noted that in light of production shortfall government had banned sugar exports. Nonetheless, in anticipation of good harvest in this sugar year one cannot rule out exports in the near term. It may be noted that India, world's top producer after Brazil, has been facing acute shortage of sugar over the last 2 years due to poor weather conditions which impacted the production and political bureaucracy with respect to cane pricing which created an artificial shortfall. However, over time with clarity over cane pricing and improving weather conditions the production levels have increased. Thus, government is exploring the possibility of exporting the produce in a gradual manner.