Profit booking takes toll

Fri, 23 Dec Closing

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   09:30 am   

   11:30 am   

   01:30 pm   

Indian stock markets had a rather volatile outing today. The indices began the day's proceedings on a cautious note and the larger part of the day saw the markets struggling to stay afloat. However, in the afternoon session, profit booking finally took toll and pushed the indices into the red. There was no respite in the final trading hour as well and the indices closed well below the dotted line. While the BSE-Sensex closed lower by around 75 points (down 0.5%), the NSE-Nifty closed lower by around 20 points (down 0.4%). While the BSE Mid Cap index remained flat, the BSE Small Cap index bucked the trend and notched gains of 1%. While auto stocks found favour, banking and consumer durables stocks were at the receiving end.

As regards global markets, Asian indices closed mixed today while the European indices have opened in the green. The rupee was trading at Rs 52.85 to the dollar at the time of writing.

As per a leading business daily, Asian Paints is likely to face the heat as far as its earnings are concerned going forward. This is on account of fierce competition and possible increase in raw material prices. Competition has increased in the paints space with players such as Akzo Nobel, Kansai Nerolac, Berger and Nippon becoming aggressive in terms of advertisement spends and product innovations. As a result, the company may find it difficult to pass on any rise in raw material prices in the form of price hikes to consumers. It must be noted that for paint companies, one of the key raw materials is titanium dioxide, the prices of which are likely to increase from 2012. The fact that Asian Paints is facing pressure on profits was evident in the first half of FY12. While sales, during this period, grew by a healthy 24% YoY on the back of buoyancy in demand, operating margins declined by 2.7% on account of significant raw material price inflation. What is more, the company refrained from increasing prices in 2QFY12 in order to safeguard its market share. The stock closed lower today.

Power stocks closed mixed today. While Neyveli Lignite and Power Grid Corporation found favour, National Thermal Power Corporation (NTPC) and Tata Power closed in the red. As per a leading business daily, NTPC is looking at long-term coal import tie-ups and excavation of its own mines to meet the shortfall from domestic sources. It must be noted that at present, NTPC has a current power generation capacity of over 34,000 MW. Of this, a large chunk comes from coal-based thermal power plants. The company aims to ramp it up to 70,000 MW by 2017, for which it would require more domestic coal. Indeed, the company faced issues with respect to volumes during 2QFY12, which declined on account of the 11% YoY fall in the receipt of domestic coal. This was on account of excessive rains as well as the Telengana agitation. While the company has coal linkages for 9 new projects with a total capacity of 10,920 MW and a gas supply agreement for 14.5 MMSCMD of gas, fuel supplies remain a hindrance to growth. NTPC plans to import 23 MT of coal in FY12 against an import of 14 MT in FY11.