Auto stocks lead the rally

Fri, 30 Apr Closing

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Led by sustained buying activity across index heavyweights, Indian indices closed well above the dotted line although trading was rangebound for the larger part of the day. While the BSE Sensex closed higher by around 55 points (up 0.3%), the NSE Nifty gained around 24 points (up 0.5%). The BSE Midcap and the BSE Smallcap indices also notched gains of 1% and 0.4% respectively. Barring metals, most stocks across sectors closed firm today.

As regards global markets, most Asian indices closed in the green today, while the European indices have opened on a mixed note. The rupee was trading at Rs 44.42 to the dollar at the time of writing.

Pharma stocks closed mixed today. While Cipla, Dr.Reddy's and Cadila Healthcare found favour, Sun Pharma and Piramal Healthcare closed in the red. Cadila Healthcare announced its FY10 results yesterday. The topline grew by a healthy 26% YoY during the year led by 45% YoY growth in formulation exports, 28% YoY growth in API exports and 37% YoY growth in the consumer business. The growth in the formulations export business was attributed to the 69% YoY growth in sales from the US market and 31% YoY growth in the EU market. Operating margins improved by 1.2% to 21.9% in FY10 largely due to a considerable fall in purchase of traded goods (as a percentage of sales). Bottomline (excluding the extraordinary items) grew at a healthy rate of 63% YoY and was on account of strong growth in operating profits, reduction in interest costs and lower forex losses.

Siemens has announced its 2QFY10 results (September ending fiscal). Sales fell by 7% YoY in 2QFY10 as the power transmission business saw a 40% YoY fall in sales and contributed 24% to the overall topline. Operating margins contracted to 12.3% on account of significantly higher cost of traded goods, employee costs and other expenditure (as percentage of sales). Net profits fell 20% YoY during the quarter owning to margin contraction. Profits fell 25% YoY during the half year period, largely due to much higher other income in the comparable period last year. The stock closed 1% higher today.

India's state and central fiscal deficit stood at a combined 9.7% of GDP in FY10. And Takahira Ogawa, S&P's director for sovereign and international public finance ratings, is of the view that it will take several years for India to get its combined fiscal deficits to desirable levels. Ogawa believes that soaring prices are a worry for India. He also opines that the RBI's inflation projection of 5.5% for FY11 would be difficult to achieve. Infact, inflation and a higher deficit are major concerns for India. They could thwart India's growth which has been pegged at 8.5% this fiscal. What is more, India's fortunes will also depend on how monsoons this year pan out. Indeed, it will be a challenging task for the Indian government to keep both inflation and the deficit in check in the coming years.