Todays Market from Equitymaster

Markets overcome stubborn resistance

Wed, 8 Feb 2012 10:30:00 GMT

Some stubborn resistance towards the fag end of the day was finally overcome. And as a consequence, indices in the Indian stock market closed in the green on yet another occasion. While Sensex edged higher by close to 85 points (up 0.5%), gains on the NSE-Nifty came in at close to 33 points. BSE Mid cap and BSE Small cap indices fared even better, edging higher by 1.5% and 0.9% respectively. More than 3 stocks gained for every one that closed the day in the red on the BSE-Sensex.

As far as other Asian markets are concerned, all of them registered strong gains with Europe too trading in the positive currently. The rupee was poised at Rs 49.2 to the dollar at the time of writing.

With today's gains, markets are now up nearly 15% than when they started the year. A good achievement indeed. However, the gains are not restricted to India alone. A lot of other risk assets have gone up too so far this year. This has perhaps to do with the fact that confidence is making a comeback in the global markets and investors are going in droves into high risk, high return emerging markets like India. But we don't think this confidence is built on firm grounds. Problems in the developed economies still persist and one adverse development is all that will take to diminish confidence. This should not deter long term Indian investors though as the same may present them the opportunity to buy into fundamentally strong stories at attractive valuations.

Auto stocks traded mostly strong today with Ashok Leyland and Hero MotoCorp being the leading gainers. The gains are supposed to have come in on account of a good performance by the auto sector in the month gone by. As per SIAM, the industry body, cars recorded a growth of 7% YoY in January, its third consecutive monthly rise this fiscal. It should be noted that car sales had been in decline for the first few months of FY12, mainly on account of strong growth witnessed in FY11 and also weak economic environment. And though the sales have improved November 2011 onwards, they are unlikely to make up for the drop in the earlier months of the fiscal. Thus, the industry may well miss its sales projection for FY12 of 0-2%.

Opto Circuits, one of India's leading makers of medical equipment, also closed higher on the bourses today. What led to the buoyancy was the company's strong performance in the December 2011 quarter. On a consolidated basis, the company posted a growth of 31% YoY in its net profit on the back of a near 42% increase in its total income. Standalone profits came in higher by more than 7% even as the topline growth came in nearly flat. The management observed that its efforts towards expanding presence in emerging markets, with a renewed focus on India, have begun to bear fruit. The company also recommended to issue bonus shares to the tune of 3 shares for every 10 share held in the company.

This article (Markets overcome stubborn resistance) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.

Stock market indices trade firm

Wed, 8 Feb 2012 08:00:00 GMT

Posted by Equitymaster

Indian stock markets pared some gains in the last two trading hours but continued to trade well above the dotted line. Majority of the sectoral indices are trading positive with realty and consumer durables trading the strongest. Healthcare and FMCG stocks are the only losers.

The BSE-Sensex is trading up 80 points and NSE-Nifty is trading up 30 points. The BSE Mid cap and BSE Small cap indices are up by 1.22% and 1.23% respectively. The rupee is trading at 49.08 to the US dollar.

Majority of the telecom stocks are trading in the green. Telecom major, Bharti Airtel has announced its December 2011 quarter results. The company reported a revenue growth of around 17.3% YoY backed by double-digit growth in all segments barring telemedia service segment that witnessed a tepid growth of 0.7% YoY during the quarter. The company's minutes of usage (MoU) declined marginally to 419 minutes per subscriber per month after hike in promotional tariffs in some of its key circles. Bharti's operating margins stood at 32.2% during 3QFY12, which was higher than the 31.7% seen during the same period last year. Operating expenses were lower on account of the savings in staff costs as well as in selling, general and administrative expenses. However, the company's net profits declined by 22.4% YoY due to higher interest costs as well as higher depreciation charges during the quarter. The stock is down 5%.

Most of the engineering stocks are trading positive with Emco Ltd and AIA Engineering being the biggest gainers. As per a leading financial daily,Larsen & Toubro (L&T)'s arm L&T Construction has bagged fresh orders valued at over Rs 18.8 bn under various business segments during the December 2011 quarter. Bulk of the order worth Rs 10.48 bn was bagged by the Infrastructure segment. In the water and effluent treatment business, the company has secured orders worth Rs 3.48 bn from Gujarat Water Infrastructure Ltd. In the Power Transmission & Distribution IC, the company received new orders worth Rs 2.6 bn and additional orders from various ongoing projects worth Rs 2.2 bn have been bagged. While this is a positive for the company in terms of revenue visibility, execution is the key. L&T stock is up 0.75%.

This article (Stock market indices trade firm) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.

Indian stock markets move higher

Wed, 8 Feb 2012 06:00:00 GMT

Posted by Equitymaster

Indian stock market indices traded strong over the last two hours of trade on the back of heavy buying activity witnessed across index heavyweights. Realty and Consumer Durable stocks witnessed maximum buying interest.

The BSE-Sensex is up by 135 points, while the NSE-Nifty is up by 37 points. BSE Mid cap index and the BSE Small cap index are up by 1.18% and 1.28% respectively. The rupee is trading at 49.05 to the US dollar.

Aluminium stocks are trading mixed with Hindalco trading in the green, while Nalco is trading in the red. State run National Aluminium Company Limited (NALCO) has announced results for the quarter ended December 2012. The company reported a 0.4% YoY increase in net sales and an 80% YoY decline in net profits. Operating profits declined by 83.6% YoY on account of higher expenditure and lower LME (London Metal Exchange) aluminium prices. The sharp drop in LME aluminium prices has made it unviable for several aluminium producers across the globe to operate, forcing them to partially shut down smelters. For the nine months ended December 2011, net sales increased by 14.1% and net profits declined by 23.1% as compared to the same quarter previous year.

Steel stocks are trading strong led by Tayo Rolls and JSW Ispat. As per a leading daily, Steel Authority of India Limited (SAIL) will be hiking the prices of long products by up to Rs 3,000 per tonne. The hike will be effective from February 1, 2012. The steel company has raised the prices of TMT bars by Rs 2,500 per tonne and that of angles by Rs 3,000 per tonne. The revised prices of TMT bars and angles are Rs 40,000 per tonne and Rs 37,500 per tonne respectively. Channels are now priced at Rs 37,500 per tonne up from earlier Rs 35,000 per tonne. SAIL has kept prices for hot-rolled and cold-rolled coils unchanged. It may be noted that construction activity has gathered pace in the country and TMT bars, angles and channels are used in the construction sector.

This article (Indian stock markets move higher) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.

Indian stock markets open in the green

Wed, 8 Feb 2012 04:00:00 GMT

Posted by Equitymaster

Despite the uncertainty surrounding the Greek debt deal, Asian stock markets have opened the day on an upbeat note. Stock markets in Taiwan (up 1.5%), South Korea (up 0.8%) and Japan (up 0.7%) are leading the gains in the region. The Indian stock markets have opened the day on a positive note as well. Stocks in the realty and FMCG sectors are leading the pack of gainers. However, auto and banking stocks are witnessing selling pressure.

The BSE-Sensex is up by around 25 points (0.1%), while the NSE-Nifty is up by around 7 points (0.1%). Mid cap and small cap stocks are trading in the positive zone as well, with the BSE Mid cap and the BSE Small cap indices up by about 0.4% and 0.5%% respectively. The rupee is trading at Rs 49.22 to the US dollar.

Engineering stocks have opened the day in the positive zone with Jyoti Structures, KSB Pumps and Punj Lloyd trading in the green. Greaves Cotton, one of India's largest engine manufacturers, has declared its third quarter results for the financial year 2011-2012. On a standalone basis, the company has reported a 10.8% YoY growth in net sales. The growth was led by the 16.9% YoY growth in the company's engines division. However, its positive effect was partially offset by the 24.8% YoY decline in the sales of the company's infrastructure division. Raw material price inflation, higher other expenses and non recurring items led the operating profits to drop by 18.1% YoY during the quarter. As a result, operating margins declined to 12.6% during the quarter as compared to the 17% seen during the same period last year. Lower operating margins as well as higher depreciation expenses led net profits to decline by 23% YoY during the quarter. The company has declared a dividend of Rs 0.4 per share during the quarter.

Container Corporation of India Ltd (Concor) has declared its third quarter results for the financial year 2011-2012 (3QFY12). The company has reported a 7.7% YoY growth in net sales. This was mainly account of the increase in volumes as the company has not increased the freight rates. However, it did fully pass on the 11.8% increase in surcharge by railways to its customers. Operating profits for the quarter declined marginally by 1.1% YoY during the quarter. As a result, operating margins came in lower at 26.5% as compared to 28.9% seen during the same period last year. This was mainly on account of running a higher number of empty rakes during the quarter which led to an increase in operating costs. Net profits for the quarter increased by 5.1% YoY despite the decline at operating levels. This was due to higher other income as well as lower tax outflow during the quarter. The stock of the company has opened the day in the red.

This article (Indian stock markets open in the green) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.

Stage set for a better growth

Wed, 8 Feb 2012 03:00:00 GMT

Posted by Equitymaster

We do not think that anyone would be surprised to know that the Indian economy is going to report 6.9% growth for the current fiscal year 2011-12. This is the number estimated by the Central Statistical Office, a government body responsible for coordination of statistical activities in the country and maintaining statistical standards. The data is somewhat in-line with the general expectation as most of the people are looking at a number around 7%. However, what is surprising in the estimation was the projected growth in the agricultural output. Considering two good harvests and close to 7% growth in the first half of the year itself, 2.5% growth projection for the agricultural sector for the full year looks like a conservative estimate.

Well, there are several obvious reasons for the projected slower growth in GDP as compared to the last fiscal year 2010-11. Higher interest rates, stubborn inflation, policy paralysis, lower business confidence and lack of infrastructure were the main causes for the slower growth. Also, prevailing uncertainty in the global economic environment added to the woes and hurt the exports. In addition, slowdown in the investment activities led the growth rate to sub 7% level.

Is 7% number all bad We definitely do not think so. No doubt, the number looks dismal compared to the 9-10% growth expected from the Indian economy, especially when it logged these rates in the years before the global financial crisis. However, looking at the performance of other large economies and gloomy economic conditions around the world, it is not that bad. Especially when infrastructure in the country continues to remain poor. However, in our view, the Indian economy definitely has the potential to perform better going forward.

And the good news is that stage is getting set for the ensuing fiscal 2012-13. It starts with the inflation numbers which shows that inflation is easing out now. Then, the encouraging policy actions taken by the Reserve Bank of India (RBI). Recently, RBI cut the cash reserve ratio (CRR) by 0.5% and eased some liquidity in the system. The budget is also expected to announce some positives on the reform front. Business confidence is coming back which is truly reflected in the surge in investments made in the Indian economy by foreign investors. However, the debt crisis in Europe and rising debt and recession in the US means that conditions in the developed world are likely to remain subdued for some more time.

However, these are near term concerns and the Indian growth story still remains intact from a long term perspective. Moreover, if the government focuses on improving infrastructure in the country, there is no reason why the country should not achieve higher growth rate on a sustainable basis in the longer term.

This article (Stage set for a better growth) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.