There are too may concerns that seem to be clouding the minds of Indian investors these days. Volatility in corporate earnings, high inflation, possibility of interest rate hike, risk of sovereign default and asset bubble in other economies being the prime ones. Thus despite some positive news on the economy and corporate earnings investors seem to have chosen to take some profits off the table. As a result, the benchmark indices failed to make inroads into the positive territory despite struggling through the session. The markets finally closed today extending the losses seen last week. While the BSE Sensex closed lower by around 86 points (down 0.5%), the NSE Nifty lost around 34 points (down 0.6%). Midcap stocks were also at the receiving end, losing 1.3% while smallcaps lost 0.9%. Losses were largely seen in auto, realty and engineering stocks.
As regards global markets, while most Asian markets closed lower today, the European markets have also opened in the red. The rupee was trading at Rs 46.18 to the dollar at the time of writing.
In an effort to help the government stick to its fiscal deficit targets for the current financial year, the RBI will be shelling out an additional Rs 50 bn in addition to the Rs 250 bn of dividend already paid to the government. The higher dividends coupled with the expected disinvestment proceeds to the tune of Rs 250 bn for FY10 are expected to bridge 2009-10 fiscal deficit gap and bring it closer to the target of 5.5% of the GDP. Keeping the fiscal deficit within the estimate will also mean the government not overshooting its anticipated market borrowing that is already at a record high. In the current fiscal, the high market borrowing has depressed the prices of government securities, hitting the treasury income of Indian banks. While the deficit levels may be curbed by these measures, wasted non-plan expenditures can continue to play spoilsport.
Engineering major Voltas announced its results a while ago. While the net sales grew by 4% YoY in 3QFY10, the growth was 12% YoY in 9mFY10. The growth in topline was aided by a relatively better performance from the unitary cooling products business, which grew by 27% YoY during the quarter. Operating margins expand by 3.6% YoY primarily due to substantially lower cost of raw materials (as percentage of sales). This gave a boost to the company's bottomline, which has grown by 60% YoY (excluding extraordinary items). The profit growth was further helped by a fall in interest expenses.
One of India's fastest-growing generic drug companies Lupin is planning to set up three new manufacturing facilities at an investment of Rs 2 bn in Indore. The new facilities are part of the company's aggressive expansion plan to tap the US and Japanese markets. The company plans to get into new niche product areas in dermatology, injectables, eye care and oral contraceptives. It is also looking to acquire established brands in the US market, in segments like paediatric and primary care. Over the last few years, the focus of Lupin's business has shifted from low margin APIs to high margin formulations. This can be gauged by the fact that the contribution of formulations to total revenues has increased from 47% in FY04 to 82% in FY09.