Realty and IT stocks drag indices

Mon, 31 Jan 11:30 am

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Indian indices, though still in the red, recouped some of their opening losses on buying interest in heavy weights over the previous two hours of trade. Stocks from the IT and realty space are trading weak, while stocks from the oil & gas and capital goods space are trading firm.

Currently, the BSE-Sensex is down by 163 points, while NSE-Nifty is trading 41 points below the dotted line. BSE Midcap and BSE Small cap indices are both down by 1.1%. The rupee is trading at 45.96 to the US dollar.

Food stocks are trading lower currently led by Tata Coffee and Lakshmi Energy. ITC is planning to invest up to Rs 30 bn to set up a paper manufacturing unit in Andhra Pradesh in order to double its capacity over the next five years. Right now, the company has four manufacturing units with a total capacity of 5.5 lakh m tonnes per annum. With the setting up of a greenfield project the overall capacity is expected to increase by an additional 2.5-3 lakh tonne per annum. The company has already received the clearance from the Andhra government and proposes to finance the project through internal accruals. It may be noted that currently the paperboards and specialty division contributes about 12% to the top line and with the expansion plans the contribution is set to increase in the future. Further, considering that the demand for paperboard in the country is expected to grow by 8-10% on an annual basis, the decision to expand capacity offers decent headroom to garner incremental market share. The stock is trading lower currently.

FMCG stocks are trading mixed with Dabur and Paper Products trading firm and Gillette India and Camlin Ltd. trading weak. Procter & Gamble Hygiene and Health Care Limited (PGHH) declared its 2QFY11 results. The company’s top line grew by 8.5% YoY. This was the result of 15% YoY volume growth during the quarter. However, the realization was lower as a result of increase in excise duty. Both the company’s business segments i.e. feminine hygiene and health care showed robust growth supported by Whisper Ultra, Whisper Choice and Vicks. Operating margins of the company, however, declined by 16.7% to stand at 18.6%. This was due to sharp increase in input costs, higher advertisement expense as a result of brand building and increase in other expenditure. Bottom line of PGHH fell by 40% YoY. This disappointing performance was due to fall in operating income partly offset by higher other income and fall in effective tax rate.