The benchmark indices remained directionless till the end of the session today. They were perched reasonably above the dotted line in the final hours but ended the day only marginally in the positive. Despite the weakness in infrastructure and telecom stocks, players in the commodity and software sectors managed to keep the indices in the green.
The BSE-Sensex closed with gains of around 27 points whereas the NSE-Nifty closed almost flat. BSE Midcap and BSE Small cap indices had a relatively better outing, closing higher by 0.5% and 1% respectively. Most Asian indices closed in the positive today whereas Europe has also opened on a positive note. The rupee was trading at Rs 45.46 to the dollar at the time of writing.
MNC pharma major Novartis has announced its 3QFY11 results. The company's revenues for 3QFY11 grew by 12% YoY and were largely led by growth across all businesses. Revenues from the pharma division, which accounts for 70% of total sales, grew by a decent 14% YoY. The OTC business continued to do well as sales from this segment also grew by 14% YoY. While the generics business grew by 21% YoY, sales growth of the animal healthcare business was healthy at 18.5% YoY. Novartis' operating margins substantially improved by 6.7% to 22.3% during the quarter due to reduction in all expenses (as percentage of sales). Raw material costs, in particular, fell from 39.3% of sales in 3QFY10 to 36.4% of sales in 3QFY11. Further, if one looks at the segmental performance, there was a huge ramp up in the PBIT margins of the generics and the pharma businesses. The animal health business, however, saw a drop in PBIT margins. While we expect the performance of the generics business to remain volatile, the animal health business should see growth on the back of various initiatives taken by the company
India's corporate debt market is expected to see some important developments post the Union Budget. In his speech today, the Prime Minister outlined the need to develop a corporate debt market to meet the projected investment of US$ 1 trillion investment in the 12th Five-Year Plan (2012-2017). A corporate debt market will enable the private sector to raise funds through debt instruments and channelise these into specific sector investments, including infrastructure. We believe that the same will also help companies raise funds at competitive prices depending upon the health of their balance sheets.
Meanwhile banks that have been facing asset liability mismatches for funding infrastructure projects are now looking at raising long term money through bonds. After the huge success of its initial bond issue, SBI is planning to raise Rs 10 bn through retail bonds. Although the interest costs on the same is higher than fixed deposits, the long nature of the liabilities will make them appropriate for funding of long term projects. We believe that if the bank succeeds in pricing its assets appropriately, it may not witness any margin pressure despite the aggressive pricing of the bonds. The stock closed 1% higher today.