After opening in the negative, the Indian share markets continued to languish well below the dotted line in the last two trading hours. Majority of the sectoral indices are trading negative with auto and banking stocks clocking the biggest losses. Only IT and FMCG stocks are trading in the green.
The BSE-Sensex is trading down 101 points and NSE-Nifty is trading down 33 points. BSE Mid cap index and BSE Small cap index are trading down by 0.8% and 0.7%, respectively. The rupee is trading at 56.2 to the US dollar.
Majority of the auto ancillary stocks are trading negative with Exide Industries and Fag Bearings being the biggest losers. For the fourth quarter ended March 2012, Bharat Forge posted a 19% YoY growth in sales led by a healthy 28% YoY growth in exports. Operating margins expanded by 1.7% YoY to 25.7% during the quarter due to lower raw material and staff costs and other expenditure (as a percentage of sales). Profits fell by 45% YoY largely due to the exceptional expense of Rs 704 m. Excluding this, growth in net profits stood at 25% YoY.
For the full year FY12, the company reported a topline growth of 25% YoY led by a 42% YoY increase in exports, while domestic revenues increased by a decent 13% YoY. Its operating margins during the year expanded by 0.5% to 24.9% largely on account of lower raw material and staff costs (as percentage of sales). However, its earnings grew by a slower 16.5% YoY during the year on account of the exceptional item of Rs 704 m incurred by the company during the fourth quarter and the full year. This is with respect to Bharat Forge America (BFA). Because of the uncertain future outlook, substantial erosion of net worth of BFA and the possibility of the company not begin able to recover its investment in BFA, the company created a provision of Rs 704 m.
Majority of the automobile stocks are trading in red with Tata Motors the biggest loser. As per a leading financial daily, automobile manufacturers hit by the rising import bill from the depreciating rupee are looking to source domestically to cut costs. Maruti Suzuki has said that higher localization will reduce its component costs by 25-40% annually. Mahindra & Mahindra (M&M) plans to source some parts domestically as components such as airbags and parking sensors are still not locally available. Additionally, foreign automobile manufacturers are contemplating increased domestic procurement for both domestic as well as overseas requirements. In 2012, Volkswagen plans to double the purchase value of parts sourced from the country to 700 m Euros. Other international carmakers in India, such as Ford, are targeting 95% localization to lower their costs.