Flat finish on poor 1Q numbers

Wed, 8 Aug Closing

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The Indian stock markets started the day in the green zone and had a relatively robust outing till the afternoon session. However, in the final hour of trade they moved lower and ended the day on a flat note. The market breadth was negative with 1.3 declines to every advance. While the BSE-Sensex closed lower by around 1.2 points (down 0.01%), the NSE-Nifty closed higher by around 1.3 points (up 0.02%). The smaller indices also had a negative day on the bourses. The BSE Mid Cap index and the BSE Small Cap closed 0.2% and 0.4% lower respectively. The realty index and the teck index (which includes telecom and IT stocks) both saw losses today with auto and PSU stocks leading the gains.

As regards global markets, Asian indices had a mixed outing today. European indices opened the day on a negative note. The rupee was trading at Rs 55.19 to the dollar at the time of writing.

India's top telecom operator Bharti Airtel reported profit decline for the 10th quarter in a row as increased competition squeezed margins despite the company gaining a bigger subscriber share. Bharti topped customer additions in the three months to June as its smaller rivals including Uninor faced license cancellation fears. The company's consolidated net profit fell 37% YoY to Rs 7.62 bn for the first quarter ended June (1QFY13). Overall revenues rose only 14% YoY during the period, which was also disappointing. Hyper-competition and recent regulatory and tax developments eroded profitability. Voice call prices, which are still the bread and butter of Indian carriers have been stable in the past few months. However, the market is yet to recover from the sharp price cuts during a price war two years ago. Mobile data, especially 3G services is at a very nascent stage, and is only picking up in metros. The stock closed 6.6% lower on the back of a disappointing set of numbers.

Aurobindo Pharma is looking at garnering at least 25% of its annual revenues from the custom research and manufacturing (Crams) business over the next 4-5 years. This strategy has been put in place in order to hedge itself against dwindling revenues from the US market once it goes off patent 2016 onwards. Figures from IMS indicate the year 2012 will have patent expiries worth $44 billion (Rs 2.4 lakh crore) in sales in the US, more than double compared to last year. Currently the company does not generate any revenue from the Crams business, but saw its first contract materialize last year. AuroSource, the custom research and manufacturing division of Aurobindo Pharma, is looking at long term contracts from Big Pharma and working with emerging pharma companies on new molecules. The Crams business is a better bet since it has better margins than generic drugs sales. In partnership with a few companies, Aurobindo has a couple of products that are in phase II of clinical trials and will take 3-4 years for them to be launched. The stock closed 1.5% lower today.