Volatility mars indices

Wed, 11 Aug 11:30 am

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After starting on a positive note, Indian indices have had a volatile trading session and have slipped into the red. Other key Asian markets are trading weak as well with Japan (down 2.6%) leading the pack of losers. Currently, heavyweights in the Sensex are trading mixed with stocks from healthcare and IT space facing the brunt of selling activity. However, stocks from the auto and consumer durables space are seeing some healthy gains.

The BSE-Sensex is trading down by around 19 points, while the NSE-Nifty is trading flat with a negative bias. Buying interest is muted amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.3% and 0.5% respectively. The rupee is trading at 46.47 to the US dollar.

Pharma stocks are trading mixed with Wockhardt and Aventis Pharma leading the gains. Cipla and Lupin are trading in the red. Piramal Healthcare declared its 1QFY11 results yesterday. Revenues grew by a subdued 2.5% YoY during the quarter, largely driven by the pathlabs and global critical care businesses. Large scale uncertainty surrounding the domestic formulations business which was sold to Abbott Laboratories led to the tepid sales growth. Revenues from the custom manufacturing business declined by 17% YoY during the quarter, due to the depreciation of the Pound and lower offtake of orders. The Global Critical Care business grew by 49% due to increased revenues from ‘Sevuflorane' in the US.

Operating margins fell by 3.7% due to a rise in all costs (as percentage of sales). While Piramal's profits declined by 5% YoY during the quarter, this was lower than the 17% YoY fall in operating profits. This was largely due to reduction in interest costs and tax expenses.

Telecom stocks are trading strong with Tata Communication and Tata Teleservices (Maharashtra) leading the gains. However, Bharti Airtel is trading flat. As per a leading news daily, Bharti has approved the acquisition of 100% stake in Telecom Seychelles Ltd for an EV of US$ 62 m (` 2.85 bn). With this acquisition, Bharti will expand its African footprint to 16 countries and its overall presence to 19 countries. It should be noted that Bharti recently acquired the mobile operations of Zain group in 15 countries across Africa. Acquisition of Telecom Seychelles will benefit the company by leveraging the efficiencies of scale in the African operations. It should be noted that Telecom Seychelles provides 3G mobile and integrated wire line services across the island nation (Seychelles) and has over 57% share of the mobile market. This acquisition will add another feather to Bharti's African kitty and expand its foothold in the emerging markets.