Markets flat with a positive bias

Tue, 17 Aug 11:30 am

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After starting today’s session on a positive note Indian indices are currently trading in a narrow zone. Other key Asian markets are trading flat as well with Nikkei (down 0.3%) leading the pack of losers. Currently heavyweights in the Sensex are trading mixed with stocks from consumer durables and banking space leading the gains. However, stocks from metals and IT space are facing the brunt of investors’ selling activity.

Currently, the BSE-Sensex is trading up by around 10 points, while the NSE-Nifty is up by about 6 points. However, strong buying interest is witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.4% and 0.5% respectively. The rupee is trading at 46.69 to the US dollar.

Healthcare stocks are currently trading mixed with Biocon and Apollo Hospitals leading the gains. Divi’s Laboratories and Bilcare Ltd are at the receiving end. Biocon recently announced the launch of a new Comprehensive Care Division. This will be dedicated to providing affordable solutions to critical illnesses like nosocomial infections, post surgical complications, trauma and medical emergencies. This will be the fifth business division for Biocon. Having this division would help complement its existing product portfolios in diabetology, oncology, nephrology and cardiology divisions. The company believes that there is a definite increase in hospital acquired infections with respect to critical care illnesses in India. The company’s comprehensive care division has been set up to counter this challenge. It helps in providing affordable & specialized solutions to these patients. The division also is introducing 5 new products in the initial phase of launch for the treatment of critical illnesses like Septicemia, Nosocomial pneumonia and other acute hospital infections.

Capital goods stocks are mainly trading positive with Thermax and Gammon India leading the gains. Suzlon is trading weak. The company recently announced its 1QFY11 results. It reported a 42% YoY fall in sales. This was mainly due to a fall in sales volumes of wind turbines. Gear box sales are also not fully comparable as the company sold a stake in its gear box subsidiary (Hansen Transmissions) during FY10. These sales have not been consolidated as of this quarter as Suzlon now has a minority stake in the company. Suzlon reported a loss right from the operating level. The reasons for this were a rise in all the company cost heads as a percentage of sales. The company also had a notional forex loss during the quarter, compared to a gain previously. Suzlon witnessed a net loss of Rs 9.1 bn during the quarter. This was mainly due to poor operating performance. Also a relatively lower fall in interest costs and depreciation charges compared to the fall in turnover impacted performance.

The company achieved financial closure on its debt refinancing of Rs 107 bn. This refinancing includes a holiday of two years in principal repayments and removal of many debt covenants. A rights issue of about Rs 12 bn was successfully completed which will go towards reduction of debt.