Banks, engineering stocks lead gains

Thu, 9 Sep 01:30 pm

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The Indian indices have managed to recoup some of the losses in the earlier hour as buying activity intensified during the previous hour of trade. Currently stocks from the banking, capital goods and realty spaces are leading the pack of gainers while those from the oil & gas and FMCG spaces are amongst the top underperformers at the moment.

The BSE-Sensex is currently trading higher by 75 points (up 0.4%), while the NSE-Nifty is up by about 18 points (up 0.3%). Mid and smallcap stocks seem to be in favour at the moment as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.6% and 0.5% respectively. The rupee is trading at 46.57 to the US dollar.

Stocks of capital goods companies are trading firm led by Voltas, Engineers India and Bharat Bijlee. The stock of textile machinery manufacturer Lakshmi Machine Works (LMW) is trading firm at the moment. In fact, the stock touched its 52-week high today. Over the last year, the stock has risen by about 93%. From its low in March 2009, the stock has risen by a whopping 550%. The company has seen a bounce back in business post the crisis over the past few quarters. During the quarter ending June 2010, it reported a 79% YoY increase in revenues and a 170% YoY increase in profits, albeit on a lower base. During FY10, the company revenues had dropped by 15% YoY, while profits declined by 2% YoY. However, during the fourth quarter of FY10 i.e. the quarter ending March 2010, the company reported a 96% YoY and 281% YoY increase in revenues and profits respectively. These are clear signs of a strong recovery in the textile market.

The company also got a boost from the booming auto markets as it caters to the same through its machine tools division (which relies to a large extent on the engineering, auto and auto ancillary industries for business). However, considering its trailing twelve month earnings per share of Rs 100, the valuations seem to be on the slightly higher side at the moment.

Food inflation numbers for the week ended August 28 were announced today. The number rose to 11.47% as compared to 10.86% during the week ended August 21. The rise in the inflation numbers was on the back of higher cereals, fruits and milk prices. It may be noted that this is the second week in a row when food inflation numbers have moved upwards. On a year on year basis, prices of cereals are higher by about 5.1%, with pulses (up 13.4%), rise (up 4.7%) and wheat (up 7%) leading the pack. Milk prices were dearer by 17.6% while prices of fruits are up by 13.3%.

While it seems that concerns over the high inflation numbers impacted the market to a certain extent, the indices seem to have recovered as buying activity increased towards the end of the current trading session.