Indian indices recovered their opening losses as buying interest returned in heavy weights during the previous two hours of trade. Stocks from the pharma and consumer durable space are trading firm while stocks from the IT and banking space are trading weak.
Both the BSE-Sensex and the NSE-Nifty are trading marginally above the dotted line. BSE-Midcap is up by 1.0% while BSE-Smallcap index is trading 0.9% above yesterday's closing. The rupee is trading at 44.20 to the US dollar.
Pharma stocks are trading mixed with Biocon and Ranbaxy trading firm while Pfizer and Merck Limited are trading weak. Pfizer released its 3QCY10 results yesterday. The company's topline grew by 12.7% YoY for the quarter. This was due to a strong growth of 14.3% in the company's pharmaceutical business as well as a growth of 118% YoY in clinical development operations. However, the company's animal health business increased by 9.3% YoY, capping the company's topline growth. Operating (EBITDA) margins fell from 24.3% in 3QCY09 to 22.1% during the quarter. This is due to a sharp rise of 55% YoY in employee costs as a result of gratuity provision made during the quarter. Other expenditure also increased sharply by 28% YoY putting further pressure on margins. On the other hand, the company got some relief as raw material costs fell by 7% YoY.
FMCG companies are trading firm led by Dabur and Marico. As per a leading financial daily, laundry detergent makers who have been struggling due to rising raw material prices are facing another challenge. The government plans to impose anti-dumping duty on soda ash. Soda ash forms 30% of the total product formulation costs of low price detergents and 15% for premium detergents. It may be noted that at present soda ash attracts a safeguard duty on imports from China at 16%. Since laundry detergent makers operate on thin margins, a price hike of 10-12% is likely if the anti-dumping duty is imposed. This is likely to affect companies like HUL, P&G, Nirma etc.