Broad based buying aids indices

Mon, 1 Nov 11:30 am

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After starting today’s session on a positive note in the morning, Indian indices have gained further ground. However, other key Asian markets are trading mixed with Nikkei down and Hang Seng in the green. Currently, heavyweights in the Sensex are trading strong with stocks from banking and realty space leading the gains. However, auto and oil & gas stocks are trading flat.

Currently, the BSE-Sensex is trading up by around 324 points, while the NSE-Nifty is up by about 95 points. There has been strong buying interest amongst the mid and small cap stocks as well with the BSE-Midcap and BSE-Smallcap indices trading higher by 1.3% and 1.2% respectively. The rupee is trading at 44.40 to the US dollar.

Paint stocks are trading mixed with Asahi Colors and Berger Paints leading the gains. However, Kansai Nerolac is trading in the red. Kansai Nerolac announced 2QFY11 results recently. Top line grew at a healthy pace of 18.8% YoY 2QFY11. The company registered healthy growth despite prolonged monsoon due to low base effect and improving macro environment. Operating profits declined 1% YoY during the quarter with margins succumbing to 15.8%, a fall of 310 bps over 2QFY10. The dip was due to raw material price escalation. It may be noted that prices of titanium dioxide (key raw material input) have increased by over 30% over the last three months. Thus, in light of increasing raw material prices, margins are expected to remain under pressure. Despite muted operating performance, net profits increased 1.2% YoY in 2QFY11 on the back of higher other income and decline in tax rates.

FMCG stocks are trading firm led by Camlin Ltd and Archies Ltd. Godrej Consumer Products Limited released its 2QFY11 results. The company’s consolidated top line grew by 67% YoY on the back of a 205% growth in the company’s international business. The top line for the standalone entity however remained flat. Consolidated operating income grew by 58% YoY while the operating margins fell by 1%. This was a result of higher raw material costs, increase in advertisement and other expenditure partly offset by fall in employee expense (all as a percentage of sales). The company’s net profit grew by 41% YoY which was slower than operating income. This was due to a sharp increase in interest costs, higher depreciation, rise in effective tax rate and lower other income.