FMCG, realty stocks open weak

Mon, 15 Nov 09:30 am

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After last week's sell-off, Asian markets have opened this week on a mixed note. While losses are still seen in China and Singapore, other markets like Hong Kong and Japan have opened in the positive. As for the Indian markets, these have opened marginally in the negative. FMCG and realty stocks are leading the weakness currently.

The BSE-Sensex is trading lower by around 30 points (0.2%), while the NSE-Nifty is down about 10 points (0.2%). Mid and small cap stocks are trading marginally in the positive though, with the BSE-Midcap and BSE-Smallcap indices up by 0.1% and 0.4% respectively. The rupee is trading at 44.97 to the US dollar.

Tata Steel announced its 2QFY11 results late last week. The company has posted a strong performance for the quarter, especially seen by its return to profits. Consolidated sales grew by 13% YoY during the quarter, led by higher volumes and despite some weakness in steel prices. Operating margins rose to 13%, from a mere 1% in the same quarter last year. Subsequently, the company reported net profits of Rs 19.8 bn, as compared to a net loss of Rs 27 bn in 2QFY10. Tata Steel's balance sheet position has also improved considerably since last year. The debt to equity ratio, which stood at 2.5 times in at the end of 2QFY10, currently stands at 2 times. The company is now looking to raise Rs 70 bn to funds its future capex and prepay a part of the debt. While Tata Steel's overall growth during the current year so far has been impressive, concerns still remain on the slower growth in one of its biggest markets, Europe. Anyways, the stock is trading strong currently. Among other steel stocks, while SAIL is witnessing some buying interest, JSW Steel and Bhushan Steel are trading in the red.

Telecom stocks have also opened on a mixed note. While MTNL and Bharti Airtel are up, selling pressure marks trading in Tata Comm. and Reliance Comm. Reliance Comm. declared its 2QFY11 results late last week. Total revenues declined by 10% YoY during the quarter. This was largely due to lower average revenue per user (ARPU) as well as lower minutes of usage (MOU) per subscriber during the quarter. Net profits declined by 40% YoY. Profits were adversely affected by the set off of an earlier notional forex loss by a forex gain this quarter. The second quarter has been seasonally a weaker quarter for the telecom operators. Going forward, the company plans to focus on its data related services. Its 3G services are expected to be launched within the next quarter. The company has already tied up with Universal Music to offer music related services and content to its customers.