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Metals drag markets lower
Tue, 16 Nov 11:30 am

Indian indices continue to languish in the red on profit booking in heavy weights over the last two hours of trade. Stocks from metals and capital goods space are trading weak while stocks from the consumer durable and pharma space are trading firm.

The BSE-Sensex is down by 185 points while NSE-Nifty is trading 55 points below the dotted line. BSE-Midcap is down by 0.1% while BSE-Smallcap index trading 0.2% below yesterday’s closing. The rupee is trading at 45.1 to the US dollar.

Construction stocks are trading mixed with Patel Engineering and Unity Infraprojects leading the gains. However, Lok Housing & Construction and Madhucon Projects are trading in the red. IVRCL has announced its 2QFY11 results. Top line registered a decline of 16% YoY during 2QFY11 mainly of account of extended monsoons. Over all, the company lost around Rs 2.5 to 3.0 bn of top line in 2QFY11 on account of delays in projects due to prolonged monsoons. Operating profits declined 23% YoY in 2QFY11 due to increase in absorption of overheads. Nonetheless, management is confident of recovering the excess absorption in 2HFY11. This should enable margin sustenance in the region of 9.5-9.75%. The net profits of the company declined 51% YoY due to increase in interest and depreciation expenses during the quarter. The interest expenses increased due to increase in CP rates and overall hawkish interest rate environment while depreciation expenses increased due to increase in capex.

Packaging stocks are trading up led by Parekh Aluminex and Essel Propack. Ess Dee Aluminum released its results recently. The company’s consolidated top line grew by 14.6% YoY. This performance was aided by a strong growth in the company’s domestic business. Sales of the domestic business which contributes 96% of the company’s top line, grew by 42% YoY during the quarter. Operating margins fell by 1.6% to stand at 27.5% during the quarter. This was because of a sharp increase in raw material costs as well as an increase in other expenditure. Net profit of the company grew by 50% YoY during the quarter. This was higher than operating income growth and was a result of higher other income and reversal of impairment of assets. When adjusted for the reversal of impairment of assets, net profit is seen to grow by only 24% YoY.

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