Indices in Indian stock market fell sharply to a two-year low today as FIIs, spooked by a weak rupee and global economic turmoil, sold in droves across the market breadth. Before a recovery later in the session, the benchmark index had plunged 586 points. Ultimately, the BSE-Sensex closed lower by around 365 points (down 2%), while the NSE-Nifty
closed lower by around 106 points (down 2%). The BSE Mid Cap and the BSE Small Cap were not spared either as they closed lower by 2% each. Losses were largely seen in banking
, metals, oil and gas and IT stocks.
As regards global markets, Asian indices closed weak today while European indices have opened on a mixed note. The rupee was trading at Rs 52.13 to the dollar at the time of writing.
Steel stocks were at the receiving end today with behemoths such as Steel Authority of India (SAIL) and Tata Steel closing well into the red. As per a leading business daily, Tata Steel's interest cost burden is expected to reduce significantly to 10.75%. This is on the Rs 93 bn debt that the company took for the brownfield expansion of its Jamshedpur plant from 7 million tonnes (MT) to 10 MT. This will result in total savings on interest cost of Rs 2.25 bn per annum, which translates into 8% of the total interest cost burden on the company last fiscal. Tata Steel's additional steel capacity at the Jamshedpur plant is due for commissioning by March 2012. The interest rate reduction includes 3% on the Rs 57 bn debt on the books of Centennial Steel and 1.5% on the Rs 36 bn debt on the books of Tata Steel. It must be noted that the company's overall net debt stood at US$ 9.2 bn at the end of September 2011 and the second quarter also saw interest costs rising at a benign pace of 8% YoY.
Pharma stocks also closed weak today with the key losers being Biocon and Ranbaxy. Cadila Healthcare had announced results for the second quarter and half year ended September 2011. Cadila's net sales registered a mere 10.7% YoY growth due to the sluggish growth both in the domestic and exports markets. Sales from the domestic market slowed from double digit growth to a growth of just 7.5% due to flat growth in its branded formulation business. The growth in the consumer division (15% of domestic sales) considerably slowed down to 10% on back of slowing demand for one of its established product - Sugar Free. The US market grew by 36% YoY and included sales of US$ 5 m from the US based company Nesher, which was acquired by Cadila during the quarter. Operating margins (EBITDA) decreased by 2.7% due to drastic increase in employee costs. Net profits fell by 39.9% YoY due to slower sales growth, reduction in operating margins and huge increase in financial charges, which included forex losses. The stock closed lower today.