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Focus shifts to mid & smallcap stocks
Tue, 2 Nov 11:30 am

Indian indices crossed the dotted line to trade in the green on buying interest in heavy weights over the previous two hours of trade. Stocks from consumer durables and capital goods space are trading in the green while stocks from realty and oil & gas space are trading in the red.

The BSE-Sensex is trading up by 9 points while NSE-Nifty is trading 4 points above the dotted line. BSE-Midcap is up by 0.4% while BSE-Smallcap index is trading 0.3% above yesterday's closing. The rupee is trading at 44.40 to the US dollar.

Pharma stocks are trading mixed with IPCA Lab and Glenmark Pharma leading the gains. However, Cadila Healthcare and Orchid Chemicals are trading in the red. Sun Pharma announced 2QFY11 results recently. Topline grew by 16% YoY during the quarter. This was largely due to the strong performance of its domestic formulations business which grew by 36% YoY. The company also launched 11 new products during the quarter. As far as the US generics business is concerned, this quarter saw Taro turn into an indirect subsidiary of Sun Pharma.

Operating margins declined by 3.6% from 37.7% in 2QFY10 to 34.1% in 2QFY11 largely due to higher raw material costs (as a percentage of sales). Raw material costs increased from 24.1% of sales in 2QFY10 to 27.7% in 2QFY11. As a result, operating profits grew by a tepid 4% YoY. Having said that, the performance at the net profit level (up 11% YoY) was much better primarily on account of lower tax expenses and depreciation charges.

Food and tobacco stocks are trading firm led by Godfrey Phillips and United Spirits. Godfrey Phillips released its 2QFY11 results yesterday. The company's top line grew by 18.5% YoY on the back of 18.9% YoY growth in cigarette sales. Sales of tea & other retail products category also contributed to growth with an increase of 14.7% YoY in sales. Operating Income of the company grew by a robust 156%. This strong performance was a result of fall in raw material costs as a percentage of sales. Godfrey Phillip's net profit grew by 127.5% YoY. This is due to higher operating income partly offset by higher effective tax rates. Effective tax rates increased from 19.1% in 2QFY10 to 29.9% in 2QFY11.

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