India Markets Monday Wrap-Up: Range-Bound Trading Day

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Includes: EPI, IFN, IIF, INDY, INR, PIN, SCIN, TTM
by: Equitymaster

Although markets traded well above the dotted line throughout the day, trading remained largely range-bound. While the BSE Sensex closed higher by around 213 points (up 1%), the NSE Nifty gained around 64 points (up 1%). Midcap and smallcap stocks also did well as the BSE Midcap and BSE Smallcap notched gains of 1% each. Barring IT stocks, buying was witnessed across sectors.

As regards global markets, most Asian indices closed in the green today while European indices have also opened in the positive. The rupee was trading at Rs 46.19 to the dollar at the time of writing.

As per a leading business daily, engineering major L&T has secured one more mega project from Jaiprakash Power Ventures Ltd (JVPL). This deal is to the tune of Rs 65 bn. The scope of the work includes the supply, erection and commissioning of the boiler-turbine generator package, critical piping, and power plant automation for their 3x660 MW power plant being set up in Uttar Pradesh. The order is expected to be fully commissioned in 60 months. It must be noted that L&T had bagged the first order from JPVL in Aug 2009. The company's order backlog at the end of June 2010 stood at Rs 1,078 bn. Although this provides revenue visibility in the future, the company has had problems executing these projects in the past. The stock closed higher today.

Auto stocks closed mixed today. While Bajaj Auto and Maruti found favour, M&M and Tata Motors (NYSE:TTM) were at the receiving end. As per a leading business daily, Maruti posted strong sales growth in July as against a slowdown in the previous month. Maruti's total volume sales rose 29% in July to 100,857 units. The company's domestic sales grew 33% in July to 90,114 units, while exports rose 2% to 10,743 units. Moreover sales are expected to pick up in light of the upcoming festival season. It must be noted that in the June 2010 quarter, the company had reported 27% YoY growth in sales, on the back of a 25% YoY growth in volumes. Both the domestic and the export markets propelled growth. Maruti's operating performance, however, had taken a major beating during the quarter due to higher raw material and royalty expenses.

Kansai Nerolac had announced its results for the quarter ended June 2010 recently. Net sales of the company registered a strong growth of 27% YoY due to an improving macro environment coupled with robust demand from both decorative and industrial segments. Operating margins expanded by 0.9% during the quarter to 15.4%. Despite rise in raw material costs during the quarter, margins expanded due to price increases and operational controls. Despite strong growth in operating profits, the net profits grew by about 23% YoY in 1QFY11. Higher depreciation and interest expenses dented the bottomline growth. As a result, net margins contracted by 0.3% to 9.9% during the quarter. Going forward, the management expects the overall demand environment to remain healthy. However, concerns over raw material price inflation and hence profitability is likely to persist in the near term. The stock closed higher today.