India Markets Monday Wrap-Up: Indices Close on Firm Footing

by: Equitymaster

Led by sustained buying activity across index heavyweights, Indian indices held on to their gains and closed well above the dotted line in today's trading session. While the BSE Sensex closed higher by around 72 points (up 0.4%), the NSE Nifty gained around 17 points (up 0.3%). The BSE Midcap and the BSE Smallcap also closed in the positive. Gains were largely seen in metals, oil & gas and consumer durables stocks, while FMCG and IT stocks were at the receiving end.

As regards global markets, Asian indices closed firm today while European indices have also opened in the green. The rupee was trading at Rs 45.12 to the dollar at the time of writing.

As per a leading business daily, Dabur will be adopting the franchise route for its retail stores called 'Newu'. The company's subsidiary, H&B Stores Ltd currently operates 22 'Newu' stores primarily in North India. The company is looking to open upto 150 new stores in FY12 and enter in the western region. The rationale for going in for the franchise model is that it is a simple model to replicate with the potential to generate good return on investment. It must be noted that H&B Stores were badly impacted by the global economic slowdown in 2008. It registered a loss of Rs 178 m in FY09 which came down to Rs 93.5 m in FY10. While the retail business forms a small part of Dabur's business, if it turns around and grows fast, then it could make a meaningful contribution to Dabur in the future. The stock closed marginally higher.

Engineering stocks closed mixed today. While L&T, ABB and Voltas found favour, Praj and Suzlon closed in the red. As per reports, engineering major L&T has bagged a Rs 16.1 bn order from Visa Power, which is a Visa Steel and Power Group company. The project involves execution of balance of plant (BOP) package for the latter's 2x600 MW power plant being set up in Chhattisgarh. The scope of the contract includes designing, engineering, supplying, erecting and commissioning the complete balance of plant and also providing all associated services. The project is expected to be commissioned within 29-32 months. It must be noted that the company's order backlog grew by 50% YoY during 1QFY11. What is more, this backlog at the end of June 2010 stood at Rs 1,078 bn. This is a positive development for the company and will provide revenue visibility in the future. But execution will remain the key.

As per a leading business daily, Biocon has extended its alliance with Cuba-based Centre of Molecular Immunology (CIM) for an integrated programme in immunology. Biocon and CIM have collaborated for almost a decade to develop biotechnology products for chronic diseases. Two drugs have already been approved as a result of this collaboration for medical use in India and other territories. This is a positive for the company and will enable it to strengthen its biotech portfolio going forward.

It must be noted that Biocon has been increasingly focusing on enhancing its research capabilities by entering into partnerships with global innovators. Some key partnerships that the company has entered into include its co-licensing agreement with the U.S.'s Bentley Pharmaceuticals (BNT) to develop and distribute the latter's intranasal insulin in India and other key markets. The other is its partnership with Abraxis BioScience (ABBI), a leading global biopharma company focusing on oncology to which Biocon has out-licensed GCSF for the North American and EU markets. The stock closed firm today.