India Markets Monday Wrap-Up: Firm Close For The Markets

by: Equitymaster

Indian stock markets began the day's proceedings on a strong note and managed to hold on to these gains during the morning session as buying activity continued unabated across index heavyweights. Although the afternoon session saw the indices paring some gains, they closed well above the dotted line in the final trading hour. While the BSE-Sensex closed higher by around 154 points (up 1%), the NSE-Nifty closed higher by around 48 points (up 1%). The BSE Mid Cap and the BSE Small Cap were, however, at the receiving end as they closed lower by 0.3% each. Barring banking stocks, gains were seen across sectors.

As regards global markets, Asian indices closed firm today while European indices have also opened on a positive note. The rupee was trading at Rs 49.90 to the dollar at the time of writing.

MNC pharma stocks closed weak today and the key losers were Pfizer (NYSE:PFE), Novartis (NYSE:NVS) and GSK Pharma (NYSE:GSK). Pfizer announced its results for the second quarter and half year ended September 2011. Revenues for the quarter grew by a healthy 22% YoY. This was led by good growth in both its pharmaceuticals (up 17% YoY) and animal health (up 13% YoY) businesses. However, operating margins declined by 4.2% to 17.8%. This was because raw material costs increased from 29.5% of sales in 2QFY11 to 34.7% of sales in 2QFY12. Thus, operating profits fell by 1% YoY. Net profits managed to grow by 11% YoY during the quarter due to a surge in other income. Excluding the extraordinary item during 2QFY11, growth in net profits stood at 7% YoY. It must be noted that Pfizer had changed its accounting year from November ending to March ending. Hence, in that sense the results for the quarter are not strictly comparable.

Diversified major ITC also declared results for 2QFY12 The company's sales grew by 17.5% YoY. This was led by its FMCG business (also includes the cigarette business), which grew by 19% YoY. However, the hotel business did not do too well as sales grew by a muted 1% YoY. While net revenue from the agri-business stood at Rs 14 bn, sales in paperboards, paper and packaging segment generated revenues of Rs 10 bn. ITC's net profits grew by around 21% YoY. The cigarette business has been the proverbial cash cow for ITC, generating huge margins and shielding it from the vagaries of its other businesses. Thus, ITC has been able to grow as well as improve profitability in this inflationary environment at a time when its other FMCG peers have been witnessing some pressure. The stock closed higher today.