India Markets Friday Wrap-Up: Languishing In The Red

by: Equitymaster

The Indian stock market languished in the red throughout the trading session today as persistent selling across index heavyweights took its toll. There was no respite in the final trading hour either and the indices closed well below the dotted line. While the BSE-Sensex closed lower by around 169 points (down 1%), the NSE-Nifty closed lower by around 52 points (down 1%). The BSE Mid Cap and the BSE Small Cap were not spared either as they closed lower by 1% and 2%, respectively. While selling was seen across sectors, auto and oil and gas stocks managed to buck the trend.

As for global markets, Asian indices closed mixed today while European indices have opened on a positive note. The rupee was trading at Rs 50.22 to the dollar at the time of writing.

Bharat Forge announced its results for the second quarter and half year ended September 2011. The company reported a topline growth of 27% YoY during 2QFY12. Growth during the quarter was led by a 58% YoY increase in exports, while domestic revenues increased by a lukewarm 8% YoY. Healthy growth in exports was largely attributed to strong demand from the U.S. and European CV market. Growth in India was hampered by an environment of high fuel prices, interest rates and slowdown in the overall auto industry. Operating margins during the quarter contracted by 0.5% to 23.7% largely on account of higher staff costs and manufacturing expenses (as percentage of sales). This resulted in operating profits growing at a slightly lower pace (up 24% YoY) as compared to the growth in sales. Net profits grew by 56% YoY during the quarter. In addition to a healthy growth in operating profits, higher other income, a relatively benign increase in depreciation charges and reduction in interest costs helped in boosting profits during the quarter. While the stock closed flat, its peer in the auto ancillary space Exide Industries (XIDE) closed higher.

Engineering stocks closed weak today with the key losers being BGR Energy, Larsen & Toubro (L&T) and Blue Star. Blue Star also announced second quarter results for financial year 2011-2012 (2QFY12). Standalone topline declined by around 13% YoY during 2QFY12. Disappointing performance from the electro-mechanical projects and packaged air-conditioning systems and professional electronics and industrial systems impacted topline growth. Operating profits declined 79.3% YoY during 2QFY12 due to continuing inflationary pressures. The company reported a net loss of Rs 208 m in 2QFY12 compared to a net profit of Rs 387 m in 2QFY11. Muted performance at the operating level, cost overruns, delayed execution and sharp rise in the interest costs led to a decline in net profits. Order book as on September 30, 2011 stood at Rs 21.6 bn, representing an 8% YoY growth.