India Markets Monday Wrap-Up: Weak Fiscal Outlook Spooks Indices

by: Equitymaster

Indian stock markets traded deep into the red throughout today's trading session as relentless selling pressure across heavyweights took a toll. While fears of the Eurozone crisis continued to haunt the markets, the Indian government's inability to stick to its fiscal deficit targets also added on to the pressure. The Planning Commission deputy chairman Mr Montek Singh Ahluwalia stated that the fiscal deficit in FY12 would exceed 4.6% of the GDP and pegged the economic growth for this fiscal at around 7-7.5%. While the BSE-Sensex closed lower by around 425 points (down 3%), the NSE-Nifty closed lower by around 127 points (down 3%). The BSE Mid Cap and the BSE Small Cap were not spared either as they closed lower by 2% each. Losses were largely seen in banking, metals and IT stocks.

As regards global markets, Asian indices closed weak today while European indices have also opened deep into the red. The rupee was trading at Rs 51.98 to the dollar at the time of writing.

Barring Maruti Suzuki, most auto stocks closed in the red today. As per a leading business daily, Tata Motors (NYSE:TTM) is contemplating giving the Nano a facelift in order to bolster the sales of the car. This would include a more powerful engine and new features. For instance, the entry-level variant of the Nano will now have features like booster-assisted brakes, which were available only in the mid and top end variants. Further, the mileage of Nano will increase to 25.4 km a litre of petrol from 23.6 km a litre earlier. Despite the revamp, the company aims to keep the price of the Nano intact. It must be noted that Tata Motors' passenger vehicles business did not do too well in 2QFY12. Sales volumes of this business fell by 21% YoY during the quarter on account of rising interest rates, fuel price hikes and intense competition. The small car segment was the worst hit as volumes plunged 67% YoY. The stock closed lower by around 4% today.

Pharma stocks closed mixed today. While Cadila Healthcare and Sun Pharma found favour, Ranbaxy, Cipla and Lupin closed into the red. Lupin announced results for the second quarter and half year ended September 2011. The company's sales growth stood at 23.6% YoY during the quarter led by an upfront licensing income received from Medicis Pharma and strong domestic formulations sales. Medicis Pharma paid an upfront payment of US$ 20 m to Lupin after signing an agreement to apply Lupin's formulation technologies to multiple therapeutic compounds. While the branded business registered a growth of 19% YoY, the generics business grew by 14% YoY. Operating margins increased by 2% to 22.8% on account of licensing income from Medicis Pharma. However, on excluding this income, the operating margins dipped 0.5% on account of higher operating expenditure. Bottomline growth stood at 24.2% YoY, lower than the growth in operating profits, on account of a spike in tax payout from 11% in 2QFY11 to 22% this quarter.