India Markets Thursday Wrap-Up: Trailing Asian Gainers

by: Equitymaster

Although the Indian indices managed to stay afloat till the end of the session today, their gains paled in comparison to their peers in Asia. Select realty and automobile companies managed to gain investor interest. Telecom stocks bore the brunt of uncertainty over the TRAI recommendations. While the BSE Sensex closed higher by around 70 points (up 0.4%), the NSE Nifty gained around 22 points (up 0.4%). Midcap and small cap stocks fared marginally better with gains of around 1% each.

As regards global markets, other Asian markets also closed in the red today with China and Japan being the key gainers. European markets have opened higher. The rupee was trading at Rs 45.13 to the dollar at the time of writing.

In a statement that should soothe Indian investors' nerves, the RBI deputy governor Dr. Subir Gokarn has said that the Greek crisis will not have any impact on the central bank's policy approach to monetary tightening. He said that the RBI's pace of exit from the loose monetary policy takes into account that the global economy is still not stable. The central bank therefore prefers baby steps to normalise monetary policy. This assurance comes in good time when the market is expecting the RBI to tighten liquidity more swiftly and sharply.

The Indian banking sector is set to witness more competition, not just from the PSU and private sector players. But also from the foreign entities operating here. This is particularly when it comes to raising capital for growth. Britain-based Standard Chartered Bank's initial public offering (IPO) in India will open from May 25 to 28. The sale of shares through Indian Depositary Receipts (IDRs) will be the country's first such issue. The bank will issue 240 m IDRs, with every 10 IDRs representing one share of Standard Chartered Plc
(OTCPK:SCBFF). The success of this issue will determine whether more foreign banks line up for capital issues. What it means is that domestic banks will have to prove their worth to compete for their capital needs. Private sector banks like ICICI Bank and Yes Bank closed higher today.

Novartis (NYSE:NVS) has announced its FY10 results. The company has reported 7.3% YoY and 12% YoY growth in sales and net profits respectively. Its EBDITA margins improved marginally by 0.7% to 21% due to a fall in raw material costs and other expenditures (as percentage of sales). The revenues for FY10 grew by a subdued 7% YoY and were largely led by the pharmaceutical and animal health businesses. Revenues from the pharma division, which accounts for 70% of total sales, grew by 8% YoY. The robust 22% YoY growth in the animal health division could be attributed to various marketing initiatives undertaken by the company. Having said that, revenues from the generics division fell sharply by 36% YoY.

In the pharma business, the company has chalked a strategy of driving growth through life cycle management of existing products and in-licensing opportunities. In the OTC segment, while consolidation of existing brands and launch of new products in various categories is expected to augur well for this business, overcoming competitive pressures will be the key challenge going forward.