Closing Bell 28th May 2009

Closing Bell 28th May 2009

The Indian markets recorded another strong day today, possibly taking cues from their Asian peers and hopes of an improved economic and political climate. Among the key Asian markets, Hong Kong and China led the pack of gainers with 5% and 2% gains respectively. Among Indian stocks, those from the metal and realty sectors gained ground while the ones from the pharma and FMCG sectors fell.

The BSE-Sensex and the NSE-Nifty closed with gains of around 185 points (1.3%) and 60 points (1.4%) respectively. The BSE-Midcap and BSE-Smallcap indices were up by 0.9% and 0.2% respectively. Rupee was trading at 47.65 to the US dollar at the time of writing.

L&T announced results today. Its standalone and consolidated sales grew by 35% YoY and 38% YoY respectively during FY09. Higher construction material costs and subcontracting charges led to a 0.2% YoY contraction in consolidated operating margins during the fiscal. Margins on a standalone basis contracted by 0.7% YoY. Consolidated net profits (excluding extraordinary items) grew by 31% YoY during FY09. Sharp increase in interest expenses though took some sheen off the bottomline. The company’s board recommended a final dividend of Rs 10.5 per share. The company’s E&C segment’s consolidated order backlog stood at Rs 703 bn at the end of March 2009, which is 2.2 times the consolidated sales of the segment in FY09.

The stock of Novartis ended on a strong note on the back of reports that the parent Novartis AG which holds around 51% in the company is likely to revise its open offer price upwards. It is believed that open offer price that was earlier Rs 351 will be revised to a range of Rs 425 and Rs 450 a share. The buyback open offer to increase the parent company’s holding to 90% started on 20th May and will close on the 8th of June.

The United Nations has gotten more pessimistic about the growth of the global economy. In January, the UN had estimated the world economy to shrink by 0.5% during the year 2009. However, it has now revised its estimates downwards, estimating a 2.6% fall instead. A UN spokesperson stated that they are yet to see any positive signals of revival in the economy. However, the organisation has also stated that with a coordinated, development-oriented policy scenario, the world economy would recover to an annual growth of 4% to 5% in 2010 to 2015.

The Indian markets continued to surge further during the previous two hours of trade on the back of continued buying activity among the index heavyweights. Currently, stocks from the metals, auto and pharma sectors are leading the pack of gainers, while select telecom and power stocks are trading weak. The overall advance to decline ratio is poised at 1.8 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 160 points and 50 points respectively. The BSE-Midcap and BSE-Smallcap are also trading higher, up by around 0.6% and 0.4% respectively. The rupee is trading at 47.69 to the dollar.

As per a leading business daily, Godrej Consumer has acquired 49% stake in Godrej Sara Lee. This is possible on account of the merger of Godrej ConsumerBiz Private (GCBPL) and Godrej Hygiene Care Private (GHCPL) with the company. These companies together hold 49% stake in Godrej Sara Lee. Godrej Sara Lee is the market leader in household insecticides, air care and hair cream segment with around Rs 2 bn in revenues. The proposed consolidation would strengthen the company’s position in the FMCG market and will scale its ability to pursue growth opportunities. The merger will consolidate the promoters’ holding in Godrej Consumer from 69.7% to 74.8%. Further, the company will also be eyeing Sara Lee’s 51% stake, as the latter is reportedly in talks to sell its global household and personal care portfolios to focus on its core business of food and beverages. The stock of Godrej Consumer is trading firm, while Dabur is in the red.

Auto stocks are trading mixed. While M&M is trading firm, Tata Motors and Ashok Leyland are in the red. As per a leading business daily, Tata Motors has completed its final obligation for the US$ 3 bn bridge loans, which it had taken a year earlier for financing the Jaguar Land Rover acquisition. As such, the company has been able to extend the final maturity of US$ 1 bn by over 18 months to December 2010, while the other obligations were met through a mix of bond issue, rights issue and the proceeds from the divestment. It may be noted that despite the economic crisis globally, which resulted in liquidity tightening, Tata Motors has been able to refinance its loan obligations.

The Indian markets gained further ground during the previous two hours of trade on account of sustained buying activity. Stocks from the steel, engineering and auto are leading the pack of gainers, while select stocks from the telecom, power and energy are trading lower. The overall advance to decline ratio is poised at 1.7 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading higher, up by around 150 points and 45 points respectively. The BSE Midcap and BSE Smallcap indices are trading higher by 0.5% and 0.3% respectively. The rupee is trading at 47.80 to the dollar.

Energy stocks are trading mixed. While Reliance Industries and ONGC are trading higher, HPCL and BPCL are trading lower. As per a leading business daily, Reliance Industries (RIL) has discovered 20 trillion cubic feet (tcf) of natural gas reserves in D-3 and D-6 blocks of the KG basin. The estimates are from UK based Hardy Oil and gas which has 10% stake in these blocks. RIL has the remaining stake. It may be noted that RIL also owns the D-6 block in the same fields, which is estimated to hold up to 50 tcf of gas reserves and 143 m barrels of oil. This is positive development for the Indian natural gas industry in general and RIL in particular as it creates another significant source of revenue.

Pharma stocks are trading mixed. While Ranbaxy and Sun Pharma are trading higher, Wockhardt is trading lower. As per a leading business daily, Wockhardt is likely to sell its German business Espharma GmbH in order to raise cash. It is believed that the company is in talks with Lindopharm GmbH, a Germany based company for the same. However, the size of the deal has not been disclosed. It may be noted that Wockhardt acquired Espharma for US$ 11 m in 2004. However, the company has been facing problems to service its debt of Rs 30 bn. Also, the dynamics of the German market which has changed from branded generics to unbranded generics and the pricing pressure is taking a heavy toll on Espharma.

In line with its Asian peers, the Indian markets have started the day on a positive note. Software, energy, engineering and power stocks are trading firm, while select telecom and banking stocks are in the red. The overall advance to decline ratio is poised at 2 to 1 on the NSE. As regards global markets, the US ended lower on the back of sharp rise in Treasury yields coupled with news of looming bankruptcy for General Motors. The European markets closed higher yesterday, while the Asian indices are currently trading firm. Crude oil prices have gone up nearly 20% since the beginning of this month.

The BSE Sensex is trading higher by around 58 points. The NSE Nifty is up 36 points. The BSE Midcap and BSE Smallcap index are both trading higher. The rupee is trading at 48.06 to the dollar.

BHEL announced its FY09 results yesterday. The net sales grew 36% YoY during FY09, led by a strong growth in both its segments. BHEL’s ‘power’ segment grew by 34% YoY, while its ‘industry’ segment recorded a growth of 21% YoY. During FY09, the company’s operating margins contracted by 2.9% YoY owing to higher raw material costs (as a percentage of sales). Net profits grew by 10% YoY during FY09. This is mainly on account of BHEL’s poor performance at the operating level. During 4QFY09, the company’s topline and bottom line grew by 46% YoY and 21% YoY respectively. The Board has recommended a final dividend of Rs 8 per share (that, along with an interim dividend of Rs 9 per share paid during the year, leads to a dividend yield of 0.8%). Engineering stocks are trading firm.

Software major, Infosys Technologies is seeing good outsourcing business opportunities in India and the Middle East. The company on account of the global economic downturn has been facing pressure in the developed markets. As per the company, around 89% of its clients have indicated a cutback in their technology budgets. Hence it is looking at India and the Middle East. The company has won three deals in these markets over the last five months. Amidst the ongoing financial crisis and economic slowdown in the US, Infosys registered 10% QoQ revenue growth in sales from the domestic market. However, the company witnessed a decline in sales from the European region (by around 3% QoQ) and North America (by around 2% QoQ). The management has estimated 3% to 7% lower earnings in FY10 as compared to FY09. Software stocks are trading higher.