L&T, RIL weigh down Sensex, Nifty

iifl22nd July, 2013 : Comments by Amar Ambani, Head of Research, India Infoline

The Indian equity market ended Monday on a flat note as benchmark indices struggle to find any specific direction throughout the day. After opening with a negative gap in early trade, the markets did manage to stage a smart comeback. However, sentiment was hit after capital goods major Larsen & Toubro registered lower-than-expected Q1 FY14 earnings and worst margins in over 12 years.

Larsen & Toubro posted a Q1 net profit of Rs. 7.56bn as compared to Rs. 8.64bn in the same period last year. Total income increased from Rs. 125.63bn to Rs. 130.28bn year-on-year. Commenting on the same, Amar Ambani, Head of Research at IIFL, said the engineering behemoth’s results were lower than estimates on all fronts. “Operating margin of 8.5% was lower than street’s estimates and below our estimate of 8.9%.” Ambani sees the company missing its FY14 revenue guidance of 14-17% YoY growth along with flat margins due to the weak Q1 numbers and stiff competition in the market.

The Mukesh Ambani-led company posted a Q1 FY14 profit after tax of Rs. 5,352cr as against Rs. 4,503cr in the same period last year, an increase of 18.9% year-on-year. Revenue dipped 4.6% YoY at Rs. 90,589cr on back of lower output from its flagship KG-D6 gas fields. Gross refining margins came in at $8.4 on turning every barrel of crude oil into fuel as compared to $7.6 per barrel YoY. KG-D6 gas production fell 53% to 49.2bn cubic feet in Q1.  The stock closed weak down 1.59% at Rs. 909.05 per share on volumes of 38.76 lakh as against its five-day average of 34.57 lakh.

Among sectors, capital goods, oil & gas, power, realty and healthcare stocks lagged. Small-cap stocks also witnessed some selling pressure. On the other hand, auto, banking and IT stocks gained.

The Sensex closed at 20,159, up a mere nine points, while the Nifty shut shop flat at 6,032.

The advance-decline ratio favoured the bears. On the Bombay Stock Exchange, 1,233 stocks declined against 1,033 advances, while 150 stocks remained unchanged.

Volatility, as indicated by India VIX, ended down 2.7% at 17.63. It hit a day’s high of 18.66 and low of 17.62.

L&T, BHEL, Ambuja Cements, ONGC, Tata Steel, ACC, Ranbaxy, Asian Paints, Reliance Industries and Dr Reddy’s Laboratories lost out while HDFC, IndusInd Bank, Sun Pharmaceutical, M&M, Bank of Baroda, Punjab National Bank, Hindustan Unilever and Bharti Airtel gained.

Drug manufacturer Wockhardt tanked a whopping 8.7% after it received a warning letter regarding the earlier issued import alert on its Waluj facility.

Asian Paints declined 2% to close at Rs. 5,066 per share on disappointing Q1 results. Consolidated profit fell 4.57% YoY at Rs. 2.75bn compared with Rs. 2.88bn last year. Consolidated sales increased 11.59% YoY at Rs. 28.41bn as against Rs. 25.46bn in the same period last year.

Tata Power gained 1% to shut shop at Rs. 93 on reports it is eyeing a local acquisition opportunities in the domestic market. The company is seeking to expand its footprint in solar and wind power segments.

NIIT stock hit a 52-week low of Rs. 17.05 after the company posted a 2% decline in its Q1 consolidated net revenue at Rs. 222.2cr from Rs. 227.5cr in the same quarter last year.

Dabur India ended up 1.94% at Rs. 170.90after hitting its 52-week high in trade today. The company will post its June quarter results on Wednesday.

Crisil closed at Rs.1,186.85, up Rs. 3.55 or 0.3%, after touching its 52-week high on Monday. The ratings agency posted a 38.5% jump in its Q1 FY13 results on Friday post market hours.