India Markets Monday Wrap-Up: Volatility in the Final Hours

Although the Indian indices began the day's proceedings on a strong note, subsequent bouts of profit booking pared some gains. While the latter part of the afternoon session saw the indices struggling to stay afloat, renewed buying in the final hour helped the indices to close in the positive. While the BSE Sensex closed higher by around 34 points (up 0.2%), the NSE Nifty gained around 7 points (up 0.1%). While the BSE Midcap closed marginally in the positive, the BSE Smallcap closed in the red. While metals and auto stocks found favour, IT and FMCG stocks were at the receiving end.

As regards global markets, most Asian indices closed in the positive today while European indices have opened on a mixed note. The rupee was trading at Rs 46.88 to the dollar at the time of writing.

Auto stocks closed firm today and the key gainers included Maruti, TVS Motor and Ashok Leyland. As per a leading business daily, auto major Maruti is looking to limit its exports in a bid to focus more on the growing domestic market especially since it is facing increasing competition from many new entrants in the small car space. The aim is to limit exports to around 15% of output. In FY10, exports accounted for 14.5% of total sales. According to the company, the passenger vehicle market size in India ranks seventh globally. The presence of a number of global players, the introduction of technology, features, styling and regulation mean that the market is gradually attaining maturity. Maruti Suzuki's share in the domestic passenger cars and vans market stood at 51.7% at the end of FY10.

It may be noted that increasing competition took its toll on Maruti's 1QFY11 results. Maruti's gross revenues (including excise duty) increased by 29% YoY during the quarter ended June 2010, while net sales (excluding excise duty) increased by about 27% YoY. This meant that the company did not pass on the hike in excise duty to its customers due to higher competition leading to the company pricing its vehicles competitively. Plus, margins also took a beating on account of an unusual rise in royalty payments.

As per reports, Glenmark has announced the discovery of a new chemical entity (NCE) called ‘GRC 17536'. This is indicated for pain and respiratory disorders and could be a potential first in class molecule. The molecule has completed pre-clinical trials and is expected to move into clinical trials in the first quarter of 2011. It may be noted that Glenmark in the past has followed the strategy of out-licensing its molecules to pharma innovators for milestone payments.

However, in the past couple of years its R&D programme suffered some setbacks as 2 molecules failed to progress any further. R&D in pharma is a time consuming and expensive affair. But a successful launch would enable any pharma company to reap rich rewards. The stock closed lower today.