Tuesday, February 24, 2009

Closing Bell 23-02-09

Taking cues from their global peers, the Indian markets opened the day on a weak note. Thereafter, persistent buying activity led the indices to gain momentum and end the day marginally below the dotted line. The Sensex closed lower by around 20 points, while the Nifty closed lower by around 5 points. Stocks from the mid-cap and small-cap indices ended in the red as well. While stocks from the oil & gas and IT space lead the pack of gainers today, stocks from the metal and banking space bore the brunt of profit booking. Rupee closed at 49.92 against the US dollar. The Asian markets ended on a weak note today. The European indices are currently trading weak as well.

Stocks of oil marketing companies (OMC) ended the day on a weak note led by BPCL, HPCL and IOC. As per a leading business daily, IOC, HPCL and BPCL have shelved their plans to invest in Brazilian sugarcane farms for producing ethanol. This is on account of the economic slowdown and liquidity crunch. According to initial plans, the three firms had decided to jointly buy or lease plantations and related units for producing ethanol. In addition, these OMCs were to form a joint venture company for ethanol investments and share half of the equity in it, with the remaining half being offered to the Brazilian partners. It may be noted that crude prices have dropped by over 70% from the highs they touched mid 2008. As such, it makes the usage of ethanol less viable.

FMCG stocks ended the day on a weak note led by P&G Hygiene and Godrej Consumer. As per a leading business daily, Dabur India has introduced newer variants of its anti-dandruff shampoo brand ‘Vatika’. This will allow the company to enter the segment in competition with big players such as HUL and P&G. P&G’s brand ‘Head and Shoulders’ currently has the largest market share (58%) in the anti-dandruff segment. This is followed by ‘Clinic All Clear’, a brand promoted by HUL with a share of 36%. It is believed that ‘Vatika’ has a market share of over 5%. This is a positive development for the company considering that its ‘Vatika’ branded products are growing at a pace of over 38% YoY in volumes as compared to the industry’s growth rate of 18% YoY. The hair care segment contributes around 22% to the company’s consolidated revenues.

The government today announced that the 4% excise duty cut across-the-board will continue beyond March 31, 2009. The excise duty on cement will be reduced to 8% from 10%, while service tax will be cut from 12% to 10%. Further, customs duty exemption on naphtha has been extended beyond March 31, 2009, to provide relief to the power sector. The measures would help the industries to mitigate some pressure of the economic slowdown.

L&T focuses on ‘core’

The markets extended the recovery on account of sustained buying activity witnessed during the previous two hours of trade. Stocks from the banking, metals and realty sectors are leading the pack of losers, while select stocks from the auto, pharma and energy sectors are trading firm. The overall market breadth is negative with losers outnumbering gainers by a ratio of 3 to 1 on the NSE.

The BSE-Sensex and the NSE-Nifty are trading lower, down by around 78 points and 10 points respectively. The BSE Midcap and Smallcap indices are also trading weak, down by 1.7% and 1.5% respectively. The rupee is trading at 49.88 to the dollar currently.

As per a leading business daily, Titan Industries is planning to expand its product range and launch exclusive Fastrack stores. It plans to set up 50 stores across 25 cities by April 2010, the maiden Fastrack store would be launched in Pune in next two days. These unique stores would be set up at an investment of Rs 3.5 m to Rs 4 m each and the stores would be a mix of company-owned and franchisee model. The accessories market is growing at rate of 15% to 18% YoY and branded segment in particular is seeing a growth of more than 25%. The accessories market provides an opportunity for Fastrack brand that is growing at a CAGR of 30%, to expand its portfolio. Despite slowdown, Titan Industries has outlined expansion plan to cash on the lower commercial space rentals and growing youth segment. Retail sector stocks are trading lower currently.

As per a leading business daily, L&T is planning to sell its fuel dispenser business, in line with its long term strategy to dispose of its non-core businesses. The fuel dispenser business contributed Rs 2 bn during 9mFY09, less than 1% of the group’s total revenues. L&T has been making fuel dispensers for at least 25 years. The automation of fuel stations was a key driver for the business as both state-owned and private oil companies had started expanding their retail outlets from 2000. However, in recent times oil companies have slowed down their retail expansion plans. This has impacted the demand of the fuel dispenser business. L&T is trading firm, while ABB, Siemens and BHEL are at receiving end.

HDFC in competitive mood

The markets pared off some of the losses as buying activity was witnessed at the lower levels during the previous two hours of trade. Currently, stocks from the metals, realty and banking sectors are trading weak. However, select power, energy and pharma stocks are garnering investor’s interest. The overall decline to advance ratio is poised at 2.6 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading lower, down by around 130 points and 15 points respectively. The BSE Midcap and Smallcap indices are also trading weak, down by 1.9% and 1.7% respectively. The rupee is trading at 49.85 to the dollar currently.

Banking stocks are trading weak led by ICICI Bank, PNB and HDFC. As per a leading business daily, switching loans has become expensive for HDFC borrowers. As per the company, it will now charge a 3% pre payment penalty if borrowers repays the loans by borrowing from other lenders. It may be noted the company has been losing its customers to the various public sector banks (PSB), which have been charging lower interest rates in recent times to lure new borrowers. The low cost of funding as compared to private sector banks allows the PSBs to charge lower interest rates without reducing their margins. This move by HDFC would now prevent the borrowers to switch to another lender, thereby aiding the company to maintain its market share.

Pharma stocks are trading mixed. Dr Reddy is currently trading firm, while Wockhardt and Cadila are trading in the red. As per a leading business daily, Dr. Reddy may write off the intangible value of major products of its German subsidiary Betapharm during the current quarter. This would likely squeeze the company’s profits during FY09. Dr Reddy has already made two provisions totaling Rs 4 bn towards Betapharm’s impairment since its acquisition. The current unimpaired goodwill of the subsidiary is estimated to be around 150 m euros. However, the amount likely to be written off has not been divulged. Betapharm currently contributes around 17% of company’s consolidated turnover.