Closing Bell 07-05-09

Closing Bell 07-05-09

The Indian markets continued to trade in the positive territory on account of sustained buying activity witnessed during the previous two hours. Currently, stocks from the metals, energy and engineering sectors are leading the pack of gainers, while select stocks from the auto, cement and software sectors are trading lower. The overall advance to decline ratio is poised at 2 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading higher, up by around 140 points and 45 points respectively. The BSE Midcap and Smallcap indices are also currently trading higher, up by 2% each. The rupee is trading at 49.41 to the dollar.

Auto stocks are trading mixed. While Tata Motors is trading higher, M&M is trading lower. As per a leading business daily, M&M is losing revenue of around Rs 250 m per day on account of the workers strike at its largest plant in Nashik. The workers are protesting against the suspension of their union president. They are demanding a new salary agreement, which had lapsed 22 months ago. It may be noted that M&M rolls out around 486 vehicles per day from this plant which includes utility vehicles like Scorpio, Bolero and Xylo as well as Logan, a sedan. It currently employees around 2,750 permanent and 1,200 temporary workers at Nashik. At a time when auto sales are witnessing a revival across India after months of slowdown, this strike at M&M’s largest plant is likely to hurt its fortunes.

Sugar stocks are trading higher led by Bajaj Hindustan and Balrampur Chini. As per a leading business daily, the government is likely to set aside the mandatory clause for blending petrol with ethanol. This is on account of shortage in ethanol and a tax structure that makes it costly for non sugar producing states. It may be noted that the commerce ministry had made blending petrol with 5% ethanol mandatory and 10% ethanol optional from October 2007 in 20 states and 4 union territories. 10% ethanol blending was made mandatory in 2008. However, the ministries of petroleum, agriculture and chemicals & fertilisers have recommended delaying the mandatory blending. Thus, a decision on same will be taken by the new government. In case the new government does not make blending mandatory, it will have a negative impact on companies like P

The Indian markets continued to trade in the green during the previous two hours of trade on the back of sustained buying activity. Stocks from the metals, engineering and banking sectors are leading the pack of gainers, while select software and auto stocks are trading weak. The overall advances to decline ratio is poised at 1.8 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading higher, up by around 150 points and 50 points respectively. The BSE Midcap and Smallcap indices are also currently trading higher, up by 2% and 1.6% respectively. The rupee is trading at 49.46 to the dollar.

FMCG stocks are trading firm led by Dabur India and HUL. As per a leading business daily, HUL has lost market share across its various categories during 1QCY09 on YoY basis. The erosion was witnessed among categories like soaps, shampoos, toothpastes and skin creams. This fall came even though the broader markets expanded during the period. A major fall was witnessed in soaps and skincare segments with a decline of 5.9% YoY and 5% YoY respectively during the quarter. The decline was partly on account of down trading, as price-sensitive consumers switched to cheaper products made by rival manufacturers. Increase in the prices by HUL also hurt its market share. In fact, as per the 4QFY09 results, Godrej Consumers' market share improved from 9.7% to 9.9% in recent times in the soap category due to down trading.

Banking stocks are also trading firm led by SBI, Bank of Baroda and ICICI Bank. As per a leading business daily, ICICI Bank has scaled down its overseas operations especially in the US and Sri Lanka. This is on account of a decline in fund raising and merger and acquisition activities in these markets. It may be noted that the bank had earlier trimmed its operation in West Asia and South Africa on account of the ongoing slowdown. The move is per the bank’s objective of reviewing the opportunities and risks in its various locations and adequately allocating its resources.

Taking cues from its global peers, the Indian markets have started the day’s proceeding on a positive note. While stocks from the banking, telecom and engineering sectors are garnering investors’ interest, select stocks from the software and auto sectors are trading weak. The overall market breadth is positive with gainers outnumbering losers by a ratio of almost 3.5 to 1 on the NSE. As regards global markets, both the US and the European markets ended in the green yesterday. The Asian markets are currently trading in the positive.

The BSE Sensex and NSE Nifty are trading higher, up by 150 points and 53 points respectively. The BSE Midcap and Smallcap indices are also currently trading higher by 2%. The rupee is trading at 49.4 to the dollar.

As per a leading business daily, ITC has managed to capture around 11% market share of the domestic biscuit market. The market size estimated at Rs 90 bn had witnessed a growth of 20% last year and is slated to sustain its growth this fiscal. The company had taken initiatives like product innovation, contemporary packaging and targeted brand communication. A huge investment is also being planned for brand building and product development. ITC is looking at enhancing its biscuit manufacturing capacities by at least 15% to 20%, primarily to manage supply chain costs and improve profitability. Though glucose biscuits continue to be the largest category in terms of volumes, a large proportion of the growth is coming from the mid-price category which is growing at 35%. The mid-price category includes the non glucose segment, cookies and sandwich cream products. This comes in as some respite for the company, which has been facing pressure on its foods division and is even planning to gradually move out if the division does not perform as per management’s expectations within the stipulated time frame. The stock, along with Britannia, is trading flat currently.

Indian Hotels (IHCL) has bought 2.3 m Class A shares of the US-based Orient-Express Hotel (OEH) for US$ 12.9 m, at US$ 5.8 per share. The company had acquired a stake of 11.5% for US$ 247 m in 2007. The acquisition would be done through IHCL’s wholly-owned subsidiary Samsara Properties. ICICI Bank UK Plc has agreed to lend the company around US$ 51 m for the acquisition, which would be paid within three years from the date of the loan agreement. The initial acquisition had been in the region of US$ 52 a share. This will help the company pare the overall cost of buying into OEH. Recently, OEH had unveiled a common share offering of 15 m shares priced at US$ 5.75 per share, as it is exploring ways to pay off debts on account of the economic slump which has seriously impacted its occupancy levels and earnings. After the fresh issue of shares, IHCL’s stake in OEH will fall from 11.5% to 9.7%. IHCL along with Oriental Hotels is trading in the green currently, while Taj GVK is witnessing selling pressure.