Positive start to the decade

Mon, 4 Jan 09:30 am

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Indian markets have started the first trading day of this new year and a new decade on a strong note. The benchmark indices opened below the breakeven mark, but soon managed to cross over into the positive territory where they have stayed since then. Asia is currently trading in the green with Japan (up 1.2%) leading the pack of gainers.

Currently, in India, heavyweights from the BSE-Sensex are trading in the positive with auto, engineering and banking stocks leading the pack. The BSE-Sensex is trading higher by around 40 points, while the NSE-Nifty is up by around 15 points. Buying interest is also being witnessed among mid and small-cap stocks as the BSE Midcap and BSE Smallcap indices are trading higher by 0.5% and 0.6% respectively. The rupee is trading at 46.66 to the US dollar.

FMCG stocks have opened the day on a mixed note. Gainers here include Godrej Consumer and Marico. However, Gillette India is in the red. As per a leading business daily, Godrej Consumer is close to acquiring Indonesian household products company Megasari. Megasari makes HIT insecticide, Stella air freshener and instant foods. The deal is estimated to be in the region of Rs 12 bn to Rs 14 bn. Godrej Consumer will fund it through a combination of internal accruals and debt. The acquisition will be run by the company's household insecticides joint venture Godrej Sara Lee.

It may be noted that Godrej Consumer is also looking at buying out US based Sara Lee's 51% stake in the joint venture in a few months. In our view, these moves fit the company's stated intention of aggressively looking for international acquisitions. It has obtained board approval for raising Rs 30 bn for this purpose. In the past few years it has acquired UK based Keyline Brands and South Africa based Rapidol and Kinky.

Steel stocks have opened the day on a mixed note. Gainers here include Jindal Steel and SAIL. However, Bhushan Steel is in the red. As per a leading business daily, India's steel companies have witnessed almost a 50% YoY increase in sales in the month of December 2009. SAIL has reported a 32% growth in volumes at 1.3 m tonne for the month. For the quarter, the company posted a 23% volume growth. In our view, the robust growth can be attributed to the pent-up demand from the automobile and infrastructure sectors. Moreover, December, 2008 was a low-base due to the economic downturn. With volumes off take expected to grow further, steelmakers have hiked prices by around Rs 2,000 a tonne to Rs 32,000 to Rs 34,000 per tonne.