Markets slip further into the red

Thu, 7 Jan 01:30 pm

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After witnessing weakness during the morning session, the Indian stock markets slipped further into the red during the previous two hours of trade. Profit booking is being seen in IT and auto stocks among others. However, stocks from the consumer durables and oil & gas sectors are finding favour.

The BSE Sensex and NSE Nifty are trading in the red, down by 120 points and 30 points respectively. The BSE-Midcap index is trading lower by 0.2%, while the BSE-Smallcap index is trading up by 0.4% respectively. The rupee is trading at 46.81 to the dollar.

Cigarette major Godfrey Phillips India has entered the pan masala category by launching a premium pan masala brand called 'Pan Vilas' in Jaipur. The company plans to acquire 5% share of the premium pan masala market within the first year of its launch. The company is also planning to launch a zarda product by the end of next year. This will help the company establish further synergies with its newly launched pan masala product. As per the management, the company has conducted four years of extensive research before rolling out this new category of product which has traditionally not been part of its portfolio. Pan Vilas is magnesium carbonate free product and complies with PFA standards. The company estimates the premium pan masala market to be worth Rs 15 bn.

The management's bullishness on the prospects of the new business are evident from the fact that it expects the pan masala category to contribute 30% of the company's total revenue over the next five years. The company is planning to invest Rs 1 bn over the next 3 years for the aggressive marketing of the product and will push the product aggressively to penetrate deeper into existing markets. In the first phase it will look at covering the Rajasthan, Gujarat and Madhya Pradesh markets. In the next six months, it plans to have pan India presence with even deeper penetration. This is a good strategic move by the company considering the fact that it can easily leverage its existing sales and distribution network of cigarette category for the pan masala business through 800,000 retail centres. The stock is currently trading higher on the bourses.

The stock of Pidilite Industries has seen some sharp up moves in the last two days. This came on the back of reports that the company's board is seriously considering a bonus issue at its next meeting which is to be held by the end of January. Pidilite Industries' financials have seen a gradual improvement in the last trailing twelve months. However, the improvement has been restricted to the bottomline. That was on the back of savings on raw material costs leading to margin expansion as also lower forex losses. The company's revenues have not seen any such similar significant increases. However, investors need to be aware of the fact that a bonus issue as such is a non event for shareholders other than the fact that there will be a higher number of shares outstanding and a consequent increase in the stock's liquidity on the bourses.