Banks & autos weigh on the markets

Fri, 7 Jan 09:30 am

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Asian markets are trading mixed. Benchmark indices in China (up 1.4%), Hong Kong (up 0.2%) and Malaysia (up 0.2%) are trading in the positive zone. However, Indonesia (down 1.7%), Taiwan (down 0.9%) and Japan (down 0.2%) are trading in the negative. Indian markets have opened the day in the negative as well. Banking and auto stocks are the biggest losers. However, FMCG and IT stocks are trading in the positive.

The BSE-Sensex is trading lower by around 27 points (0.1%), while the NSE-Nifty is down by about 7 points (0.1%). Mid and small cap stocks are trading in the negative as well, with the BSE Midcap BSE Small cap down by 0.3% and 0.2% respectively. The rupee is trading at 45.45 to the US dollar.

FMCG stocks have opened the day in the green. Godrej Consumers, ITC and HUL are witnessing a strong momentum. However, Nestle is seeing selling pressure. Tea is an important beverage for most Indians. But despite that domestic consumption has been dwindling. Most people feel that tea is bad for health and is only meant for the older generation. The Tea Board of India has embarked on a major campaign to correct this notion and boost the consumption of tea in the country. This has helped boost sales for the tea producers. It has also helped companies like HUL, which has introduced its 'Arogya' brand of tea in 2010. The company has already garnered a market share of 22% across its brands. The company plans to gain market share as a part of its strategy for growth. For this it will embark upon a programme to conduct awareness campaigns to boost tea consumption especially amongst the youth. Considering that India has a huge youth population, this campaign may yield bumper results for the company's tea business at least.

High oil prices are playing spoil sport for the country's top oil firms IOC and ONGC. Their problems are being compounded with the government delaying the decision to increase prices of diesel, kerosene and cooking gas. As a result the two firms are facing huge amounts of revenue losses. The loss between what the firms are paying to the refineries for these products and what they are able to sell these products for in the market, has amounted to a whopping Rs 1.5 bn on a daily basis. Retailers like IOC have to sell diesel and cooking gas at prices fixed by the government. Exploration companies like ONGC have to sell crude oil to the refineries at cheaper rates to help offset some of their losses. Crude oil prices have been moving north for most part of 2010. It is almost US$ 90 per barrel at the moment. The government has been delaying its decision to increase fuel prices in light of higher inflation rates that are affecting the economy. Diesel accounts for nearly one-thirds of the fuel consumption in the country and any price hikes would lead to inflationary pressures. Well if this continues then oil companies are looking at seriously bad times in the days to come. Stocks of these companies are trading in the red along with the other oil retailer HPCL. BPCL, on the other hand, is trading in the green.