Maruti to take competition head on

Mon, 11 Jan 01:30 pm

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Indian markets remained flattish in the last two hours of trade. Currently, stocks in the reality, metal and PSU space are trading firm while stocks in the oil and gas sector are trading weak with heavy weights like Reliance and ONCG trading in the red.

The BSE-Sensex and the NSE-Nifty are currently trading above the dotted line by around 65 points and 22 points respectively. Stocks from the midcap and small cap spaces are currently trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 90 points and 181 points respectively. The rupee is trading at 45.35 to the US dollar.

The BSE auto Index was trading higher by 60 points at the time of this commentary. Keeping to international norms, Maruti is refurbishing its entire portfolio by launching new variants of existing models. However, the new variants of smaller cars are expected to be launched at lower prices than existing models. This is seen as a move to take on global biggies like Toyota, Honda and Volkswagen who are launching small cars in India. The company had taken on a cost reduction exercise in the wake of the Nano launch. This is expected to lead to more competitive pricing for the company’s products. Maruti has also reduced the engine size of its popular model Swift. This has resulted in the car being placed in a lower excise duty slab. The company is expected to pass on these benefits to its customers. 2010 is expected to be a tough year for Maruti with the company expected to play a volume game in the face of increased competition.

The BSE FMCG index was trading higher by 25.5 points with Nestle India being the highest gainer with an increase of 1.4%. According to a leading daily, FMCG companies like GlaxoSmithKline, Nestle, Hindustan Unilever, Marico, Godrej and Dabur are making a bee line to capture the bottom of the pyramid (BOP) customers. This segment estimated at 350 m individuals, is the fastest growing consumer segment. Marketers are not only betting on smaller pack size to capture this market but are also launching products specifically for this segment. This space neglected till now is large in terms of potential consumers; however the income level for this segment is quite low. The average earning is estimated to be less than Rs 100 per day. For this reason, FMCG companies will have to research their consumer’s preferences and tastes thoroughly to be successful.