Auto & Energy stocks drag indices

Thu, 20 Jan 11:30 am

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After starting today’s session on a negative note Indian indices have recovered marginally but continue to trade in the red. Currently, all the key Asian indices too are witnessing selling pressure. Right now, heavyweights in the Sensex are trading weak with stocks from Oil & Gas and Auto space bearing investors brunt. However, IT and healthcare stocks are trading flat.

Currently, the BSE-Sensex is trading down by around 67 points, while the Nse-Nifty is down by about 21 points. There has been some buying interest amongst the mid cap stocks with BSE Midcap index trading higher by 0.09%. However, BSE Small cap index is trading with a marginal loss and is down by 0.06%.

FMCG stocks are trading firm led by Henkel India and Marico. However, Paper products and Dabur are trading weak. In a bid to offset the rising raw material costs Godrej Consumers is planning to raise the prices of its products third time in the past three months. It may be noted that prices of key raw materials like soybean and palm oil have rallied substantially in the recent past due to supply side concerns prevailing in overseas markets. In light of rising raw material prices the company has decided to increase the prices of soaps and hair color by 5%. However, the company is raising prices in a calibrated way so as to maintain its sales growth. With inflation reaching all time high levels, sales of consumer companies is likely to be impacted as customers may opt for down trading. Thus, it is important for these companies to opt for price increases in a gradual manner so as to maintain the balance between growth and margins.

Metal stocks are trading mixed with NMDC and Bhushan Steel trading firm while Sterlite Industries and JSW Steel are trading weak. As per a leading financial daily, Hindustan Zinc Limited or (HZL) is planning to increase its silver production by 180% over the next one year. It may be noted that silver is a by-product obtained from lead refining. Hence, HZL would require no extra cost of production with the result that any growth in production would flow directly to the bottom line. The company is one of the biggest producers of lead and zinc in the country and is the process of increasing the capacity of its silver rich Sindesar Khurd lead mine by 1 m tones in the next fiscal. As per a press release by the company, this would increase the company’s silver production capacity to 500 tonnes. This would also elevate the company to the position of the 5th largest producer of silver in the world. However, the effect of this increase in silver production on the bottom line is expected to be miniscule as the company derives majority of its revenue from lead and zinc production.