Persistent buying aids indices

Thu, 28 Jan 11:30 am

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After breaking the streak of losses that it witnessed in the last few days, the Indian markets continued to trade in the positive during the previous two hours of trade. On account of market wide buying activity most of the sectors are trading in the green led by realty, metal, IT and healthcare sectors. However, select stocks from the capital goods sector are failing to garner investors' interest.

The BSE Sensex and NSE Nifty are trading in the green, up by 183 points and 62 points respectively. The BSE-Midcap and BSE-Smallcap are also trading up by 1.4% and 1.7% respectively. The rupee is trading at 46.28 to the dollar.

As per a leading business daily, FMCG major HUL, will continue spending heavily on advertising in order to combat intensifying competition as well as grow in new areas. The company is witnessing cutthroat competition in all of its core segments like soaps, detergents, home and personal care, foods and beverages. This growing competition mandates the company to invest highly in promotional and advertising activity, resulting in very high sales and marketing costs. In 3QFY10, while the sales for the company grew by 4.4%, its margins contracted by 0.2% primarily on account of 66% increase in its ad spending.

It may be noted that HUL lost some market share in its key segments in the last few quarters and had to take price cuts and relaunch products with variants in order to garner consumers' attention. As a result of a weak market segment and decrease in disposable income, consumers downtraded during the recession, which resulted in companies like Dabur and Godrej Consumer gaining more. Lately HUL is also moving to mass and discount end. Though the price cuts eroded some value growth, they did result in pushing the volumes higher. The company is also planning to foray into newer areas like water and out-of-home consumption in an attempt to derive future growth. The company will ramp up the number of its Swirls ice-cream parlours as well as Lipton Cafes in some quarters. While it will take some time for these ventures to come to fruition, the company's margins will definitely remain under pressure for some time to come.

State-owned infrastructure financing company, IDFC (Infrastructure Development Finance Company) declared its 3QFY10 and 9mFY10 results yesterday. The company's consolidated income from operations grew 13% YoY in 9mFY10, primarily on the back of 14% YoY growth in advances. While its disbursements grew by 44% YoY, approvals grew by 91% YoY in the nine month period. The company also saw an increase in asset management fees which grew by 67% YoY. Its total asset under management (AUM) stood at Rs 359 bn at the end of December 2009. While its net interest margins (NIM) improved from 2.9% in 9mFY09 to 3.5% in 9mFY10 due to lower funding costs, its non-interest income grew by 44% in 9mFY10 due to drop in income from treasury operations. Despite higher provisioning, the company managed to grow its bottomline by 31% YoY in 9mFY10. With one of the highest capital adequacy ratios, highest operating efficiency and one of the best return ratios, the company appears to be all set for reaping the benefits of the infrastructure thrust that India is witnessing.