FMCG & Realty stocks drag indices

Fri, 4 Feb 11:30 am

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After starting today's session on a negative note the Indian indices have lost further ground and are currently trading in the red. Stocks from the FMCG and realty space are trading weak while metal and consumer durable stocks are trading firm.

Currently, the BSE-Sensex is down by 109 points while NSE-Nifty is trading 22 points below the dotted line. BSE Midcap and BSE Small cap indices are both up by 0.35% and 0.34% respectively. The rupee is trading at 45.66 to the US dollar.

FMCG stocks are trading firm led by Camlin and Pidilite Industries.  As per a leading financial daily, Marico and Dabur have suspended their operations in Egypt. This is following the political unrest in the country and is seen as a safety measure by the companies to protect their interest. It may be noted that Egypt accounts for about 7-8% of Marico's sales while it accounts for 2.5% of Dabur's sales.

Over the years Egypt has become a major manufacturing hub for Marico to service the MENA region. To ensure supplies, the company has supplemented the MENA supply chain with supplies from India. On the other hand, Dabur has several manufacturing bases in the Middle East. Hence it has not been significantly affected by the ongoing political crisis. Over the years, Indian FMCG players found Egypt quite an attractive proposition as it offers tax cuts, preferential trade treaties, and speedy approvals for business, in addition to high growth. However, if this crisis continues then the slowdown in Egypt and neighboring economies could impact demand.

Chemical stocks are trading firm led by Kanoria Chemicals and United Phosphorous. Kanoria Chemicals has announced 3QFY11 results. Top-line grew at a healthy pace of 29.9% YoY in 3QFY11 on account of strong performance from both Alco and Chloro chemicals segment. After a lull in last quarter due to decline in caustic soda prices, the company's principal segment Chloro Chemicals witnessed a 25.9% YoY increase in revenues. Alco Chemicals, the other division of the company also performed well and posted a near 54.2% YoY increase in revenues. The operating margins of the company remain intact at 17.6% during the quarter. However, bottom line declined 19.2% YoY mainly on account of decline in forex gains in 3QFY11. Adjusted for the non-recurring gains the net profits increased 77% YoY due to decline in tax rates. The effective tax rate of the company fell from about 41% in 3QFY10 to about 22% in 3QFY11.