Flat with a negative bias

Fri, 11 Feb 11:30 am

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After starting today's session on a negative note, Indian indices have further magnified the losses in the previous two hours of trade and are currently trading in the red. Stocks from the metal and IT space have taken a beating while stocks from the consumer durables and banking space are trading firm.

Currently, the BSE-Sensex is down by 70 points while NSE-Nifty is trading 15 points below the dotted line. However,BSE Midcap and BSE Small cap indices are both up by 0.22% and 0.44% respectively. The rupee is trading at 45.66 to the US dollar.

Energy stocks are trading weak with ONGC and BPCL leading the pack of losers. However, Cairn India and Gujarat Gas are trading firm. RIL has unveiled its mega capex plan for the next five years. In a bid to almost double its earnings by 2015-16 the company plans to invest US$ 25-30 bn (Rs 1,125-1,350 bn) across various verticals. The company will invest about US$ 10-12 bn in petrochemicals (Rs 450-540 bn) and US$ 10-15 bn (Rs 450-675 bn) on exploration of oil & gas discoveries in India & US shale gas. It also has plans to invest huge sums in telecom. Investment in the proposed verticals is likely to garner an EBITDA of about US$ 15 bn (Rs 675 bn) by 2015 and about 1/3rd of the planned EBITDA is likely to come from the refining segment alone.

Further, the company also states that it does not expect the production in KG-D6 to go below 54-55 mmscmd in the near future. And in order to ramp up production from current levels the company is waiting for an approval from DGH. Lastly, the management is confident that cash generated from internal operations would be sufficient to fund the capex plans thus reducing the reliance on external debt.

FMCG stocks are trading firm led by Henkel India and Gillette. As per a leading financial daily, food inflation is forcing consumer goods companies like HUL and Parle to tighten their belts by reducing the packaging. Reduced packaging means two things. Reducing the content of the pack and reducing the material for making the pack.

While most FMCG companies have been reducing the pack size to deal with input costs, packaging firms are working to develop new and cheaper packaging material to control costs. These measures include reducing the size and thickness of packaging as well as replacing costly material with lower cost alternatives. Tetra Pak India with a 90% share in packaged fruits and juices segment has introduced smaller, 60-65 ml and 100-110 ml pack offerings, for brands such as Parle Agro's Frooti. Jindal Polyfilms with customers like HUL and Colgate has reduced the thickness of packaging material for products such as soaps from 12 microns to 8 microns. This has resulted in savings of 10-15% for companies.