Banks, FMCG stocks drive up markets

Fri, 25 Feb 11:30 am

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Indian indices continue to trade positive on buying interest in heavy weights over the last two hours of trade. Stocks from banking and FMCG space are trading firm while stocks from the metal and IT space are trading weak.

The BSE-Sensex is up by 85 points while NSE-Nifty is trading 38 points above the dotted line. BSE Midcap index is up by 0.2% while BSE Small cap index is trading 0.3% above yesterday's closing. The rupee is trading at 45.38 to the US dollar.

FMCG stocks are trading firm led by Godrej Consumer Products and P&G Hygiene and Health Care Limited. As per a leading financial daily, Hindustan Unilever Limited (HUL) has opened a 'Bru World Cafe' outlet on a pilot basis at an upmarket western suburb of Mumbai. This is seen as the company's attempt to test waters in the fast growing coffee shop market. It may be noted that Bru is HUL's only coffee brand and is sold only in India. The total domestic coffee market stands at Rs 30 bn of which organized coffee market is only Rs 6 bn. With coffee prices at an all time high, this initiative can potentially provide HUL a better pricing power for Bru coffee. HUL's biggest competitor, Nestle also has similar format Café Nestle. However, the company has not made any significant progress in this segment.

While coffee outlets are becoming increasingly popular amongst young Indian consumers who have more disposable income than their previous generations, established coffee chains such as Cafe Coffee Day, Lavazza-Barista and Costa Coffee have plans to flood the Indian street with hundreds of outlets over the next few years. For this reason, it may not be easy for HUL to tap into this market.

Steel stocks are trading mixed with Adhunik Metaliks and Maharashtra Seamless leading the pack of gainers. However, Jindal Saw Ltd and JSW Steel are trading weak. Tata Steel has finally struck a deal to sell certain assets of Teesside Cast Products (TCP) to Sahaviriya Steel Ltd (SSL), one of the largest steel producers in Thailand. The deal is valued at US$469 m and is expected to culminate by March 2011. The company will use the proceeds from sale of assets in TCP to pay down debt . Tata Steel was constantly evaluating an alternative plan for TCP after an illegal withdrawal by a consortium (to purchase TCP's product) happened after entering into an agreement. The assets covered in the sale include Redcar blast furnace, the Redcar and South bank coke ovens, TCP's power generation facilities and sinter plant, and the Lackenby steelmaking and casting facilities. However, Tata Steel will continue to operate the other Teesside assets including the Teesside Beam mill and Teesside Technology centre.