Investors favour IT, FMCG

Mon, 15 Mar 01:30 pm

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Increased buying activity led the Indian indices to cut their losses and move above the dotted line during the previous two hours of trade. The market breadth remains positive as the overall advance to decline ratio is poised at 1.7 to 1 on the BSE. Stocks from the IT and FMCG spaces are amongst the top gainers, while those from the capital goods and banking spaces are amongst the top losers.

The BSE-Sensex and the NSE-Nifty are trading flat. While the former is trading marginally higher, the latter is trading marginally lower. The BSE-Midcap and BSE-Smallcap are trading lower by about 0.7% and 0.5% respectively. The rupee is trading at 45.56 to the dollar.

FMCG stocks are currently trading firm led by HUL, Godrej Consumer Products and Nirma. As per a press release by Godrej Consumer Products (GCPL), the company has entered into an agreement to acquire 'Tura', a company based in Nigeria. The company, which caters to the Nigerian and West African markets, is a manufacturer and distributor of a wide range of products including soaps, moisturizing lotion and skin toning cream. GCPL is looking at this acquisition as means to get a foothold in the fast growing Nigerian and West African markets. GCPL intends to leverage the distribution platform of Tura to introduce Kinky, Rapidol and Godrej brands in Africa. While no financial details of this deal are available as of now, it may be noted that GCPL had recently taken the approval of its board to raise up to Rs 30 bn for inorganic growth. We believe that this acquisition is part of GCPL’s larger strategy to tap developing markets. However, we would be cautious on the company until further details of this deal are available.

Engineering stocks are currently trading weak led by Praj Industries, Punj Lloyd and Suzlon. A leading business daily has reported that engineering and construction major Punj Lloyd is expecting orders to the tune of Rs 30 bn from the oil and gas sector in the next financial year. These would be from both the domestic and international markets. The company, however, expects 50% of the orders from ONGC. It must be noted that Punj Lloyd’s order backlog at the end of the last year stood at about Rs 235 bn, which is nearly 2 times its FY09 consolidated revenues.

In addition, the company recently also launched a vessel, which is capable of laying pipelines at a water-depth of 150 metres. It is believed that this vessel is the only Indian vessel which is capable of laying pipelines at such depth. The company’s management is also expecting more than 200 km of pipe laying work from ONGC in FY11, for which it would start bidding in the near future. Last year, this segment (oil drilling) contributed to nearly 12% of Punj Lloyd’s revenues.