Markets slip further in the red

Thu, 18 Mar 01:30 pm

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The Indian markets continued to remain volatile as alternate bouts of buying and selling led the indices to hover around the dotted line during the previous two hours of trade. However, towards the end of the session, the markets dropped further into the red. Stocks from the FMCG, capital goods and auto spaces are seeing the most pressure, while those from the realty and banking spaces are amongst the few gainers.

The BSE-Sensex and the NSE-Nifty are currently trading lower by around 45 points and 10 points respectively. Stocks from the midcap and small cap spaces are however trading in the green. The BSE-Midcap and the BSE-Smallcap indices are trading higher by 0.4% and 0.3% respectively. The rupee is trading at 45.52 to the US dollar.

Textile stocks are currently trading firm led by Bombay Dyeing, Arvind, Raymond and Alok Industries. In an interview with a leading business daily, the management of textile major, Alok Industries gave his views on the outlook of the sector. The company's management is of the view that there is a certain level of buoyancy in the industry at present. This is on the back of the world retailers looking at India to meet their additional volume requirements. As per the management, China currently meets nearly 40% requirements of the global retailers, while India contributes to a mere 4%. As such, to reduce their dependency on China, more and more retailers are looking at India as a strategic destination of sourcing their requirements. The management expects the industry to expand to about US$ 40 bn within the next five years. Last year the industry size stood at about US$ 15 bn, of which export formed the majority portion.

In addition, the management also gave his views on raw material prices. Cotton prices have gone up by about 15% to 20% in the last few months on the back of strong demand. Considering that India is the only textile manufacturing country which has surplus cotton, it exports a large portion of it to other textile manufacturing nations such as Pakistan, China and Bangladesh. US also supplies cotton, but the farmers there are believed to be shifting to other crops. As such, with the demand for textile on a global scale expected to rise, so will the demand for cotton. Hence prices are expected to move upwards going forward. However, at the same time, the management also went on to say that it is easy for the company to pass on prices to its customers.

Food inflation numbers for the week ending March 6 were announced recently. Food inflation stood at about 16.3%, which is lower as compared to the preceding week's figure of 17.8%. This decline has been mainly due to lowering prices of pulses and vegetables. While vegetable prices declined by about 10% as compared to the previous week, prices of pulses decreased by about 4%.

While food prices managed to decline to a certain extent, this decline was offset by the increase in fuel inflation, which stood at 12.7% as compared to 11.4% during the previous week. This was mainly led by an approximate 17% and 15% increase in petrol and diesel prices. The rise in fuel prices is as a result of the budgetary announcement of a hike in excise and customs duty on petrol and diesel. It may be noted that food inflation number would have gone down even more had it not been for the rise in fuel prices. This could have an impact on food manufacturing companies as their entire supply chain would be impacted on the back of higher transportation and freight charges. Food stocks are currently trading weak led by Britannia, Nestle and Tata Tea.