Titan Industries plays the regional card

Thu, 8 Apr 01:30 pm

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Although trading in a volatile manner, the markets dropped further into the red during the previous two hours of trade. However, at the time of writing the market breadth was positive as the gainers outnumbered the losers in a ratio of 1.3 to 1 on the overall BSE. While stocks from the consumer durables, IT and realty spaces are amongst the key gainers, those forming part of the BSE-Metal, BSE-Bankex and the BSE-FMCG indices are seeing the most pressure.

The BSE-Sensex is trading lower by about 120 points, while the NSE-Nifty is trading lower by about 35 points. However, stocks from the midcap and smallcap space are trading higher with the BSE-Midcap and BSE-Smallcap indices up by about 0.1% and 0.5% respectively. The rupee is trading at 44.61 to the US dollar.

Stocks of tyre manufacturing companies have been seeing some action over the past few weeks on the back of volatile movements in prices of rubber (key raw material). A leading business daily has reported that during FY10, natural rubber output decreased by about 3.8% YoY, while the consumption improved by about 7% YoY. The output of natural rubber had dropped due to poor monsoons last year. With the demand-supply gap widening, prices of the commodity have moved upwards.

Price of domestic rubber is priced higher by about 10% to 11% as compared to imported rubber. This is why rubber imports have increased by about 120% YoY to about 170,000 tonnes or about 18% of total consumption. The same figure last year stood at about 9% YoY. Plus, it is also believed that tyre industry, the key consumer of rubber, is on an expansion spree. While tyre majors such as Ceat, JK and Bridgestone have commissioned capacity-expansion plans last year, other tyre manufacturers such as Birla, Apollo and TVS Sri Chakra Tyres have installed new plants. The Rubber Board is expecting expansion to continue this year as well. However, it must be noted that tyre companies will not find it difficult to pass on the costs to their consumers, considering there is an overall shortage in the radials market as well.

Retail stocks are currently trading firm led by Titan Industries, Koutons Retail and Trent. A leading business daily has reported that the management of Titan Industries' is planning to enter the lucrative regional ornaments market as a new strategy for its Tanishq brand. The main idea of this development is to cater to the requirements of brides belonging to different communities around the country. At present the products sold under the brand are standard jewelry in the wedding range.

It is believed that the jewellery market in India is sized at about Rs 1 trillion, of which wedding jewellery holds nearly half the share. This move is a positive one for the company considering that it will give its brand some presence across regional markets as well. However, it will definitely have to compete with the small and unorganized regional players across the nation. The jewellery segment contributes to about 70% of the company's revenues.