Markets shed early gains

Tue, 17 May 11:30 am

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Indian stock market indices have shed their early morning gains and are now trading in the red. Oil & Gas and realty stocks are leading the losses, while stocks from the FMCG and capital goods sectors are trading in the green.

The BSE-Sensex is down by 45 points while NSE-Nifty is trading 16 points below the dotted line. However, BSE Midcap and BSE Small cap indices are down by 0.2% and 0.1% respectively. The rupee is trading at 45.05 to the US dollar.

Auto stocks are trading weak led by TVS Motor and Hero Honda. As per a leading financial daily, the auto industry may witness further slowdown as a result of hike in petrol prices by Rs 5 per litre. The industry is now facing double whammy of rising interest rates and costlier fuel. It may be noted that car sales in India posted the slowest growth in 22 months in April, 2011. The sales grew by only 13.2% in April due to rising interest rates and lower consumer demand. A hike of Rs 5 in petrol is quite a substantial hike and the latest increase is surely going to affect the demand adversely at least in the short term. As per industry players, consumer sentiments are not favourable and the slowdown may continue for the next couple of months. However, this may increase the demand for diesel-driven cars till the time diesel prices are deregulated as there is a significant difference in the prices of the two fuels.

Consumer product companies are trading firm led by Dabur India and Camlin Limited. As per a leading financial daily, Hindustan Unilever Limited (HUL) has launched a new initiative call India Water Body. The company is looking to address water scarcity problems of the future through this initiative. As per the company's spokesperson, HUL is looking to save 50 bn liters of water in the next four years through this programme and intents to half the water associated with consumers for use of its products by 2020. It may be noted that HUL gets a bulk of its sales from daily hygiene products like detergents, toilet soaps, toothpastes, and shampoos. These products consume the maximum amount of water from households. Moreover, almost 40% of HUL water footprint comes from the laundry process.

HUL's R&D team is now focusing on product innovation in shampoos, laundry and personal wash which will help consumers reduce water usage. As of now the company has Surf Excel Quickwash which is being promoted as a product that requires less water for washing clothes. While the company's initiative will offer its consumers a unique proposition considering urban India is dealing with a shortfall of water supply, the company's bottom line may be impacted marginally in the medium term as its R&D expenses would increase.