Indian stock markets under pressure

Wed, 18 May 11:30 am

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Over the last two hours of trade Indian stock markets pared their opening gains and are currently trading flat backed by selling activity in heavyweights. Stocks from the IT and capital goods space are trading firm while stocks from the PSU and oil & gas space are trading weak.

The BSE-Sensex is trading flat while NSE-Nifty is trading 5 points below the dotted line. BSE Midcap index is down by 0.3% while BSE Small cap index is trading 0.1% below yesterday's closing. The rupee is trading at 45.06 to the US dollar.

Consumer product stocks are trading mixed with Marico and Gillette India trading firm while Camlin and Paper Products are trading weak. As per a leading financial daily, Dabur India is planning to set up two more factories and introduce more products in Africa. This is because the company believes that Africa will be the epicenter for Dabur's future growth. The new factories are being set up in Johannesburg and Nairobi and will start production by June 2012. To cash in on the opportunities in Africa, Dabur has already built two factories in Egypt and one in Nigeria. Products like hair oil and toothpaste are manufactured here.

Dabur had also acquired Namaste Laboratories LLC recently which derives as much as a third of its sales from Africa. Dabur sells bath gels, shampoos and skin creams in Africa under the Hobby brand. Hobby brand came with the company's purchase of Hobi Kozmetik last year. Dabur plans to decrease its reliance on India due to heavy competition and inflation worries and increase the share of overseas sales from the current 22% to 28% in three years. Africa forms an important part of this strategy.

Auto stocks are trading weak led by Tata Motors and Maruti Suzuki. As per a leading financial daily, M&M is all set to launch a mini version of Xylo. The trial production has already begun for the smaller version of the popular Mahindra SUV (Sport Utility Vehicle) car. The car will be rolled out of Mahindra's Chakan plant and is expected to hit the roads in the next two months. Mahindra has decided to price the diesel version of mini Xylo at Rs 0.5 m putting it in the same range as Maruti Suzuki Swift, Hyundai's i20 and Tata Motor's Indigo. In times of rising petrol prices, diesel cars are expected to be in demand.

It may be noted that at present, most 5-seater SUVs are priced above Rs 1.8 m thus making it unaffordable for many people. Xlylo too is priced at Rs 0.8 m but the new mini Xylo may drive volumes for Mahindra. Toyota Innova is another player in the same segment. As per management, it makes sense for M&M to launch a mini SUV to leverage its position in the utility vehicle market. The automaker is expected to soon launch cars from Ssang Yong brand like Korando and Rexton in India.