Realty, metals pull down markets

Mon, 31 May 01:30 pm

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The Indian markets witnessed a volatile trading session as the benchmark index shed all its morning gains and dropped below the dotted line during the previous two hours of trade. While stocks from the PSU, oil & gas and healthcare spaces are amongst the top gainers, those from the realty, metal and IT spaces are amongst the top losers at present.

While the BSE-Sensex is trading up by about 10 points, the NSE-Nifty is trading marginally below the dotted line. The BSE-Midcap and BSE-Smallcap indices are trading marginally higher by 0.3% each. The rupee is trading at 46.55 to the US dollar.

FMCG stocks are currently trading firm led by Tata Tea, Tata Coffee, ITC an Nestle. Britannia Industries is launching its cookies brand in rural markets. This would be the first time a cookie would be launched in the rural markets and would help supplement Britannia’s biscuit portfolio. The company would be launching "Britannia Cookies" priced at Rs 5 for a pack of 10. The company has a firm eye on this uncontested territory with a proposition of nutrition and smaller pack size. Rural market is crowded with a host of local as well as national biscuit players, vying for a share of the consumer’s wallet.

To market its products in rural India, the company is planning to tie up with the local print media. It has also directed its sales staff to interact with consumers who come to shop at stores apart from talking with retailers. The company is also on a distribution overdrive and is targeting canteens, bus stations and railway platforms in both urban and rural areas. The low priced cookie will not give a miss to urban market. While it may not be stocked at retail stores, it would be available at stores catering to urban poor. This move to identify newer markets is a strategy to sustain its market share in a competitive environment. It may be noted that Britannia is a market leader in the Rs 83 bn biscuit market with a share of 38%.

Engineering stocks are currently trading mixed with Voltas, Alstom Projects and Blue Star trading firm, while TRF, Punj Lloyd and Suzlon Energy are trading weak. Voltas announced its FY10 results towards the end of last week. The company reported a consolidated topline growth of 11% YoY during the year. This growth in revenues was largely led by a 13% YoY increase in its EMPS (Electro-mechanical projects and services) segment, which was mainly on the back of execution of large overseas projects. However, the same was not the story for the company’s engineering products and services segment, which was marred by reduced spending of corporate in the domestic market. Moving on to the operating performance of the company, Voltas reported a strong 62% YoY increase in operating profits as expenses grew at a slower pace of 8% YoY. For the full year, operating margins expanded from 6.5% in FY09 to 9.6% in FY10 due to a large fall in raw material costs. Profits for the full year grew by 51% YoY (including extraordinary items) during FY10 led by a strong performance at the operating level. The increase in profits is lower than the growth in operating profits on the back of lower other and extraordinary income. On excluding the effect of extraordinary items during both years, profits saw a rise of 58% YoY.