Telecom, pharma shed index gains

Fri, 11 Jun 01:30 pm

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The Indian markets began drifting towards the dotted line as selling pressure during the previous two hours of trade led the markets to shed gains notched during the first half of the trading session. Stocks from the telecom, healthcare and IT spaces are seeing the most pressure at the moment. However, stocks from the oil & gas and power sectors are amongst the top gainers at the moment.

The BSE-Sensex is trading higher by around 95 points while the NSE-Nifty is trading up by around 25 points. The BSE-Midcap index is up by 0.3% and BSE-Smallcap index is up by 0.5%. The rupee is trading at 46.85 to the US dollar.

According to official data released today, industrial output grew at a strong pace of 17.6% YoY during the month of April 2010. This is the seventh month in a stretch when the industry has reported a double digit growth rate. This kind of growth is mainly due to the low base effect. During the same month last year, the industry grew by 1.1% YoY. Growth was led by the manufacturing segment. Manufacturing has a majority share of 80% in the index of industrial production (IIP) numbers and reported an increase of 19.4% YoY in April. Last year, it grew by 0.4% YoY. Within manufacturing, the capital goods production indicated positive signs as the figure increased by about 73% YoY. Last year, it recorded a fall of about 6% YoY. In addition, production of consumer durables rose by about 37% YoY (17.6% YoY last year).

As for the other two segments of the IIP - mining and electricity - they expanded by 11.4% and 6% in April respectively. During the same period last year they recorded a growth of 3.4% and 6.7% respectively. While the IIP numbers do seem impressive, one should remember that this is mainly due to a low base effect. It is quite possible that from June this year, the IIP numbers may normalize as activity picked during the month last year.

FMCG stocks are trading mixed with Mcleod Russel and United Spirits trading firm while Ruchi Soya and Godrej Consumer Products Limited are trading weak. As per a leading financial daily, Nestlé looks to gain when food inflation moderates. The company had been suffering from a double whammy with the rise in input prices and slowdown in demand from the urban poor as a result of high food inflation. The company however, chose to limit its price hikes so that consumers were not burdened with higher prices. As a result of this strategy while volumes grew at a healthy pace, the company saw pressure on margins. Now there are signs that the company has turned the corner with signs of commodity prices easing. Even if the prices of commodities do not drop from here, the demand momentum and moderate price increases are expected to see Nestle’s profitability increase.