PSU, FMCG stocks lose favour

Wed, 16 Jun 01:30 pm

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Profit booking led the Indian markets to shed their morning gains and move towards the dotted line during the previous hour of trade. Pressure is currently seen in stocks from the PSU, FMCG and oil & gas spaces. On the other hand, stocks from the IT and auto sectors are amongst the top performers at the moment.

The BSE-Sensex is trading higher by around 10 points, while the NSE-Nifty is trading lower by about 4 points. Buying interest is however being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.3% and 0.5% respectively. The rupee is trading at 46.39 to the US dollar.

Auto stocks are currently trading mixed with Tata Motors, Mahindra and Mahindra (M&M) trading firm, while Hero Honda and TVS Motor are trading weak. A leading business daily has reported that M&M will be in negotiations with its ex-joint venture (JV) partner, Renault for making changes to the specifications of the sedan 'Logan'. M&M and Renault were in a JV to sell the vehicle. However, as things did not go as planned, Renault chose to exit the venture with M&M buying its (Renault's) 49% stake. M&M now plans to reform the vehicle by making certain changes including reducing the size of the car to less than 4 meters. This would allow the vehicle to attract lesser excise duty.

However, it should be noted that the company will be spending some amounts on developmental costs for making engineering changes to the vehicle. In addition, it will need to shell out some cash to Renault for making these changes as well. The amount has not been disclosed yet. This is because Renault holds the original rights for the vehicle till the end of the current year. After that, M&M will be allowed to rebrand the vehicle.

IT stocks are trading mixed with Patni Computers and TCS trading firm while Tech Mahindra and HCL Tech are trading weak. As per a leading daily, Infosys is suffering from a shortage of manpower. With the job market picking up and more options being available, employees of the company have been quitting in spite of compensation hikes. In fact the company has also seen job applicantions fall from 1.4 m candidates in FY06 to 0.4 m candidates in FY10. The shortage of manpower is so acute that to meet its target of recruiting 30,000 candidates this year, the company has opened a 'green channel' inviting its ex-employees to return to the fold. In such a scenario, times look challenging for Infosys as it is likely to face higher employee costs to recruit, train and retain its employees.