Investors prefer largecaps over peers

Mon, 2 Aug 01:30 pm

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The Indian market continued to gain momentum as buying activity pushed the indices higher into the positive during the previous two hours of trade. Buying activity is being witnessed in stocks across sectors led by those from the banking, consumer durables and the realty spaces. Stocks from the healthcare and IT sectors are amongst the lowest gainers at the moment.

The BSE-Sensex is trading higher by around 190 points (up 1.1%), while the NSE-Nifty is up by about 60 points (up 1.1). Buying interest is also being witnessed in stocks from the mid and small cap spaces as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.9% and 1% respectively. The rupee is trading at 46.24 to the US dollar.

Food stocks are trading mixed with Britannia and VST Industries trading firm and Agro Tech Foods and Nestle trading weak. As per a leading financial daily, the proposed joint venture between Tata Global Beverages (TGB) and PepsiCo to develop beverages in the health and wellness space, is likely to start its venture by developing affordable water. As per sources, the JV is working to launch a sub Rs 10 per litre product. This may even be positioned at Rs 5 per litre. It is so far clear that the JV will not be launching tea. This is because PepsiCo already has an agreement with Unilever on tea beverage. However, to avoid conflict TGB will be focusing on products which are value accretive while the joint venture will launch products solely for the mass.

The Indian packaged water market is already worth between Rs 1.5-2 bn and constitutes 15-20% of the overall packaged beverage industry. It is growing at around 20%. However, the margins are quite low as companies give heavy discounts to the retailers.

Auto stocks are currently trading firm led by TVS Motor, Maruti Suzuki, Hero Honda and Ashok Leyland. Gains in TVS Motor are on the back of it reporting strong sales volumes for the month of July 2010. The company reported a volume increase of 35% YoY to 163,106 units. The volume growth was driven by a 42% YoY rise in motorcycle sales, whose share in the total volumes rose to 37.4% from 35.6% last year. Sales of scooters rose by a faster 25% YoY, and contributed to nearly 25% of total volumes. Export volumes, on the other hand, surged by 54% YoY. With this its share of exports increased to 12.3% of total volumes as compared to about 10.7% last year.

It may be noted that during the quarter ended June 2010, the company has reported sales volumes of about 460,000 units. If we compare the sales volumes of July to that of the cumulative sales of the quarter ended June 2010, it forms around 35%, which by any means is a very strong growth number.