Markets negative on realty

Tue, 24 Aug 11:30 am

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After starting today’s session on a positive note Indian indices have slumped into the red. However, other key Asian markets are trading mixed with Nikkei down 1.3%, but China up 0.9%. Currently heavyweights in the Sensex are trading negative with stocks from FMCG space trading flat with a positive bias. However, stocks from realty and metal space are witnessing declines.

Currently, the BSE-Sensex is trading down by around 43 points, while the NSE-Nifty is down by about 23 points. Mid and small cap stocks are also facing declines as the BSE-Midcap (lower by 0.2%) and BSE-Smallcap indices are trading flat with a negative bias. The rupee is trading at 46.78 to the US dollar.

FMCG stocks are trading positive with Marico and Nestle leading the pack of gains. Britannia is depending on the upcoming festive season in India to ramp up its revenues. The company is looking to achieve greater market share during the festival season of August-December, from the ‘gifting’ segment. As of now, its revenues from the festival season stand at Rs 300 m. Britannia wants to push its revenues up to Rs 2 bn over the next three years.

According to a company official, rough estimates of the entire gifting market stand at Rs 15 bn. The opportunity in the market is huge, as currently the leading biscuit maker has a small share of the market. Currently 70% of its festival period revenues come from 10 cities (which includes metros and major cities), but it wants to leverage 25 other cities where it has distribution networks. New product introductions will also help it achieve its revenue targets. Despite the slowdown last year, the company's gifting segment grew 20%, and it hopes growth of 35% YoY in 2011, despite higher input costs.

Construction stocks are trading in the red with Lok Housing and Unity Infraprojects leading the pack of losers. However, IVRCL and Simplex Infrastructures are trading strong. IVRCL plans to raise funds for two of its subsidiaries namely IVRCL Assets & Holdings Ltd (IVRCL Assets) and Hindustan Dorr-Oliver Ltd (HDO) via QIP. The company plans to raise Rs 6 bn for IVRCL Assets and Rs 2.5 bn for the EPC subsidiary, HDO. Earlier the company had sought board approval to raise Rs 10 bn for IVRCL Assets at one go. But now the funds will be raised in two tranches of Rs 5-6 bn. The idea behind raising funds for IVRCL Assets is to bolster its balance sheet so that it can bid for larger projects going ahead. IVRCL Assets currently takes strength from the parent’s balance sheet to bid for larger projects. Further the idea behind raising money in HDO is to tap the significant growth opportunity in the future.