IT, auto stocks lead pack of gainers

Wed, 12 Sep 01:30 pm

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The Indian equity markets continued to trade firm, in a range bound manner during previous two hours of trade. Barring stocks from the power, healthcare and PSU sectors, buying activity is seen in stocks across the board with those from the IT, Auto and consumer durables sectors leading the gains.

The Sensex today is trading higher by about 65 points (up 0.4%), while the NSE-Nifty is trading higher by about 16 points (0.3%). Midcap and smallcap stocks are trading firm with the BSE Mid Cap and BSE Small Cap indices trading higher by 0.25% each. The rupee is trading at 55.28 to the US dollar.

Stocks of FMCG companies are trading mixed with Godrej Consumer and GSK consumer trading weak while Marico and Dabur are trading firm. As per a leading financial daily, FMCG company Marico has said that beauty & wellness will be the main growth drivers in future. Therefore the company is open to making acquisitions in the beauty & wellness categories particularly in the emerging markets of Asia and Africa. In February 2012, the company had acquired the personal care business of Paras Pharmaceuticals from Reckitt Benckiser for Rs 7.4 bn. This acquisition has added personal grooming brands for youth namely Set Wet, Zatak and Livon to Marico's traditional portfolio of hair and edible oils. This will enable the company to gain a foothold in the rapidly growing and high margin categories of deodorants and hair gels. Marico has said that as a company, it is imperative to have a youth portfolio in line with demographic trends. The company believes that categories aimed at the youth are tailwind categories with high potential for growth over the long term.

IIP (Index or Industrial Production) numbers for the month of June 2012 were released recently. Led by a poor show by the manufacturing, mining and capital goods sector, industrial production grew by a mere 0.1% during the month. With this data, the YTD (year to date) data i.e. data for four month period April to July this year, has contracted by 0.1%. During the corresponding month last year, the growth in IIP was a low 3.7% during the month and 6.1% during first four month period of FY12. Forming nearly three-fourth of the index, the manufacturing sector contracted by 0.2% in July. Last year, the sector's growth figure stood at 3.1% YoY. During the April - July period, growth for the sector contracted by 0.6% (6.5% in the four-month period of FY12). The capital goods sector continued its dismal performance, declining by 5% in July as against a decline of 13.7% last year. Mining output dipped by 0.7% as against a growth of 0.7% in the same month a year ago.

With this data being released, all eyes will be on the RBI's mid-quarter policy review, which is scheduled for Monday next week. However, as per the Hindu Business Line, this modest uptick in IIP for the month could imply that the Reserve Bank of India (RBI) would leave policy rates unchanged and that the central bank would consider cutting rates during the mid-year review meeting in the month of October 2012.