Persistent selling mars indices

Mon, 26 Sep Closing

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Indian stock markets traded in the red throughout today's trading session. The indices opened on a weak note and selling pressure intensified in the ensuing hours pushing the indices deeper into the red. That said, in the afternoon session, investors resorted to buying at lower levels which resulted in the markets paring some losses. However, it was not enough and the indices closed below the dotted line in the final trading hour. While the BSE-Sensex closed lower by around 111 points (down 1%), the NSE-Nifty closed lower by around 32 points (down 1%). The BSE Mid Cap and the BSE Small Cap were not spared either as they closed lower by 1% and 2% respectively. Barring IT stocks, all sectoral indices closed in the red today.

As regards global markets, Asian indices closed weak today while European indices have opened on a positive note. The rupee was trading at Rs 49.66 to the dollar at the time of writing.

Food stocks closed in the red today and the key losers here were Britannia, GSK Consumer and Imperial Tobacco Company (ITC). As per a leading business daily, ITC's Personal Care Products Division is looking to foray into the domestic deodorant market. The deos market is valued at about Rs 9 bn and the company wants to capitalise on the fact that this market is growing at a strong rate. That said, this space is already crowded with around 60 players present. It must be noted that ITC is already present in the fragrances market through its Essenza range of fragrances which fall in the premium category. The company has no presence, however, in the deo range priced between Rs 100 and Rs 150, a segment that is quite popular in the country. Whether this business turns out to be profitable for the company remains to be seen given that there is fierce competition in this space. Especially since players such as Wipro, Hindustan Unilever and sports brands such as Reebok and Nike already corner a significant chunk of this market.

As per a leading business daily, Hindalco Industries has outlined an investment of Rs 100 bn in FY12 in its ongoing projects Mahan Aluminium in Madhya Pradesh, Aditya Alumina and Aluminium and Utkal Alumina in Orissa. The company will also invest Rs 7 bn this fiscal to enhance capacity at the Dahej unit of its subsidiary Birla Copper. The latter produces cathodes, continuous cast copper rods and precious metals. The funding for this capex is expected to be through internal accruals given that the company has cash reserves to the tune of Rs 295 bn. That said, there had been a delay in the commissioning of both the Mahan Aluminium and Aditya Alumina projects due to delay in obtaining environment clearances and procuring land. Availability of skilled and semi-skilled labour was also an issue.

On an overall basis, the sovereign debt crisis in Europe and downgrade of USA may lead to more risk aversion in the financial markets and can have adverse impact on investment flows in commodities sector. This could lead to lower aluminium and copper prices on the London Metal Exchange (LME). High input costs and an uncertain regulatory environment as well as subdued profitability of the copper business are likely to keep margins under pressure. The stock closed lower today.