Volatility hits Indian markets

Wed, 20 Oct 01:30 pm

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The Indian markets witnessed a volatile trading session during the previous hour of trade as the indices saw a sharp sell-off but recovered back to the neutral zone thereafter. Currently, stocks from the capital goods, healthcare and auto spaces are leading the pack of gainers, while those from the metal and realty spaces are the top under performers.

The BSE-Sensex is currently trading lower by about 22 points (down 0.1%), while the NSE-Nifty is down by about 19 points (down 0.3%). Stocks from the mid and smallcap spaces are however trading on a flattish note as the BSE-Midcap is up by 0.2%, while the BSE-Smallcap is trading flat. The rupee is trading at 44.32 to the US dollar.

Stocks of FMCG companies are currently trading weak led by Marico, Nestle and ITC. A leading business daily has reported that FMCG companies may take another round of price hikes across product segments such as hair oils, edible oils, toilet soaps and detergents. Companies such as HUL, Godrej Consumer Products and Marico had recently hiked prices of products such as toilet soaps and hair oil to the tune of about 5 to 8% during August-September. With the prices of agri products as well as crude oil (along with the materials linked to it), on the rise, companies may go ahead and hike prices in a move to protect their margins.

Prices of items such as soaps, hair oils and detergents are also poised to move upwards on the likelihood of a ban on imports of soda ash, a key input. Soda ash prices have remained flat due to a large part of the demand being met through the low cost imports in recent times.

Hotel stocks are trading in the red led by Taj GVK and Oriental Hotels Limited. Oriental Hotels released its 2QFY11 results. The company’s top line grew by 22% YoY on the back of sales from its new Trivandrum property. When looking at like-to-like growth, the company’s sales grew by 9.6% YoY. Operating profit of the company grew slower than sales registering a growth of 5.5% YoY. This slower growth was a result of higher cost of goods sold, increase in staff costs and higher power and fuel cost for the quarter. Net profit of the company grew by 14% YoY. This growth came on the back of one-time extraordinary gain in the form of exchange gain on foreign currency loan registered during the quarter. Bottom line would have grown faster but for increase in interest expense and higher effective tax rate. When adjusted for one-time extraordinary gain, the company’s bottom line is seen to fall by 78% YoY.