Persistent selling hits markets

Thu, 26 Nov 12:30 pm

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Selling activity intensified across index heavyweights during the previous two hours of trade pushing the markets further into the red. While power and steel stocks are weighing heavy on the indices, buying is being witnessed in cement and telecom stocks.

The BSE-Sensex and NSE-Nifty are trading lower currently, down by around 91 points and 27 points respectively. The BSE-Midcap and BSE-Smallcap indices too are trading lower, down by around 1% and 0.2% respectively. The rupee is trading at 46.28 to the dollar.

Software stocks are witnessing a mixed trend currently. While Wipro is trading firm, Infosys and TCS are in the red. As per a leading business daily, after being at the receiving end for most part of the last fiscal, Indian software companies are more optimistic about the outlook going forward. However, the managements believe that the recovery will be gradual as uncertainties still persist with respect to the strength of the global recovery. Overseas clients, in a bid to cut costs, have been increasingly outsourcing to Indian IT firms. However, sluggish IT spending, moderate fees, a stronger rupee and rising competition from global rivals such as IBM and Accenture are some of the factors that may prevent the sector from reporting strong growth rates as they had done in the past. Overall, however, the outlook for the sector going forward is on the brighter side and major IT firms have been announcing deals in recent months.

FMCG stocks are also trading mixed. Colgate and HUL are finding favour, Dabur is at the receiving end. As per a leading business daily, FMCG major Hindustan Unilever (HUL) seems to be making headway in terms of arresting the erosion of its market share namely in the soaps, washing powder and skin cream segments. However, all is not hunky dory as HUL continues to lose market share in the shampoos, packaged tea, toothpaste, detergent cakes, talcum powder and utensil cleaner categories. Not just that, as per data released by the research firm AC Nielsen, volumes are a cause for concern for the company even in categories where it has managed to hold on to its market share.

Earlier, HUL had stated that it is concentrating on regaining its market share going forward as it believes that without market share, profitability is impossible. The company has already started putting a strategy in place which includes grammage correction, pricing unit packs at lower price points and increasing promotions for value brands. All this should help boost volumes. However, it will be interesting to see how competitors react to this strategy going forward.