Realty, banking pull markets lower

Fri, 3 Dec 01:30 pm

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After hovering around yesterday's closing levels for most of the post noon trading session, sudden spike in selling activity led the Indian markets to dip into the red. Stocks from the realty and banking spaces are leading the pack of losers. Metal and power stocks are also not in favour at the moment. On the other hand, IT and auto stocks are finding some favour.

The BSE-Sensex is trading lower by around 30 points (down 0.2%), while the NSE-Nifty is down by about 20 points (down 0.4%). Stocks from the mid and smallcap spaces are not in favour today as the BSE-Midcap and BSE-Smallcap indices are trading lower by 2.1% and 2.6% respectively. The rupee is trading at 45.08 to the US dollar.

Stocks of cigarette manufacturers are trading weak led by Godfrey Phillips, Golden Tobacco and ITC. A leading business daily has reported that cigarette majors ITC and Godfrey Phillips have closed down their factories as a protest against the recent government order for health warnings on cigarette and beedi packets. The tobacco manufacturers have stopped production of cigarettes after uncertainty over pictorial warnings. It is reported that ITC has shut down all its factories from December 1. It is believed that the Ministry of Health and Family Welfare had ordered all tobacco product makers to carry graphic pictorial warnings on their product packaging cautioning buyers of the possible risk of mouth cancer. This was done so way back in March this year. As such, the existing warnings printed on cigarette packs were due to change from December this year. This is not likely to impact the company's sales as it has been reported that the cigarette manufacturers have built up a good amount of inventory as the changeover date was known well in advance. Also, the fact the government earns huge revenues from tobacco manufacturers in the form of excise duties makes us believes that this protest will not last for long.

Tyre stocks are trading weak with MRF and Apollo Tyres leading the losses. Indian tyre-makers have stopped signing new natural rubber import deals as they are getting the raw material more than 15% cheaper in the local market. The tyre-makers are aggressively buying in the domestic market due to cheaper supplies. In August, Indian rubber makers were charging a premium of as much as Rs 35 per kg over the Bangkok market, prompting Indian tyre companies to sign imports deals aggressively for shipment in September to December. However, the scenario has reversed. India is likely to produce around 850,000 tonnes of natural rubber in FY11, down 4.8% from the earlier estimate, after heavy unseasonal rains affected tapping. The domestic tyre production in FY11 is estimated to rise to a record 121.4 m units as companies boost capacity to meet booming demand from the local auto industry.