Flat with a negative bias

Wed, 15 Dec 11:30 am

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After starting today's session on a negative note, Indian indices are still languishing in the red. However, other key Asian markets are trading mixed. Currently, heavyweights in the Sensex are trading weak with stocks from the realty and banking space bearing the brunt of investors. However, stocks from the IT and oil & gas space are trading firm.

Currently, the BSE-Sensex is trading down by around 40 points, while the NSE-Nifty is down by about 17 points. Even the buying interest amongst the mid and small cap stocks is muted as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.13% and 0.16% respectively.

Telecom stocks are trading mixed with MTNL and RCOM leading the gains. However, Idea is trading weak. In a bid to retire the high cost of debt taken to buy 3G airwaves, RCOM is planning to borrow US$ 1.9 bn (Rs 90 bn) from China Development Bank at nominal rates. Approximately US$ 1.3 bn of the loan will used to retire the high cost of debt sitting on the balance sheet while the balance 30% will be used to buy mobile network equipment from Chinese vendors. The company has already received RBI's approval to raise the amount.

Right now RCOM has a debt burden of Rs 300 bn. Refinancing a part of the debt at lower interest rate is likely to result in interest savings of Rs 5 bn annually. It may be noted RCOM is constantly making efforts to clean its balance sheet. Post the failed talks with GTL Infrastructure to sell its tower assets the company entered into strategic discussions with buyers to sell a minority stake ranging from 14-26%, which hasn't fructified either. Thus refinancing of the debt to reduce interest burden was a wise move to say the least.

FMCG stocks are trading mixed with Marico and Henkel India trading firm and Gillette India and P&G Hygiene trading weak. As per a leading financial daily, Marico is expected to see margin pressure this quarter. This is due to the rising cost of raw material. As per the chairman and managing director of Marico, Harsh Mariwala, the price of copra has gone up by 60% YoY during 3QFY11. It may be noted that copra makes up 40% of the company's input cost. To neutralize this price increase, Marico had raised the price of its flagship hair oil brand Parachute by 5% and edible oils prices by 2-3% during 2QFY11. The company went for a second round of price increase for Parachute towards the end of the second quarter, hiking prices by 7-8%.

However, the company expects its top line to grow strongly during the second half of the fiscal. Marico is also looking for growth via inorganic means and is scouting for acquisitions in geographies such as Indonesia, Vietnam, Kenya and Nigeria, in the personal care space.