India joins weak Asia

Fri, 18 Dec 10:30 am

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The Indian markets have started on a weak note. The benchmark indices opened below the breakeven mark on the back of weak global cues. They have not managed to break into the positive territory since then. Asia is currently trading in the red with China (down 1.6%) leading the pack of losers. The US markets closed lower by 1.3% yesterday.

Currently, in India, heavyweights from the BSE-Sensex are trading a mixed bag with auto and software stocks leading the pack of gainers. However, banking majors have failed to garner investors' interest. The BSE-Sensex is trading lower by 38 points, while the NSE-Nifty is down by 13 points. However, buying interest is being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.1% and 0.3% respectively. The rupee is trading at 46.85 to the US dollar.

FMCG stocks have opened the day on a mixed note. Gainers here include Henkel India and Pidilite, while HUL is in the red. As per a leading business daily, FMCG major Godrej Consumer Products (GCPL) is looking to buy the international household products business of US-based Sara Lee. It may be noted that Sara Lee plans to sell off its non-core food business. Its household products include Good Knight, Hit, Kiwi and Biotex. In fact, it had sold its body care division to Unilever for US$ 1.9 bn and has agreed to sell its Ambi Pur air care business to Procter & Gamble for US$ 468 m. GCPL's interest stems from the fact that it is seeking to expand globally after having established itself in India. It is also in the process of buying out the 51 % stake of Sara Lee in Godrej Sara Lee. In fact, GCPL plans to raise Rs 30 bn for acquisitions. In our view, this is an extension of GCPL's strategy of taking the inorganic route to boost its growth with a major focus on the personal care segment in the last 2 years. It has expanded the business into the international markets through acquisitions in U.K, South Africa and U.A.E.

Energy stocks have opened the day on a mixed note. Gainers here include HPCL and Indian Oil, whle BPCL is in the red. As per a leading business daily, oil marketing companies such as Indian Oil, BPCL and HPCL want a price cut of as much as Rs 8 in the procurement price of biodiesel. They are ready to pay only around Rs 26 per litre as the landed price at blending location. However, the producers are seeking a price of Rs 34.50 per litre. The main area of contention is taxation. Including VAT, customs and excise the price of biodiesel exceeds that of diesel itself. In our view, the government must ensure that taxes do not act as a disincentive for the oil marketing companies at a time when it is trying to push cleaner fuels.