The bear grip continues

Mon, 19 Dec 01:30 pm

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Weakness in the Indian stock markets continued over the last two hours of trade. Barring FMCG, all the sectors are trading in the red. Stocks in banking, consumer durables and realty have witnessed the steepest fall.

The BSE-Sensex is down by 209 points, while the NSE-Nifty is down 74 points. BSE Mid Cap index and the BSE Small Cap index are down by 2.25% and 2.59% respectively. The rupee is trading at 52.95 to the US dollar.

Banking stocks are trading in the red led by Allahabad Bank and Andhra Bank. As per a leading financial daily, State Bank of India (SBI) has given a guidance of 16% -18% for the credit growth in the current fiscal. As per the management, the bank has registered some increase in the credit growth in the months of October and November and expects the trend to continue. It does not expect sharp increase in net non performing assets (NPA) that has already seen the levels of 2.1%. Regarding recoveries, the bank may sell some of NPAs to asset restructuring companies (ARCs) or coordinate with other banks to resolve the issues. The management is very aggressively working on this by persuading companies to sell off their non-core assets to reduce gearing and is taking recourse to legal measures. The management has said that while recoveries in agricultural sector have improved, there a lot of sectors under stress currently such as aviation, textile and steel some power distribution companies. The management does not expect interest rate cycle to reverse till inflation falls back to 7% and expects capital infusion by the end of the December or latest by end of March 31, 2012. The stock was trading in the red.

Food and tobacco stocks are mainly trading in the red led by Lakshmi Energy and Foods and Tata Coffee. The market of premium cream biscuits is heating up with the entry of new players ITC (Sunfeast) and Kraft Foods (Oreo). According to AC Nielsen data, the combined value share of Britannia Industries' premium cream biscuits portfolio declined by 3.3% to 14.7% during January-September 2011. During the same time, Oreo and Sunfeast brands garnered shares of 6% and 10.5% respectively. As per news reports, largest biscuit manufacturer, Parle Products is planning to enter the premium cream segment which will further intensify competition. As per a leading financial daily, Britannia has merged the sales team of its dairy business with that of its established biscuit business. The development is seen as a move to gain distribution synergies and expand the reach of dairy products which constitute a mere 5% of overall sales. Reportedly, the company has started selling bread using cycle-rickshaws in Delhi to increase reach. The merger is also being viewed as a strategic one in the backdrop of biscuit manufacturer battling low margins due to input cost pressures.