Consumer goods boost the indices

Thu, 30 Dec 09:30 am

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Asian markets have opened the day on a mixed note. Indonesia (up 0.4%), Taiwan (up 0.4%) and Singapore (up 0.1%) are the biggest gainers. However, Japan (down 1.2%), China (down 0.4%) and Hong Kong (down 0.1%) are witnessing selling pressure. Indian markets have started the day on a positive note. Consumer goods and autos are leading the pack of gainers.

The BSE-Sensex is trading higher by around 77 points (0.4%), while the NSE-Nifty is up by about 15 points (0.3%). Mid and small cap stocks are trading in the green as well, with the BSE Midcap and BSE Small cap indices up by 0.4% and 0.2% respectively. The rupee is trading at 44.91 to the US dollar.

Auto stocks have opened the day on a good note. Stocks of Tata Motors, Maruti Suzuki and Mahindra & Mahindra are leading the pack of gainers. The auto sector in India has witnessed booming sales in recent months. Auto volumes have been buoyed by the festival season. The sector was further aided by people's willingness to buy more. Encouraged by this, auto companies have been launching new models across categories to woo customers. But this has led to higher competition. In fact during the past six months, the advertising spend by the auto companies has shot by nearly 20% YoY. Auto major Maruti Suzuki has stated that they have allocated about Rs 200 m towards the advertising campaign for December. This is almost 30% YoY higher than what they have done historically. In fact the global auto majors have hiked their marketing spend by almost 76% YoY for this quarter. While the hike in spend will definitely help auto companies boost their sales it will also put a dent in their margins. Margins of auto companies are already under pressure due to higher input costs.

As 2010 draws to a close, everyone is busy with making plans for the year ahead. This includes pharma major Sun Pharma which has stated that expanding the research facility in its subsidiary, Taro, is its top priority. In a recent statement, the company has said that it will focus on expanding the research at Taro and expanding capacity in India. The company has recently won a lawsuit in the Israeli Court that has allowed it to acquire Taro. The legal battle had been carrying on for the past three years. During this period, Sun's investments in Taro were compromised. However, this is now set to change. The company has not given out any specific amount for this investment. Taro currently invests about US$ 35 m on research but this is expected to rise. Sun also plans to spend around US$ 100 m annually over the next few years towards expanding its capacity in India. In addition to this, it will seek ways to retrieving the money that it has invested in the bonds of its competitor, Wockhardt. The latter owes almost US$ 110 m to overseas bond holders, including Sun Pharma. Sun Pharma is currently trading in the green along with Ranbaxy and Glenmark Pharma. However, Lupin and Dr Reddy's are trading in the red.