Markets begin on a weak note

Thu, 4 Feb 09:30 am

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The Indian markets have started today's session on a weak note. The benchmark indices opened close to the breakeven mark but quickly plunged into the red. They have not managed to make any upward movement since then. Other key Asian markets are trading in the red with Hong Kong (down 1.1%) leading the pack of losers. The US markets closed lower by 0.3% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading in the red with metal and auto stocks bearing the brunt of selling activity. The BSE-Sensex is trading lower by around 67 points, while the NSE-Nifty is down by about 24 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 45.98 to the US dollar.

Food stocks have opened the day on a mixed note. Gainers here include Agro Tech Foods and Nestle. However, GSK Consumer is in the red. As per a leading business daily, GSK Consumer has entered the instant noodles segment. It has launched the product under the 'Horlicks' brand, named 'Foodles'. The noodles market in India is estimated to be around Rs 10 bn and has been growing at the rate of 25%. Hence, the company's interest in the segment does not come as a surprise. Foodles is expected to compete with market leader 'Maggi' from Nestle. In fact, GSK consumer expects to gain a 6% to 10% market share in the first year itself. However, in our view, it will be an uphill task for a new brand to edge out Maggi, which Nestle has maintained over the decades by a host of advertising and promotion activities.

Energy stocks have opened the day on a positive note. Gainers here include Gujarat Gas and Castrol. As per a leading business daily, the Kirit Parikh report on fuel pricing has accepted ONGC's subsidy formula. Essentially the formula talks about crude oil production from government nominated blocks to be taxed at an incremental rate as crude prices rise. This will cap the subsidy burden on the government even if crude prices escalate. It will also provide more visibility for upstream oil companies as compared to the current practice of adhoc subsidy announcements. The report departs from the recommendation of the B K Chauturvedi Committee which had suggested a 100% windfall tax on crude price above US$ 75 per barrel. In our view, the incremental tax formula is a sensible one. But a lot depends on the actual implementation. After all, there have been committees earlier too, whose suggestions have not been carried out.