FMCG, auto amongst the least favorite

Wed, 17 Mar 01:30 pm

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Indian markets continued to trade in the green during the previous two hours of trade on the back of sustained buying activity. While investors are buying stocks across sectors, those from the healthcare, metal and capital goods spaces are amongst the favourites currently. Stocks from the auto and FMCG spaces are, however, amongst the lowest gainers. The overall market breadth is positive as the advance to decline ratio is poised at 1.2 to 1 on the BSE.

BSE-Sensex is trading higher by 170 points while NSE-Nifty is trading up by 50 points. The BSE-Midcap and BSE-Smallcap indices are trading firm, higher by about 0.6% and 0.4% respectively. The rupee is trading at 45.32 to the US dollar.

Auto stocks are currently trading mixed with TVS Motor and Ashok Leyland trading firm while Maruti Suzuki and Bajaj Auto are trading weak. A leading business daily has reported that the flagship product of the joint venture between Mahindra & Mahindra and Renault, the Logan is likely to see some alterations made to it. This would mainly be due to the poor sales volumes of this car since its launch. It is reported that M&M had been asking its partner to make certain changes to the vehicle for a while now. This includes shortening the length of the car as well as increasing localisation. However, Renault was not in favour of making these alterations as it did not wish to make changes to the vehicle only for one region (India). This is considering that the car is sold worldwide and is believed to be selling well.

The Logan in its present form, measures about 4.2 metres. As per the leading business daily's sources, the company is internally evaluating the shortened version of the car, which is likely to be less than 4 metres long. This would enable the company to price the car at a more attractive rate considering that it would qualify for the lowest excise slab of 10%. Renault is believed to already have set an ambitious target of selling 15,000 units during FY11. During the year till date i.e. from April to February this year, the JV company sold barely 6,000 units.

Telecom stocks are currently trading firm led by Idea Cellular and Bharti Airtel. A leading business daily has reported that Bharti Airtel has issued a term sheet to banks to raise up to US$ 8.5 bn in offshore loans to fund the deal. As per the report, the six-year offshore facility has four tranches and carries a blended average life of 4.75 years, with a margin ranging from 176 basis points to 179 bps over Libor. This means that the company has opted not to borrow from the domestic market. It is believed that the company has received strong response from offshore lenders. In addition, it is reported that these funds would reduce execution risk (considering that payments would be made in foreign currency).

In another development related to the Zain's African asset acquisition, Bharti Airtel is believed to overcome one of the hurdles that was created over purchasing the same - the issue relating to Zain Nigeria's minority shareholders. South Africa-based Econet Wireless Holdings, the minority shareholder in Zain Nigeria had objected to the asset sale. It is believed that now this issue has been resolved between all the related parties. However details regarding the same have not been divulged. However, at the same time, Econet has stated that it has not been contacted by Zain towards resolving this issue out of court. It must be noted that there may be a lot of speculation going around. We are awaiting an official statement from the company itself.