The Indian markets have started today's session on a positive note. The benchmark indices opened at the breakeven mark, quickly moved into the green and have held on to their gains since then. Other key Asian markets are trading in the green with Japan (up 0.7%) leading the pack of gainers. The US markets closed higher by 0.9% yesterday.
Currently in India, heavyweights from the BSE-Sensex are trading strong with auto and metal majors finding investors' favour. The BSE-Sensex is trading higher by around 113 points, while the NSE-Nifty is up by about 36 points. Buying interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.8% and 0.9% respectively. The rupee is trading at 44.24 to the US dollar.
Oil marketing stocks have opened the day on a negative note. Losers here include HPCL and BPCL. As per a leading business daily, public sector oil marketing companies (OMCs) - Indian Oil, BPCL and HPCL – will receive Rs 180 bn from the government next month as compensation for under recoveries on Kerosene and LPG. Unlike in the past when such compensation was received in oil bonds, it will now be received in cash. The OMCs have together suffered a loss of around Rs 450 bn in FY10 by selling transport and kitchen fuels below cost. Of these upstream oil companies – ONGC, OIL and GAIL – have compensated Rs 150 bn towards the transport fuels. The government has so far paid Rs 120 bn, leaving dues of around Rs 180 bn. In our view, the government will find it hard to compensate the entire losses of OMCs in the future with oil prices starting to rise again. The only long term solution is to allow market pricing of fuels and let consumers bear the economic cost of using energy sources. Of course, given the political implications of such a move, it is unlikely to happen anytime soon.
FMCG stocks have opened the day on a positive note. Gainers here include Camlin and Godrej Consumer. As per a leading business daily, Godrej Consumer plans to consolidate Rapidol and Kinky, its acquisitions in Africa. Rapidol owns ethnic hair colour brands like Inecto and Soflene in ten countries. Kinky offers a variety of products like hair, hair braids, hair pieces and wigs in South Africa. For the time being, the company's third African acquisition, Tura, is being kept out of the consolidation plan. To begin with, the distribution and sales networks of Rapidol and Kinky will be merged. It will be followed by a corporate merger which involves taxation issues and a new name. The idea behind the consolidation is to expand the existing brands all over Africa under their One Africa strategy. Existing players in the space include L'Oreal, Wella and regional brands.