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Major Asian stock markets have opened the day on a positive note. Stock markets in Hong Kong and Japan are trading higher by 2.4% and 1.6% respectively. Benchmark indices in Europe and US ended their previous session on an encouraging note. The rupee is trading at 67.70 per US$.
Indian stock markets have opened the day on a strong note. The BSE Sensex is trading higher by 303 points (up 1.2%) and NSE Nifty is trading higher by 76 points (up 1%). Both, BSE Mid Cap and BSE Small Cap are trading higher by 0.7% each.
Colgate Palmolive reported its result for the quarter ended March 2016. The company's revenue grew by 6.8% YoY to Rs 10.9 billion during the quarter. New product offerings could be one possible reason for the growth. Further, increased advertisement and promotion (A&P) costs may also have led to higher sales.
The operating profits grew by 3.8% YoY to Rs 2.4 billion. While the operating margins contracted by 2.1% YoY to 21.95% during the quarter. The margins contracted on account of a robust increase in A&P expenses which grew by 28.4% YoY.
The net profits too declined by 10.8% YoY for the quarter on account of lower operating margins and phasing out of tax benefits.
Further, the company has been facing a volume slowdown since the preceding few quarters on account of severe competition from Patanjali's 'Dant Kanti' toothpaste, which has received a good response ever since it was launched.
No doubt Colgate enjoys a very strong brand equity; but it will be interesting to see how it will respond to these threats. This is something that we will be keeping a watch on, and its impact on the company's financial performance. The stock is trading down by 0.9%.
In another news update, the giant weather phenomenon that drove global temperatures to new highs El-Nino has come to an end. Reportedly, an update from Australian Bureau of Meteorology (BOM) on Tuesday said that the 2015-16 El Nino weather event in the Pacific Ocean has ended.
Now, with the ocean's surface cooling, El Nino is likely to be replaced by its opposite La-Nina. A strong La Nina typically means more rainfall. This will be good news for India, especially after two years of deficit rainfall.
Further, Indian Meteorological Department (IMD) predicted above normal rains in the upcoming monsoon season. The agency stated that the monsoon rainfall will be 106% of the long period average and there is a 94% probability that monsoon will be normal to excess. Reportedly, the monsoon is considered normal when the rainfall is 96 to 104% of the Long Period Average (LPA) and is considered above normal when it is 105% to 110% of LPA.
A normal monsoon will lead to higher disposable income in the hands of farmers, which in-turn will boost the rural consumption. To add to this, a normal monsoon will also help to keep the inflation at low levels. The possibility of a good monsoon would also increase the chances of the country's central bank retaining its easy money policy. However, there have been many instances in the past wherein the forecasts have gone wrong. Provided, they are accurate it will help to revive the rural sentiments.
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