FMCG, banks boost indices

Fri, 4 Jun 11:30 am

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The benchmark Indian indices sustained their momentum and breached the dotted line in the last two hours of trade. Stocks from FMCG and banking space are seeing buying interest while profit booking is seen in stocks from the metal and capital goods space.

BSE-Sensex is trading up by 10 points while NSE-Nifty is trading marginally in the green. BSE-Midcap index and BSE-Smallcap index are both trading up by 0.2%. The rupee is trading at 46.65 to the US dollar.

FMCG stocks are currently trading mixed with buying interest in Colgate and HUL. However, profit booking is seen in Mcleod Russel and Tata Tea. As per a leading news daily, HUL is considering a buyback of its shares. This will be a second buy back of shares by the company since FY07 and sends out the signal that the company believes that its shares are undervalued. Unilever, the promoter of HUL holds 52.12% share in the company and this buyback will increase the promoters share holding.

The market has been concerned about the growth of HUL in the recent past and this has resulted in the share price of the company floundering while the share price of its much smaller rivals have seen sharp increase in the last few years. For FY10 the company's top line grew by 6% YoY while the operating margins improved by 0.3% to stand at 15.5%. The bottom line of the company grew by 4% YoY as a result of higher effective tax rate as its plants exhausted their tax exempt period. The company at the end of FY10 had cash of Rs 20 bn which translates to roughly Rs 10 per share.

Textile stocks are currently trading mixed with Arvind Limited and Welspun India trading firm, while Alok Industries and Raymond are trading weak. Alok Industries announced its results recently. The company recorded a revenue growth of 45% YoY during FY10. Growth during the year was driven by the company's polyester yarn business, which grew by 95% YoY and contributed to nearly 31% of revenues (22% last year). Alok Industries' operating profits increased by 57% YoY on the back of an expansion in margins. At the bottomline level, the company reported an increase of 29% YoY. As for the quarter ended March 2010 numbers, the company reported a 62% YoY increase in revenues, while operating profits increased at a fast pace of 78% YoY. However, at the profit level, the growth was lower at 36% YoY.