Banks pull markets in red

Thu, 24 Jun 01:30 pm

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Indian indices pared their opening gains as investors booked profits in heavy weights during the last two hours of trade. Stock in FMCG and capital goods are trading firm while stocks from the banking and IT space are trading weak.

The BSE-Sensex is down by 30 points while NSE-Nifty is trading 10 points below the dotted line. BSE-Midcap index is up by 0.1% while BSE-Smallcap index is trading 0.5% above yesterday's closing. The rupee is trading at 46.42 to the US dollar.

FMCG stocks are trading up led by Paper products and Pidilite Industries. As per a leading financial daily, there are concerns regarding Godrej Consumer Product Limited's (GCPL) integration of its buyouts. The company has acquired 7 companies in the last 5 years. However, the success of these buyouts lies in the integration of these acquisitions. GCPL to address this concern has already set up a separate team to develop, process and execute the integration of GCPL's international empire. The team, headed by Shailesh Deshpande, with experience in handling international operations of Asian paints, is expected to have a blueprint ready by July. While it seems that GCPL went on an indiscriminate buying spree, the fact is that the company did its due diligence. In fact, all buyouts took place only after confirming whether there was a cultural fit with the company. Needless to say, for GCPL, the crucial part will be the smooth transition of its business empire under a common umbrella so that its business can function as a whole and it can exploit the synergies from its acquisitions.

Metal stocks are trading flat. Major gainers include SAIL and Jindal Saw while Hindalco and Jindal Steel have lost some ground. As per a leading business daily, SAIL is in talks with Japan’s Kobe steel for a technology deal. Kobe steel has the technology which uses low-cost iron ore fines and steaming coal to produce steel. The agreement between the two companies is in the initial stages and the announcement is expected in the coming months. It should be noted that SAIL is undertaking capacity expansion plans to raise its capacity to 25 m tonnes over the next few years. If SAIL is successful in inking the deal with Kobe steel, it will be able to expand capacity at a lower cost with the help of improved technology. This should be margin accretive for the company.