Indian stock market
indices have gotten further into the positive territory over the last two hours of trade on back of buying interest in index heavyweights. All sectoral indices are trading in the green led by Metal and Power.
The BSE-Sensex is up by 164 points while NSE-Nifty is trading 50 points above previous closing.BSE Midcap and BSE Small cap indices are up by 0.8% and 1% respectively. The rupee is trading at 44.95 to the US dollar.
Auto stocks are trading firm led by M&M and Tata Motors. As per a leading daily, car makers in India are keeping their production levels low to suit the decreased demand for cars in the market. It may be recollected that the automobile industry witnessed a near 9% cut in production last month compared to April. The demand for cars is expected to fall down further in the coming months. The industry had been doing well in the last 5 months and in anticipation of further growth in demand, more cars were produced. This has resulted in increased inventory piled up at the dealers. Some companies like M&M and Maruti Suzuki are using the period of maintenance shutdown to prune inventories at dealers. They are expected to shut their plants down for some time this month. Auto component makers have been advised by the players to reduce their supplies in the short term before the arrival of the festive season.
Consumer goods stocks are trading firm led by Marico and Colgate. As per a leading financial daily, a sharp fall in palm oil prices is set to bolster the margins of toilet soap making companies and cushion the impact of higher freight costs. HUL and Godrej Consumer Products are expected to see their margins climb up this fiscal year after facing margin pressure over the last two years. It may be noted that palm oil is a key raw material for the manufacture of toilet soaps and accounts of about half of the raw material cost. In June, the prices of palm oil dropped by 18% to Rs 45,700 per tonne. This is the lowest in seven months, after hitting a three year high of Rs 58,320 per tonne in February. Even after this drop, the prices are about 15-20% high on a year-on-year basis and are expected to correct further. However, HUL and Godrej have indicated that price cuts are not on the cards as price hikes in the last few quarters were not in-line with increase in raw material costs.