Realty drags markets

Wed, 11 Aug 01:30 pm

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Indian indices continue to languish in the red on heavy selling in heavy weights during the last two hours of trade. The auto index is up on account of Tata Motors, while stocks from the realty and pharma sectors are the top losers.

The BSE-Sensex is trading down 76 points while NSE-Nifty is trading 19 points below the dotted line. BSE-Midcap and BSE-Smallcap indices are both trading flat. The rupee is trading at 46.59 to the US dollar.

FMCG companies are trading down led by ITC and Godrej Consumer. As per a leading financial daily, FMCG companies are looking to increase their product prices. While competition had forced the FMCG companies to absorb part of cost increase last year, these companies are now looking to increase prices to protect their margins. Among the leading FMCG companies, Dabur is implementing a price increase of 5% across its product portfolio while Britannia is planning to increase margins by 5-10%. It may be noted that for 1QFY11, Britannia's net profits fell by 30% YoY. Similarly, HUL is also looking to increase prices of some of its products. However, the company has not disclosed details of this. Godrej and Marico are also expected to increase prices as the prices of palm oil and copra are up by 23% and 14% respectively. However, the price increases could be for the medium term only and may be brought down with food inflation softening.

As per a leading financial daily, a good show by Jaguar Land Rover (JLR) had a significant contribution to the strong top line growth for Tata Motors in 1QFY11. It may be noted that the top line for Tata Motors grew by 64% YoY in 1QFY11 while the net profit stood at '20 bn against a loss of '3.3 bn in the corresponding quarter last year. The JLR business reported a net profit of '15.9 bn during the quarter as against a loss of '4.9 bn in 1QFY10. Volumes for JLR grew by 53% to 57,153 units as the brands recovered from the global slowdown. In fact, the CEO for Tata Motors stated that the sales for the two brands could have been much higher. However, owning to shortfall in engines, the demand could not be met. Going forward, the company plans to assemble the Land Rover vehicles in India. This would bring down costs significantly for the company, adding further to the bottom line. The stock is trading higher currently.