There was no respite for the Indian indices in today’s trading session. Although they got off to a decent start, profit booking at higher levels quickly eroded all the early morning gains. From thereon, selling activity only intensified and in the final trading hour the markets closed well into the red. While the BSE Sensex closed lower by around 287 points (down 1.4%), the NSE Nifty lost around 29 points (down 0.5%). The BSE Midcap and the BSE Smallcap were not spared either as they racked losses of 1% and 0.4% respectively. Selling was witnessed across sectors with stocks from the oil & gas, capital goods, banking and FMCG sectors seeing the most losses.
As regards global markets, Asian indices closed mixed today while European indices have also opened on a mixed note. The rupee was trading at Rs 44.33 to the dollar at the time of writing.
Most FMCG stocks closed weak today with the key losers being Dabur, Colgate and Hindustan Unilever. As per a leading business daily, the FMCG sector is expected to grow 13% during FY11 on the back of strong economic growth, a good monsoon and subsequent rise in rural income. According to the CII, while the sector grew 11.4% in the quarter ended June, it eased a bit to 11% during the September quarter due to high inflation and higher raw material prices. With competition intensifying and costs rising, many FMCG players are increasingly looking to expand geographically and not depend on the domestic market entirely for growth. At the same time, companies have also started taking price hikes to pass on increase in raw material costs. Indeed, while the growth prospects of the FMCG sector remain intact, stock prices of many of these companies have run up quite sharply in recent months.
As per reports, India's food inflation stood at 12.85% in the year to October 23. The Prime Minister's Economic Advisory Council attributed this to shortage in supply of food. It must be noted that high food prices have been the main culprit behind India’s rising inflation. Food inflation has been on a rampage for a while now. One reason attributed to the same has been the change in consumption patterns as incomes have risen. The other is that the government has been running short of places to store excess food grain. Interestingly, monsoons were good this season. This has only highlighted the need for a deeper and more structural solution to India’s food problem.