Markets Trades Marginally Higher, FMCG Stocks Under Pressure

Fri, 18 Nov 01:30 pm

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The Indian share markets are trading on a marginally positive note during the afternoon trading session. Sectoral indices are trading on a mixed note with stocks from power sector are witnessing maximum buying interest. While, stocks from fast moving consumer good (FMCG) sector are witnessing selling pressure.

The BSE Sensex is trading higher by 82 points (up 0.4%) and NSE Nifty is trading higher by 34 points (up 0.4%). BSE Mid Cap  and BSE Small Cap index are trading higher by 0.8% and 0.4% respectively.

Gold prices, per 10 grams, are trading at Rs 28,880 levels. Silver price, per kilogram is trading at Rs 40,360 levels. Crude oil is trading at Rs 3,126 per barrel. The rupee is trading at 68.1 to the US$.

As per an article in Livemint, Infosys chairman Mr Sikka stated that the selection of Mr Trump as the President of the United States may weigh on the margins of the company.

Clamping down on immigration has been one of the top priorities of Mr Trump during his presidential campaign. Now, how does this impact Infosys? Till now, Infosys used to send IT personnel acquired at relatively cheaper rates to the United States of America on H-1B visas. Now, Mr Trump has proposed to put a clampdown on these H-IB visas as well as increase the prices at which these visas are issued.

Once, the rate of approval of these visas comes to a halt, companies like Infosys would not be able to send IT personnel from India to the States. Instead, they will have to hire recruits locally i.e. from the US. Hiring people in the US would be more expensive and this in-turn could dampen the margins of the company.

In yesterday's market commentary, we had talked about how NASSCOM- the industry lobby group for India's software industry had lowered its export estimates.

Earlier in February, the lobby expected exports of Indian software services to grow at the pace of 10-12% for the year ended March 2017. However, this forecast has now been lowered to 8-10%. The estimates have been lowered mainly owing to the concerns over Brexit and the recent unexpected election of Mr. Trump as the President of United States of America.

The uncertainty pertaining to the growth in the IT sector, is reflected in the S&P BSE IT index which has gone down by around 18% in the preceding six months. Going forward, the impact of Mr Trumps policies and effects of Brexit would closely be tracked to asses it's impact on India's IT industry.

In another news update, consumer packaged goods companies seems to be hit severely on the back of a surprise move of the government to ban Rs 500 and Rs 1,000 rupee notes.

As consumers hold on to their Rs 100 and Rs 50 notes to make only the most essential of purchases, sales have slowed to a trickle in several areas.

Reportedly, the Rs 2.6-trillion packaged goods industry mostly transacts in cash at the lower level of the supply chain. A majority of the nine million retailers in India are kirana, or mom-and-pop, stores that deal only in cash. Their inability to sell to customers because of a lack of smaller denomination bank notes is rippling upwards through the supply chain.

Varun Berry, managing director at Britannia Industries stated that in the previous few weeks, sales could be down by as much as 70-75% from the targeted levels.

However, the impact of demonetization on the industry is short term in nature. Once, the liquidity issues get resolved these problems will come to a halt. For now, the FMCG sector will remain under pressure.

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