FMCG, banking lead gains today

Thu, 4 Dec Closing

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The Indian markets ended the day on a firm note today as buying activity picked up during the post noon trading session. The BSE-Sensex ended the day higher by about 120 points (up 0.4%) while the NSE-Nifty closed higher by about 26 points or 0.3%. Stocks from the FMCG and banking spaces were amongst the key sectors in demand today. BSE Mid Cap and BSE Small Cap also ended on a firm note with their representative indices closing higher by about 0.3% each.

Stock markets in other parts of Asia ended the day on a firm note, while sentiments in Europe seemed to be buoyant at the time of writing. The rupee was trading at Rs 61.88 to the dollar at the time of writing.

Stocks of auto ancillary companies ended the day on a mixed note with FAG Bearings and SKF India leading the pack of gainers, while Amara Raja Batteries and Asahi India were not in favour. Stocks of tyre manufacturers in particular have performed well in recent times on the back of lowering input costs, coupled with expectations of a strong bounce back in car sales volumes. These two key factors are expected to drive profitability of these companies considering that lower input costs prices have not been seemingly passed on to the customers. As per business daily Mint, the four leading listed tyre firms have seen a 9% expansion in gross margins in the last eight quarters. This has largely been due to lower raw material costs, which form over two-thirds of the total cost of producing a tyre. Whether and when prices will be curbed could be anyone's guess as per us. However, it would be important for investors to know the breakup of retail versus OEM sales to gauge the effect of such an effect. While tyre companies may be able to keep prices firm in the retail space, the same will not be true when it comes to dealing with the OEMs.

Calendar year 2014 is set to see net inflow of FII investments in Indian equities crossing the Rs 1 trillion mark for the third consecutive year. In fact 2014 would be the fourth calendar year which would see an inflow of Rs 1 trillion in market in the past five years. The highest amount invested by FIIs in a particular year stood at Rs 1.33 trillion, which was seen in 2010. In 2012, FIIs invested Rs 1.28 trillion followed by Rs 1.13 trillion in 2013. As per Business Standard, the cumulative net inflows by FIIs into Indian equities since 1992 stood at about Rs 7.85 trillion. As you can see a large chunk of this figure would have come in the past five years. While the Indian growth story seems to be a key one attracting foreign money, it should also be noted that the next to zero interest rates and money printing activities of the major global economies is a key reason behind sending money into markets such as India.