Asian markets, with the exception of China and Japan, have opened this week on a positive note. As for the Indian markets, these have also opened in the green. Metal and realty stocks are leading the gains currently. FMCG stocks are however trading in the red.
The BSE-Sensex is trading higher by around 150 points (0.8%), while the NSE-Nifty is up about 50 points (0.8%). Mid and small cap stocks are also trading in the positive, with the BSE-Midcap and BSE-Smallcap indices up by 0.8% and 0.7% respectively. The rupee is trading at 44.97 to the US dollar.
Auto stocks, except Hero Honda, have opened the week on a positive note. Key gainers here include Tata Motors and TVS Motor. A leading business daily has reported that institutional shareholders of Hero Honda are looking to veto its proposal to acquire the 26% stake from Honda Motors at a discount to the current market price. As per reports, the deal is to be valued at US$ 1.2 bn, or just around Rs 1,040 per share of Hero Honda (based on current exchange rate). If this happens, it would deal a blow to minority investors, given that the deal would value the company almost 40% lower than what the market is willing to pay for it as of now. Investors also fear that Honda won’t lose out from this deal to sell its shares at a discount. This is given that Hero Honda would then compensate it (Honda) by paying a higher royalty on the technology that the latter provides to the former. The agreement in technology transfer between the two companies will last till its expiry in 2014.
The stock of Britannia is trading weak currently. As per a leading daily, the company has been trampled by its closest competitor Parle Products that has emerged as the largest biscuit seller in the country, and across different categories. The Indian biscuit market is of a size of around Rs 110 bn, much bigger than the combined market for toothpastes, skin-care products, shampoos, and instant noodles. As such, stakes are high here. For the past two years, these two big competitors - Britannia and Parle - were running neck and neck to each other. Now, the latter has emerged as a clear leader. Market watchers are suggesting that Parle has benefited on account of its better volume strategy, backed by strong distribution, and more competitive pricing. As for Britannia, its decision to raise prices (to pass on higher raw material costs to consumers) ahead of competition has also affected its performance as compared to Parle.