Strong buying activity in key index heavyweights led the Indian indices to rise above the dotted line during the previous two hours of trade. Currently buying activity is being witnessed in stocks across sectors led by telecom, pharmaceuticals, auto and metal. However, stocks from the realty and energy spaces are amongst the top losers. The overall advance to decline ratio is poised at 1.2 to 1 on the BSE.
The BSE Sensex and NSE Nifty are currently trading in the positive, up by 85 (0.5%) and 30 points (0.5%) respectively. The BSE-Midcap and BSE-Smallcap are also trading firm, up by around 0.4% and 0.6% respectively. The rupee is trading at 46.69 to the dollar.
FMCG stocks are currently trading weak led by Nestle, ITC and HUL.The board of Godrej Consumer has approved the raising of capital to the tune of Rs 30 bn for funding acquisitions. The capital is expected to be raised in tranches through a combination of debt and equity. The first tranche of Rs 10 bn will be raised through debt. Godrej has indicated that it is looking for acquisitions in the emerging market. At the same time the company is considering buying out Sara Lee’s stake in the Godrej Sara Lee joint venture. This stake is estimated to be worth around Rs 8 bn.
While Godrej Consumer has made several acquisitions in the past in the overseas markets, the company will have to be careful while bidding for targets. With all FMCG companies flushed with cash and shopping for acquisition targets, a cautious approach is necessary as it is very easy to pay a higher price for a company in a bidding war.
Telecom stocks are currently trading firm led by Idea, Bharti Airtel and Reliance Communications. As opined by the chairman of Bharti Airtel, the telecom tariffs are expected to fall further in the coming months. This is because many new entrants in the sector are trying to undercut each other in order to increase their subscriber base. One should not forget the fact that a handful of other players are expected to enter the market soon. However, that has not led the largest telecom player - Airtel - to shelve its geographic diversification plans. The company is reportedly looking for buyouts in the SAARC region. There have been reports that Bharti Airtel is looking to buy 70% stake in Bangladesh operator Warid Telecom. A leading business daily has reported that the deal size is likely to be US$ 900 m. However, Bharti Airtel has declined to comment on the Warid deal. It has stated that it is continuing to evaluate international opportunities. Warid is believed to be Bangladesh's fourth-biggest telecom company.