Persistent selling in index heavyweights continued to weaken Indian share markets that languished below the dotted line in the last two trading hours. The sectoral indices are trading mixed with FMCG, metal and consumer durables leading the losses whereas auto, capital goods and realty stocks are the major gainers.
BSE-Sensex is down 40 points and NSE-Nifty is trading down 15 points. Both BSE Mid Cap and BSE Small Cap indices are up 0.3% each. The rupee is trading at 55.9 to the US dollar.
Majority of the FMCG stocks are trading in red with Dabur and Henkel India trading the weakest. Only Nirma and Procter & Gamble Hygiene & Healthcare are trading in green. As per a leading financial daily, FMCG companies are fighting rising cost pressures by holding on price-levels and reducing the weight of products sold to the nearest standard weight. The standard weight packaging rules come into effect in November 2012. In cases where the grammage has been raised to the conventional weight, prices have not been hiked in tandem. Efforts are being made by consumer good companies to absorb the incremental costs so that volumes remain unaffected. Companies like ITC, Parle and Britannia are focussing on absorbing costs so as to prevent price-hikes that dampen volume demand. Dabur India has said that it expects sales in FY13 to be driven more by volumes rather than prices.
Tyre manufacturers seem to be facing tough times given that there has been an increase in imports from China. As per the Economic Times, the lower prices of Chinese tyres has been a good enough reason for certain section of the consumers (mainly taxi segment) - despite the quality of such tyres being inferior to that of Indian tyres - to use such tyres. The tyre industry is believed to urge the government to increase current duty of 10% on imported tyres. This is at a time when the duty on importing natural rubber is pegged at 20%. It is believed that the truck and bus tyre imports have dropped by about 7.6% during the first quarter. However, imports of passenger car tyres are believed to be higher by about one-fourth as compared to the previous year. The passenger car tyre imports rose by a marginal 2.4% YoY during FY12. The number of passenger tyres imported in the quarter ended June 2012 stood at about 28% of the total tyres imported in FY12.