The Hindu Business Line : Weather beaten

AFTER cement and auto stocks, it was the turn of FMCG scrips to be affected by monsoon blues. On concern that monsoon will not be normal this year, there was across the board selling in most of the FMCG stocks.

The major stocks to come under selling pressure on Wednesday included; HLL (down 1.01 per cent at Rs 122.45 on BSE), ITC (down 3.45 per cent at Rs 1009.25), Nestle (down 2.44 per cent at Rs 525), Glaxo Smithkline Consumer (down 5.02 per cent at Rs 234.65), Marico Industries (down 0.96 per cent at Rs 123.30) and Agro Tech Foods (down 4.45 per cent at Rs 49.40).

Dealers said market players are not upbeat on FMCG stocks due to pressure on margins and in case, there is further slowdown in demand due to monsoon, the situation for FMCG stocks will be even worse. Already, most of the institutional investors are bearish on FMCG sector and if there is lower rainfall this year, further downgrade cannot be ruled out, dealers said.

Several institutional broking firms have advised their clients to reduce their exposure to FMCG stocks, as there could be further downgrading in the next one month as most of the analysts are waiting for the June financial results.

VST tilling ahead

AT a time when there is selling in shares of companies manufacturing tractors due to monsoon worries, the stock of VST Tillers Tractors is on rise. The rise is accompanied with increased volumes.

Some market players have started accumulating the shares of the company after the announcement of budget proposals for tractor industry. Dealers said the rise in the stock price is due to the good growth prospects for the company business in the last couple of years.

The talk is that the current financial year for the company is also expected to be good. Other than manufacturing of tractors and tillers, the company is also engaged in auto ancillary business. The recent Budget announcement, which encourages in house auto components, is also likely to benefit the company.

The view of the market players is that the stock of the company is trading at price-earning ratio of around 5 (on March 2004 results) and 3 on March 2005 projected earnings, which is lower than the industry average ratio of 10. The buzz is are that there could be re-rating for the stock due to the constant growth and good future outlook. On Wednesday, the stock price of VST Tillers Tractors gained 6.67 per cent at Rs 52 on the BSE with volume of 63,231 shares.

Virendra Verma

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