Biggest sovereign fund excludes Sesa Sterlite

Norway’s finance ministry has told its USD 810 billion oil fund, the world’s biggest sovereign wealth fund, to stop investing in two Israeli firms and one Indian company on ethical grounds.

The ministry instructed the fund for a second time to exclude Africa Israel Investments and its construction subsidiary Danya Cebus from its investments and also said it should not invest in Sesa Sterlite , India’s biggest zinc and aluminium maker.

After the decision, 63 firms stand on the exclusion list, including some of the world’s biggest miners, tobacco producers and makers of certain weapons such as cluster bombs.

Separately, the finance ministry said it would now allow the wealth fund to buy sovereign bonds issued by Myanmar, after the lifting of international sanctions on the Asian country.

But the fund is now barred from buying sovereign bonds issued by North Korea, Syria and Iran, although none of these countries currently issues sovereign bonds.

Africa Israel Investments and Danya Cebus were first excluded from the fund in 2010 because they were involved in the building of Israeli settlements in the West Bank but the ban was lifted last August.

The government reinstated the exclusion “due to contribution to serious violations of individual rights in war or conflict through the construction of settlements in East Jerusalem”, it said in a statement.

Many countries deem Israel’s settlements illegal and an obstacle to peacemaking.

Africa Israel Investments and Danya Cebus were not immediately available for comment.

Sesa Sterlite, a subsidiary of mining conglomerate Vedanta Resources , was also excluded as Vedanta’s “relevant operations in India, which are run through the company Sesa Sterlite, present an unacceptable risk of environmental damage and serious violations of human rights”.

Sesa Sterlite was not immediately available for comment.

Vedanta was itself excluded from the fund’s investment portfolio in 2007.

“The fund runs an unacceptable risk of contributing to severe environmental damages and serious or systematic violations of human rights by continuing to invest in the company,” the ministry said when it excluded Vedanta.

The fund, which invests Norway’s surplus oil revenues, is not allowed to invest in firms involved in severe environmental damage, “serious and systematic human rights violation,” such as forced labour, the worst forms of child labour, murder or torture.

Sesa Sterlite stock price

On January 31, 2014, at 12:20 hrs Sesa Sterlite was quoting at Rs 189.75, up Rs 2.50, or 1.34 percent. The 52-week high of the share was Rs 213.05 and the 52-week low was Rs 119.45.

The company’s trailing 12-month (TTM) EPS was at Rs 4.14 per share as per the quarter ended December 2013. The stock’s price-to-earnings (P/E) ratio was 45.83. The latest book value of the company is Rs 44.64 per share. At current value, the price-to-book value of the company is 4.25.

In Bernanke’s final act, Fed cuts stimulus by USD 10 bn

The Federal Reserve on Wednesday decided to trim its bond purchases by another USD 10 billion as it stuck to a plan to wind down its extraordinary economic stimulus despite recent turmoil in emerging markets.

The action was widely expected, although some investors had speculated that the US central bank might put its plans on hold given the jitters overseas.

Fed Chairman Ben Bernanke, who hands the Fed’s reins to Vice Chair Janet Yellen on Friday, managed to adjourn his last policy-setting meeting without any dissents from his colleagues. It was the first meeting without a dissent since June 2011 – a sign of how tumultuous Bernanke’s tenure has been.

In addition to proceeding with plans to scale back its bond buying, the Fed made no changes to its other main policy plank: its pledge to keep interest rates low for some time to come.

The decision suggests that it would take a serious threat to the US economy before the Fed backs down from a resolve to shelve the asset-purchase program later this year.

Indeed, it offered a somewhat rosier assessment of the US economy’s prospects than it did last month, saying “economic activity picked up in recent quarters.” It also largely shook off surprisingly soft jobs growth in December. “Labor market indicators were mixed but on balance showed further improvement,” it said.

“They really want to move to the sidelines here and get out of the (bond buying) business,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

All 17 top Wall Street economists polled by Reuters on Wednesday expect the Fed to wind the program down by year’s end, and nearly all believe the Fed won’t raise rates until at least the third quarter of 2015.

Major US stock indexes closed down more than 1 percent, while yields on the benchmark 10-year Treasury note hit the lowest level since late October. The dollar rose against the euro but was little changed against a broad basket of currencies.


Importantly, the Fed stuck to its promise to keep rates near zero until well after the US unemployment rate, now at 6.7 percent, falls below 6.5 percent, especially if inflation remains below a 2 percent target. Some analysts had speculated it might alter this guidance, given how close the jobless rate now is to the rate-hike threshold.

In fact, the central bank’s statement largely mirrored the one it issued after its December 17-18 meeting, when it announced an initial USD 10 billion cut to its monthly bond purchases.

At the time, Bernanke told reporters the Fed would likely continue to taper the purchases in “measured” steps through the year until it was fully wound down, as long as the economy continued to heal. He did not speak to the media on Wednesday.

In its statement on Wednesday, the Fed said it would buy USD 65 billion in bonds per month starting in February, down from USD 75 billion now. It shaved its purchases of US Treasuries and mortgage bonds equally.

“The Fed’s action today represents a continuation of its resolute determination to end (bond purchases) during 2014,” said Daniel Alpert, managing partner at Westwood Capital in New York. “The policy has hit its ‘sell by’ date.”


In announcing its decision, the Fed made no reference to the sell-off in emerging markets that has depressed US stocks in recent days.

Markets in countries with large current account deficits, such as Turkey and Argentina, have suffered steep losses in part because of the prospect of less US monetary stimulus.

These currencies and stocks slumped again after the Fed’s announcement, offsetting aggressive interest rate hikes by Turkey and South Africa.

Meanwhile, economic signals in the United States – from consumer spending to industrial production and trade – have suggested the US recovery closed out last year on solid ground, reinforcing expectations the Fed would continue trimming the stimulus. The weak December jobs report has been viewed as an outlier.

The central bank launched its current round of bond purchases in September 2012, its third such effort since the darkest days of the financial crisis in late 2008.

The effort to bring the purchases to a halt will now fall to Yellen, who has strongly backed the unprecedented actions the Fed has taken to boost growth and get more Americans back to work. She will chair her first policy meeting on March 18-19.

Bernanke, a professor and leading scholar of the Great Depression before joining the Fed, took the central bank far into uncharted territory during his eight years on the job, building a USD 4 trillion balance sheet and keeping interest rates near zero for more than five years to pull the economy from its worst downturn in decades.

RBI quietly begins tryst with inflation targeting

Without explicitly saying so, the Reserve Bank of India (RBI) has effectively begun to target inflation based on consumer prices, a dramatic shift in approach for a central bank that has struggled to manage the balance between growth and inflation.

The RBI unexpectedly raised policy interest rates by a quarter percentage point to 8.00 percent on Tuesday.

In doing so, it cited a “glide path” towards lowering the consumer price index (CPI) below 8 percent by next January and 6 percent a year later — targets that were laid out in sweeping proposals released last week to revamp the way monetary policy is conducted in India.

The core recommendation of the central bank panel headed by Deputy RBI Governor Urjit Patel was ultimately to bring down CPI inflation to 4 percent, plus or minus 2 percent.

While that would make policymaking more predictable and less prone to government pressure, it also means rates would stay high for longer as CPI inflation now stands at nearly 10 percent — the highest among major economies.

Annual wholesale price inflation, long the favoured benchmark in India, stood at 6.16 percent in December.

“It appears that RBI is taking the responsibility head-on, saying that this is going to be their primary objective,” said Sonal Varma, economist at Nomura in Mumbai.

“It’s a game-changer,” she said.

RBI Governor Raghuram Rajan, who took office in September with an ambitious agenda, has long expressed an inclination towards adopting retail inflation as the main price gauge, although many bank-watchers did not expect him to take up the panel’s recommendations so quickly.


Inflation-targeting puts pressure on the government to meet its deficit-cutting targets, a challenge in a country prone to costly and inflationary spending programmes.

“The fact that RBI actually came out with an inflation number of 8 percent over the next one year consistent with Urjit Patel’s report in the policy review was a surprise,” said Saugata Bhattacharya, chief economist at Axis Bank.

Rajan stopped short of saying the RBI had adopted the panel’s inflation recommendation. The RBI did, however, formally adopt the proposal to review monetary policy every two months, from eight times a year previously.

“We want to bring inflation down and the Urjit Patel committee gives us a glide path to bring inflation down,” Rajan said in a conference call with analysts on Wednesday.

“And, as we examine the details of the Urjit Patel committee report, we will take up more issues. And, as I said, some issues will have to be taken up with the government. Some we can do on our own.”

Although the government has not taken an official stance on the reform proposals, Economic Affairs Secretary Arvind Mayaram last week said it was premature to make CPI the nominal anchor for monetary policy.

While CPI is the benchmark in most countries, in India it has been plagued by the difficulty of gathering accurate data in a fast-growing economy with wide gaps between urban and rural spending patterns, a shortcoming statistics officials are working to address.

By using CPI to set its policy interest rate, the RBI wants to ensure that real interest rates are positive in a consumption-led economy with low levels of savings. Retail inflation has been near or above 10 percent for three years.

The RBI’s change in approach comes as the Congress is focused on elections due by May, with opinion polls predicting it is headed for a loss after presiding over an economy that has stumbled to decade-low growth amid persistently high inflation.

“Ultimately inflation is both a monetary…but also a political issue. We need political establishment to understand that it is important. I am confident that it will, and it is, actually,” Rajan said.

No longer in eye of storm, yet caution abounds on India

Half a year after India’s worst economic crisis since 1991 reduced the rupee to record lows, a government in the last months of its life faces a new moment of truth as emerging markets again show signs of buckling.

This time round countries such as Argentina, Brazil, South Africa and Turkey have been in the firing line.

Investors are less downbeat over India, thanks to actions taken since its mauling by the markets last summer.

“From an FX perspective, a lot of adjustments that had to happen have been made,” said Joel Kim, head of Asia Pacific Fixed Income at BlackRock Inc in Singapore. “Particularly, the adjustments in the rupee and balance of payments make us feel a lot more comfortable with exposure in Indian bonds.”

Blackrock, the world’s biggest fund manager, now calls Indian bonds one of its biggest overweight positions in Asia.

Uncertainty still abounds over India on several scores, however, notably the outcome of a looming election and questions over whether monetary policy will give more priority to stifling inflation rather than bolstering economic growth.

To batten down for the gathering storm in emerging markets and counter inflationary pressures, the Reserve Bank of India raised interest rates by a quarter percentage point on Tuesday, its third such move in five months.

The calibrated response showed a steady hand, and stood in contrast to the dramatic increases in key interest rates announced overnight by Turkey to protect its crumbling lira currency.

India, unlike Turkey, has slashed its current account deficit and built up currency reserves over recent months to protect itself from a repeat of last year’s crisis, when the rupee was battered by a global sell-off, as investors fled economies with weak external balances.

Then, as now, the markets turned on expectations of how fast the U.S. Federal Reserve will wind down easy money policies that had helped drag the U.S. economy out of recession and provided money to invest in high-yield emerging markets.

Policymakers say they are confident that India can ride out the latest bout of global volatility, though foreign investors have sold heavily in the last few days. Other countries have suffered far more in the latest shake-out.


Until the global rout struck, overseas investors had been buying India, building positions in equities. January was set to be the second consecutive month of net purchases in bonds.

Since Thursday, when weak manufacturing data in China sparked a stampede out of emerging markets, foreign investors have sold around USD 1 billion in Indian stocks and bonds, but net bond purchases this month were still around USD 2.3 billion.

Caution dictated that investors should trim their bets on India. After all, the country faces key hurdles.

There is a general election due by May, that many analysts fear could return a weak coalition government, ill-equipped to lead India out of its slowest period of growth in a decade.

At the same time the central bank is engaged in a high wire act to cool inflation without imperilling weak economic growth.

Still, markets are in better shape than last summer.

Mumbai’s share market hit a record closing high last week, and although the rupee fell on Monday to its lowest against the dollar since late November, the currency is nearly 11 percent above a record low of 68.85 to the dollar hit on August 28. The gains reflect India’s efforts to tackle its Achilles’ heel – the current account deficit – with

unpopular moves to sharply cut gold imports, while providing currency swap concessions that helped banks raise $34 billion from abroad.

With exports improving as well, the deficit is expected to narrow to 2.5 percent of gross domestic product this fiscal year from a record high 4.8 percent the previous year, the central bank said on Tuesday.

India is also pushing to include government bonds in global debt benchmarks, like those of JP Morgan, which analysts say could bring in an additional USD 20-40 billion.

By mid-January foreign exchange reserves had risen to USD 292 billion from a three-year low of USD 274.8 billion in early August. Although that is enough to cover only nearly seven months of imports, it comfortably covers 1,440 percent of short-term debt.

“We are much better prepared for any outflow this time,” RBI Governor Raghuram Rajan said on Wednesday in a teleconference with analysts. “We have to continue focusing on getting our domestic house in order something the government is focused on, something the RBI is focused


Analysts are less certain that the Congress-led government can resist the temptation of populist measures to shore up support from voters ahead of the election.

Party vice president Rahul Gandhi this month demanded a hike in the ceiling on subsidised gas cylinders, while the government is mulling easing its gold import restriction rules.

“We continue to closely watch the current account deficit, inflation and government deficit figures,” said Simon Tan, a portfolio manager of fixed income at Nomura Asset Management Singapore. “We are also closely monitoring the elections for risks that the pace of reforms might be stalled or even rolled back.”

Political uncertainty is not the only thing gnawing at investors nerves.

A central bank panel last week recommended reducing India’s near double-digit consumer inflation to 4 percent, with a plus or minus band of 2 percent – a policy goal which, if adopted, would make it harder to revive growth.

“The twin deficits, the stickiness of inflation, the political risk, and the slowing economy are still the key concerns in investors’ minds,” said Geoff Lunt, a senior product specialist director in Asian Fixed Income at HSBC Global Asset Management in Hong Kong.

“However, I emphasise that you are very well paid for that as the yields are high and currency is probably the most fundamentally undervalued in the world.”


Heineken makes offer to up United Breweries stake

Dutch brewer Heineken is learnt to have made an offer for acquiring an additional 5 percent stake in United Breweries , reports CNBC-TV18’s Kritika Saxena, quoting unnamed sources.

Heineken, which holds a shade below 39 percent in UB , has bid Rs 1115 crore for the stake, which works out to around Rs 844 a share.

Sources said UB promoters are not too kicked about the price, which is only slightly higher than the current market price of around Rs 810.

Sources have told CNBC-TV18 in the past that Heineken was unlikely to take the open market route for raising its stake.

The stock had touched a record high of Rs 1006 in December 2012, and then came close to topping that mark in late October last year on speculation of Heineken increasing its stake at a hefty premium.

Heineken raising its stake in UB would be a long term positive for the company. But there is unlikely to be much for traders looking for a quick buck in the short term should Heineken buy the stake from the UB promoter instead of through the open market.

FinMin sets up panel to iron out insurance broking issues

In the wake of growing opposition from banks to a government directive on switching their insurance business to a broking model, the finance ministry today set up a panel comprising members from the RBI, Irda and bankers, to arrive at an amicable solution.

“It was decided that we will set a smaller group to work on the issue, representing banks, insurance companies, RBI and Irda, to come out with a solution that is acceptable to all. I think we should be in a position to resolve this issue very quickly,” Indian Banks Association chief and PNB chairman KR Kamath told reporters at the customary post-policy press meet.

He was reacting to questions from reporters on the outcome of the meeting that bankers had with the financial services secretary Rajiv Takru here this morning on the insurance broking model order of the government, and where the decision was taken.

While accepting that the move is good and customer- centric, Kamath said, “The issue is how do you want to do it. So the issue is that instead of selling one company’s product, banks should give option to customers. While each model has its own advantages and disadvantages, one particular model may not be the right way to do.”

Another banker who attended the meeting with Takru said the government has also assuaged fears of the public sector lenders by levelling the field by stating that the insurance broking model will be applicable to private banks too.

The model implies that all banks will have to sell products of multiple insurance companies and not just their own or those from their bancassurance partners, as is the practice now.

The public sector banker, who wished not to be named also said, Takru put his foot down in stating that banks, including private sector ones, will have no option but to fall in line.

“If the private sector lenders think that the move will give them an edge over their public sector peers, let me tell you that this is an illusion. Once a regulatory directive is issued all the existing contractual obligations stand cancelled,” Takru reportedly told the bankers, from SBI , PNB ,  Canara Bank , BoB ,  ICICI Bank ,  Axis   HDFC Bank among others.

“If private banks don’t fall in line and implement the directive, the regulator will have to issue a directive to them as well,” Takru warned.

Last month’s finance ministry directive to state-run banks to switch to insurance broking model, under which customers will get larger choice from several insurers, is criticised by banks who say they will be at a disadvantage to their private sector peers, as the diktat does not cover them.

It can be noted that most of the large state-run banks as well their private sector peers have their own insurance ventures.

SBI stock price

On January 29, 2014, at 10:40 hrs State Bank of India was quoting at Rs 1584.50, down Rs 11.45, or 0.72 percent. The 52-week high of the share was Rs 2534.10 and the 52-week low was Rs 1452.90.

The company’s trailing 12-month (TTM) EPS was at Rs 177.08 per share as per the quarter ended September 2013. The stock’s price-to-earnings (P/E) ratio was 8.95. The latest book value of the company is Rs 1422.43 per share. At current value, the price-to-book value of the company is 1.11.

Will keep vol growth at 14%; no price hikes seen: Escorts

One sector which is negative for us is the auto products which is really getting impacted because of downturn in the auto segment today.

Bharat Madan
Group Financial Controller

Escorts   has grown about 11 percent on the tractors volume in December quarter and it expects the momentum will continue going forward as well, said Bharat Madan, Group Financial Controller, Escorts.

Escorts revenues for the quarter ending December were up 13 percent to 1159.5 crore and the profit after tax was up 62 percent at Rs 45.5 crore.

Speaking to CNBC-TV 18’s Sonia Shenoy and Anuj Singhal, Madan said. the overall growth in the industry has been around 20-percent plus. The major growth has come from the South and West, which are not strong markets for Escorts.

“In our stronger market we have seen a growth rate of 15-percent plus, which is in line with the industry, but in weaker markets like South and West, the growth has been 30-percent plus, but there we have not been able to really grow,” he said.

According to Madan, rise in prices and cost control have helped in increasing margins. The company is hopeful of maintaining volume growth of current levels of 14 percent.

Sonia: Take us through the volume growth that Escorts has seen in this quarter and what kind of sustainable volume growth do you expect in the next couple of quarters?

A: This quarter has been good for the industry. Escorts has grown about 11 percent on the tractors volume in December quarter and we expect the momentum will continue going forward as well; specially in our stronger markets we have grown in line with the industry and we expect the same growth rate to continue this quarter as well.

Anuj: What is the current market share? Is that likely to go up anytime soon?

A: The thing is this time we have seen the growth happening in the industry. Overall growth in the industry has been around 20 percent plus. The major growth has come in is from southern and western markets which are not really stronger markets for Escorts.

So overall in our stronger market we have seen a growth rate of 15 percent plus where we have grown in line with the industry, but the weaker market like in the southern and western market the growth has been 30 percent plus where we have not been able to really grow. So as a result overall you see some correction happening on the share of market for us, but going forward we expect the momentum in strong markets will pick up and we will continue to grow with the market there.

Sonia: What led to this 100 bps increase in your margins this time? Was it your increase in capacity utilisations? Did you guys take price hikes? What kind of margins do you think would be sustainable going ahead?

A: If you are comparing it with last year there had been price hikes in between during the year as well as there are initiatives taken on the cost front including the manpower cost, if you look at the overall numbers we are virtually flat versus last year. So in spite of all the increases in settlement with the union still we have been able to hold the cost at the lowest level and there have been initiatives on cost front as well.

So besides the improvement in the product mix, taking hikes in the prices, controlling inflation, rid of inflation, as well as cutting down on the other costs, so all put together the improvement in margin has been visible there and we expect the momentum will continue going forward as well.

Anuj: What about your other three segments because apart from agri machinery, all of them are loss making? Is there any timeline that you can give us in terms of when these businesses will break-even?

A: If you look at the construction segment the sales have been flat versus last year, but if you look at volume, the volume has been lower than last year, because the industry being in a downturn, but still we have been able to maintain the top-line there. So we have taken the price increases in that segment and we have seen the improvement in construction segment this time, both compared to sequential quarter as well as corresponding period last year. One sector which is negative for us is the auto products which is really getting impacted because of downturn in the auto segment today.

So once the volume picks up in the commercial and passenger vehicle side we will also see some momentum coming into that segment. Railway has been positive. Railway compared to last year has really turned around, though the sequential numbers because the order book position has been low, so that is why the volume has impacted the margins, so they are in a positive terrain as of now.

Sonia: Any more price hikes that you have planned either in the month of January or February?

A: Not in this quarter. We do not expect any price increases to happen in the industry in this quarter, but going forward if the inflation does pick up and we see a revival happening in auto segment and the economy as well then some increases may happen in the April quarter, but definitely not in this quarter.

Gold steady ahead of Fed; stimulus outlook in focus

Gold was steady on Tuesday after a sharp slide the session before, with investors worried the US Federal Reserve could make further stimulus cuts at a meeting this week.


* Spot gold had risen 0.03 percent to USD 1,256.79 an ounce by 0013 GMT, after dropping 1 percent on Monday and retreating sharply from a two-month high.

* The US central bank begins its two-day policy meeting on Tuesday, with a statement expected on Wednesday.

* An improving economy prompted the Fed to cut its bond-buying stimulus by USD 10 billion last month, and the bank is widely expected to reduce by the same amount at this week’s gathering.

* The lifting of the stimulus measures would dim gold’s appeal as an inflation-hedge.

* China’s 2013 gold imports from Hong Kong more than doubled from the previous year to reach a record of more than 1,000 tonnes as a sharp fall in prices led to unprecedented demand.

* Platinum rose as government-brokered talks between South Africa’s AMCU union and the world’s top three platinum producers ended on Monday with no breakthrough in efforts to end a strike that has hit half of global output of the precious metal.



* Asian shares were pinned near five-month lows on Tuesday as turmoil in emerging markets and concerns about an economic slowdown in China took their toll.


Telecom EGoM okays 5% fee for new spectrum usage

The empowered group of ministers (EGoM) on telecom, which met today, decided that spectrum use charge (SUC) will be levied at 5 percent for all new spectrum. Union telecom minister Kapil Sibal said SUC will be computed using the weighted average.

EGoM believes this will benefit all telecom players as it will leave surplus cash in their hands to invest in spectrum auction. However, rationalisation of SUC is likely to impact government revenue in the short-run.

Once implemented, Bharti and Vodafone’s effective SUC is likely to fall to 5 percent from 8 percent. For 4G, annual spectrum fee of 1 percent remains unchanged. The attorney-general had earlier ruled that 1 percent fee for broadband wireless access (BWA) spectrum must be continued.

The Telecom Commission last week had recommended three options — first, to charge a flat fee of 3 per cent on all spectrums; second, charging operators a differential fee of 3-5 per cent for airwaves held 5 percent for new spectrum; third, continue with the differential pricing for existing spectrum while charging 3 percent for new spectrum.

Bharti Airtel stock price

On January 27, 2014, at 12:50 hrs Bharti Airtel was quoting at Rs 310.05, down Rs 3.25, or 1.04 percent. The 52-week high of the share was Rs 373.50 and the 52-week low was Rs 266.95.

The company’s trailing 12-month (TTM) EPS was at Rs 11.45 per share as per the quarter ended September 2013. The stock’s price-to-earnings (P/E) ratio was 27.08. The latest book value of the company is Rs 135.70 per share. At current value, the price-to-book value of the company is 2.28.

HUL Q3 net seen up 7.8%, volume growth may be 4-5%: Poll

FMCG major  Hindustan Unilever ( HUL ) will declare its third quarter (October-December) earnings today. According to CNBC-TV18 poll, analysts on an average expect a weak quarter for the company.

They believe challenging demand conditions and weak discretionary spends should keep volume growth soft at 4-5 percent. It had maintained average volume growth rate of 5 percent for the past four quarters.

Reported profit after tax of the company is expected to grow 7.8 percent year-on-year to Rs 939 crore and net sales may surge 10.6 percent to Rs 7,116 crore in the quarter ended December 2013.

During October-December quarter, earnings before interest, tax, depreciation and amortisation (including other operating income) is likely to rise 5.9 percent to Rs 1,153 crore while operating profit margin may decline 20 basis points to 16.2 percent compared to a year ago period.

Analysts believe the margin will see full impact of rupee depreciation on company’s portfolio. The impact will be on account of rise in input costs (high density polyethylene up 18 percent, palm oil up 4 percent, and liquid paraffin up 17 percent Y-o-Y) along with high advertising spends.

According to poll, the impact of price increases in December to counter inflationary pressures should come into full play in January-March quarter of current financial year 2013-14.

Despite unfavourable rupee, better product mix towards winter-based high-margin personal products should keep overall margin rangebound.

High advertising and promotion spends should keep margin under check. In the second quarter, advertising spends were the highest in past 12 quarters and that is unlikely to come off in Q3, analysts feel.

Soaps and detergents

In the last one-year, soaps have been the key volume driver for HUL with the segment recording consistent double digit volume growth. With overall category growth moderating, volume growth in soaps and detergents has declined. Analysts expect sales growth to moderate at high single digits, adding that is not likely to be entirely volume driven as it has been the case for the last couple of quarters. Margin is expected to be lower sequentially due to unfavourable rupee, although Y-o-Y number will look healthy on a low base of last year.

Personal products

Delayed winter and up-stocking in Q2 for the festive season will impact personal products growth, particularly skin care, in Q3.