Going nowhere

Nifty50: 17,826 ▼ 17 (-0.1%)
Sensex: 60,672 ▼ 18 (-0.03%)

Dear reader !

Recently fired as a part of a cost-cutting measure, an ex-senior manager with Google has decided to rewrite the script. 

Instead of giving up, Henry Kirk decided to start his own company. And guess what, he has been joined by 6 other ex-Google employees who had met a similar fate. Kirk and his team have given themselves 6 weeks to set up a design and development studio in New York and San Francisco.

Talk about turning hardship into opportunity! Something our trader friends must be hoping to do. Let’s find out why. 

• The markets were range-bound and ended flat.
• Of the Nifty50 stocks, 30 stocks declined.
• Negative global cues weighed down the markets.

Among the Nifty sectoral indices, FMCG (+0.11%) and Financial Services (+0.05%) were the top gainers, while PSU Bank (-1.7%) and Realty (-1.2%) were the top losers.

What’s trending

⭐ Power stocks surge on government order 

Listed power companies, including Tata Power (+1.8%) and Adani Power (+4.9%) were trading higher after the Power Ministry asked imported coal-based power plants to operate at full capacity in upcoming months. This comes after forecasts predict that India’s peak power demand could surge to 229 gigawatts (GW) in April 2023.

⭐ Capacite bags new order 

Capacite Infraprojects (+0.03%) has secured a contract worth ₹181 crore from the government-owned Indian Oil Corporation. The project involves construction of residential towers in Mumbai. 

⭐ Gujarat Ambuja Exports capacity expansion   

Gujarat Ambuja Exports (+1.5%) has announced a ₹333 crore capacity expansion plan. The company has signed an agreement with the Gujarat Government to set up a 900 tons per day (TDP) greenfield corn wet-milling plant. The expansion is expected to be completed by 2025. With this, company’s total maize processing capacity will reach 6000 TDP.      

⭐ EV sales zoom 

As per a new report, India’s electric vehicles sales rose by nearly 29% QoQ to 3.5 lakh units during the fourth quarter of 2022. Electric two-wheelers accounted for 65.1% of total sales, while three-wheelers accounted for 30.3% of sales.

In Focus

Could inflation dampen alco-bev companies’ spirits?

Alcohol companies have finally found reasons to cheer (pun intended) but inflation could play party pooper.

In 2022, the sales volumes of spirits rose 12% to 388 million – the highest in the last four years. After pandemic-triggered restrictions were lifted, alcohol sales rose to pre-pandemic levels in bars and restaurants. 

However, alcohol makers are currently grappling with a rise in raw material and packaging costs. This, on the back of an increase in barley and glass prices. So, shares of United Spirits, United Breweries and Globus Spirits are down in the range of 7% and 14%.

With their profitability under threat, let’s look at what the alcohol makers are doing to deal with inflation: 

1. Price hikes

The alcohol companies are urging the state governments to allow them to increase the prices to combat inflation. ICYDK, in India, states control the retail and wholesale alcohol prices. At present, nine states including Rajasthan and Kerala have given a nod to alcohol companies to increase prices.

2. Premium boost

The companies are looking to benefit from the sustained demand in the premium segment. This segment isn’t heavily impacted by inflation because of the robust purchasing power of its urban consumers. It thus enables them to derive higher profitability. 

In the December quarter, United Spirits’ Prestige & Above segment’s volume rose 3% YoY, whereas its popular segment declined 60%. Similarly, Radico Khaitan’s premium sales volume rose 14% YoY.  Experts estimate that the premium segment could grow at 18% annually between 2021 and 2026.  

3. Focus on innovation 

Alcohol makers have been innovating to increase penetration. For instance, they are offering wine in tetra packs! This would help in reducing the packaging costs. It also helps companies tap new consumers. 

To go beyond the usual spread, Diageo India has announced that it is investing ₹45 crore to set up a craft and innovation hub in Goa. This hub will have end-to-end capabilities to address requirements such as the distillation capabilities for malt, gin and rum and also a consumer experience centre.

Evidently, alcohol companies are aiming to ride on the premiumisation and innovation wave amid high inflation. Against this backdrop, it remains to be seen how margins hold up and whether the demand remains sticky.

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