According to our channel checks, companies have put their expansion plans outside Hyderabad on hold due to a high uncertainty over the Telangana issue. Companies and most locals believe that the Telangana issue can erupt anytime soon...

Competition amongst modern retailers is on the rise, with more number of players entering the market in addition to the existing players increasing their penetration. We saw a similar trend with Auto Dealers across the city. Auto dealers too are increasing their retail outlets within the city which is leading to intensification in competition among dealers.

There was acute lack of electricity in the entire area. Even in main city Hyderabad, many commercial establishments do not receive electricity for almost 4 hours every day. We interacted with a person who runs a stone crushing plant (a business which is very prevalent in Andhra Pradesh), who mentioned that his plant is shut for 3 days every week, merely due to the power shortage.

From our interaction with a few distributors, wholesalers and retailers, cash and carry stores like Metro are gaining market share in the city and are increasingly posing competition for distributors and wholesalers.

Retailers get working capital funding from SKS Microfinance (a model which other microfinance companies can follow).

HUL is witnessing healthy sales growth of 15-20% in Hyderabad while food companies like Haldiram are witnessing strong growth of about 30%. Food retailers are growing by about 8-10% in the city.

Auto dealers cite that high discretionary spends have taken a higher beating on account of weak sentiment in the region. Besides the usual suspects (high fuel prices, inflation, general economic sluggishness, etc.), buyer sentiment in the region has been impacted by the Telangana issue. As usual, there are some outliers to this trend, who remain immune to a weak macro - popular models like a Mahindra XUV, Maruti Swift/Dzire/Ertiga, Toyota Innova/Fortuner, Hyundai Verna and even Hero Maestro.

For Maruti, The new Ritz (the supply of which is unaffected by the Manesar lock-out) has received a strong response in the wake of the high waiting period on the Swift. Overall, footfalls/enquiries remain strong, which suggests that there is some huge pent-up demand (directionally, this makes us confident on car sales).

For 2Ws, the contraction in demand doesn't seem to be as sudden as the dispatch trend suggests. This is more a case of indiscipline by the leader in terms of inventory management throughout the year. For Hero dealers, given that the company does not budge against its maximum 15 day credit policy, the high inventory has put stress on working capital.

The scooter segment continues to outpace motorcycle segment sales by 2x. Dealers cite that almost everyone who might be buying a second 2W in the family is opting for a scooter given that it can be used by not only women, but also elderly men.

For Hero, the Maestro fits the bill even better than the Pleasure did, as the latter was almost unusable by men. Even after production has been ramped up, the Maestro has a one month waiting period.

Eoin Treacy's view The bulk of commentary focused on the Indian market has been rather pessimistic over the last few years not least because of a sclerotic government, widespread corruption and a weak currency. This report is refreshing in that it highlights the emergence of a consuming class in India. This represents the big story and the key investment theme from the perspective of a global investor.

A piece I wrote on foreign affiliates of globally oriented companies may be of interest to subscribers and appeared in Comment of the Day on March 8th.

Foreign affiliates of global companies offer the management prowess of international corporations,, their brand recognition and direct access to some of the fastest growing consumer markets in the world.

India's BSE Fast Moving Consumer Goods Index has rallied impressively but is overextended relative to the 200-day MA and susceptible to mean reversion. However a sustained move below the 200-day MA would be required to question the medium-term uptrend.

Hindustan Unilever has a similar pattern with the Fast Moving Index, Colgate Palmolive India, GlaxoSmithKline Consumer Healthcare and Nestle India all remain in consistent medium-term uptrends. We consider the parent companies of all these shares to be Autonomies.

Castrol India is owned by BP. It will need to hold the recent breakout from the more than yearlong range if the medium-term uptrend is to continue to be given the benefit of the doubt.

ING Vysya Bank is an ING Group of the Netherlands subsidiary. The share hit a new all time this week and while it has become temporarily overextended relative to the 200-day MA, a sustained move below INR400 would be required to question medium-term scope for continued upside.

While many investors will have difficulty investing in the foreign affiliates of major companies, their earnings are reflected in parent company balance sheets. As the foreign operations of these companies expand the affiliates should reflect a higher proportion of parent company earnings.