Cement stocks defy weak market

A surge in headline inflation pulled the market lower with bank shares leading the slide. The BSE Sensex fell 21.48 points or 0.13% off close to 175 points from the day's high and up close to 50 points from the day's low. Index heavyweight Reliance Industries reversed gains. Metal and FMCG stocks fell. But, cement and IT stocks rose. The market breadth was weak in contrast to a strong breadth in early trade.

The market edged lower in early trade tracking weak regional stocks. It soon rebounded after Dubai said it had received $10 billion from Abu Dhabi to help it repay $4.1 billion in an Islamic bond maturing on Monday, 14 December 2009. The market pared gains after hitting fresh intraday high in mid-morning trade. The market surged again in afternoon trade. A sell-off in mid-afternoon trade pulled the market into the red. The market moved between positive and negative zone later.

India VIX, a volatility index based on the S&P CNX Nifty index option prices, rose 2.73% to 27.89. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days

The latest data from global fund tracker EPFR Global showed emerging market equity funds received $2.3 billion in inflows in the week ended 9 December 2009, bringing 2009 inflows to $75.4 billion. Emerging-market funds are heading for record annual inflows in 2009. The previous record was $54 billion in 2007.

Asia excluding Japan and global emerging market stock funds each attracted net inflows of more than $800 million for the week. Among the largest developing nations, Russian stocks funds saw inflows rise to a seven-week high of $181 million while Indian equity funds absorbed $128 million, EPFR said.

Dubai said on Monday it had received $10 billion from fellow UAE member Abu Dhabi to help it repay $4.1 billion Islamic bond maturing on Monday. The statement said the excess would be used to cater to Dubai Worlds needs up until the end of April 2010. "We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices," Sheikh Ahmed bin Saaed al-Maktoum said in a statement.

"Dubai is, and will continue to be, a strong and vibrant global financial center. Our best days are yet to come.", he said. Abu Dhabi is the largest member of the United Arab Emirates federation and a major oil exporter. The statement also said that the United Arab Emirates Central Bank, which governs monetary policy in Dubai, Abu Dhabi and other UAE constituents, "is also prepared to provide support to local UAE banks."

Dubai's conglomerate Dubai World roiled global markets in late November 2009 when it said that it wanted to suspend debt payments for six months.

Closer home, inflation based on the wholesale price index (WPI) surged 4.78%, data released by the government showed at 12:00 IST on BSE. That was much higher than previous month's annual rise of 1.34%. The food article index within the wholesale price index rose 16.71% in November 2009. The manufacturing products index in the WPI rose an annual 3.99%. In its October policy review, the Reserve Bank raised its WPI inflation projection for end-March 2010 to 6.5% with an upside bias from 5% earlier.

The government is concerned about rising inflation, but there is no need for any emergency action at this stage, finance secretary Ashok Chawla said on Monday. Chawla said the inflation numbers were within the range set by the central bank and the government

The rise in the wholesale price index during November 2009 is mainly due to higher food prices, Finance Minister Pranab Mukherjee said today.

Trade Minister Anand Sharma said on Monday rising wholesale prices are a matter of concern and the government is monitoring prices of essential commodities.

A finance ministry official said on Friday 11 December 2009 the government was taking steps to moderate the rise in food prices, a day after data showed the food price index which is released weekly, jumped an annual 19.05% as at 28 November 2009.

The Reserve Bank of India has said it needs to strike a balance between growth and inflation, but has also noted most inflation pressures are coming from food supply shortages, where monetary policy is not an effective tool. Governor D Subbarao has said the danger was that food price inflation, running at an annual 19.05% at end-November, spills over into broader inflation expectations.

Industrial output jumped 10.3% in October 2009 from a year earlier, helped by stimulus measures and robust domestic demand, data released by the government on Friday showed. Manufacturing production rose 11.1% in October 2009 from a decline of 0.6% a year earlier. September's annual industrial growth rate was revised upward to 9.6% from 9.1% previously. Industrial output rose 2.6% in the 2008/09 fiscal year (April-March), slower than 8.5% in 2007/08.

Investors fear that a recovery in the economy and a surge in wholesale price inflation will add pressure on the central bank to tighten monetary policy. The Reserve Bank of India holds a quarterly policy review in late January 2010.

The Goods and Services Tax (GST) regime would have four slabs and it is likely to be unveiled within 15 days, chairman of empowered committee of state finance ministers Asim Dasgupta said on Sunday, 13 December 2009. GST slabs would include exempted items list, one standard rate for majority of the goods and services and another having a moderate rate, he said.

The implementation of GST is scheduled for 1 April 2010. However, there are doubts at various quarters whether the new tax regime would come into effect at the targetted date because of differences of opinion over the rates among states and the items to be included under GST. The Empowered Committee of state finance ministers had released a discussion paper on GST on 10 November 2009. It proposes to replace central levies like excise duty, service tax, special additional duty, countervailing duty by GST.

State levies like VAT, sales tax, entry tax etc would also be subsumed. Besides all this, central and state cesses and surcharges would be out once GST comes into effect.

Meanwhile, the RBI has reportedly expressed its concerns over many investment companies with low capital base raising disproportionately high funds. As per the current norms, corporate investment firms, which hold strategic stakes of group companies, are exempt from following the stringent norms similar to NBFCs. RBI may impose regulatory restrictions on such investment arms having high leverage as a measure to limit the aggressive borrowing by corporates. Currently, RBI is reported to be in discussion stage with some corporate groups on the issue.

The disinvestment programme is reportedly set to enter an ambitious phase in the next financial year with the Department of Disinvestment planning to seek Cabinet approval for a host of companies from January 2010. The Cabinet has so far followed a cautious approach in approving disinvestment in companies, though it has simultaneously come out with a broad policy direction for the programme. Based on the policy, the disinvestment department has prepared a list of up to 30 companies that can be considered for disinvestment

Stocks-specific activity will hog the limelight on Tuesday, 15 December 2009, with investors reacting to corporate advance tax payments data. The last date for payment of the third instalment of advance tax is Tuesday, 15 December 2009. Advance tax is paid in four installments in June, September, December and March, and is based on taxpayers' projected income, giving an indication of industry's performance in coming months.

Corporate advance tax payments grew by 14.7% in the second quarter, after declining by 3.7% in June. With the economy showing clear signs of recovery, the government is hopeful advance tax payments will help it meet the shortfall in direct tax collections. Direct tax collections stood at Rs 1,83,822 crore in April-November 2009.

Meanwhile, the initial public offer of DB Corp, India's second largest regional newspaper, was subscribed 2.17 times by 16:00 IST on Monday, 14 December 2009. The company has set a price band of Rs 185-212 a share.

European shares rose on Monday, extending their wining streak to three-sessions, as Dubai debt fears eased, with banks the major gainers. The key benchmark indices in France, Germany and UK rose by between 0.55% to 0.76%.

Most Asian stocks rebounded on Monday after Dubai said it had received $10 billion from Abu Dhabi to repay debt, as risk appetite improved. The key benchmark indices in China, Hong Kong Taiwan, South Korea rose by between 0.31% to 1.71%. But, the key benchmark indices in Singapore, Japan and Indonesia were down by between 0.02% to 0.5%.

Trading in US index futures indicated the Dow could jump 35 points at the opening bell on Monday, 14 December 2009.

The Dow and S&P 500 rose on Friday 11 December 2009 after stronger-than-expected retail sales and consumer sentiment data reinforced investor confidence in a steady economic recovery. The Dow Jones industrial average rose 65.67 points, or 0.63%, to 10471.5. The Standard & Poor's 500 Index added 4.06 points, or 0.37%, to 1106.41. The Nasdaq Composite Index down 0.55 points, or 0.03%, to 2190.31.

Senior White House economists on Sunday predicted the US economy will start creating jobs by spring and said that boosting employment will be at the top of President Barack Obama's agenda next year.

A key event this week is a regular two-day meeting of the US Federal Reserve Meeting which begins on Tuesday, 15 December 2009. The Fed is expected to maintain its pledge to keep US interest rates close to zero for "an extended period" after Chairman Ben Bernanke warned that US economic recovery still faced "formidable headwinds", such as tight credit conditions and rising unemployment. Bernanke's re-appointment as chairman of the Federal Reserve by the Senate banking committee is expected on Thursday.

Investors, meanwhile, are increasingly wondering when Bernanke will signal any changes to the exceptionally loose US monetary policies and liquidity conditions that have propelled asset markets higher this year. US industrial production during November, the figures for which are due on Tuesday, is expected to rise 0.5%. This would slow the year-on-year decline from minus 7.1% in October to minus 5.4%.

US producer prices are expected to show the headline measure returning to positive territory for the first time in a year, with the year-on-year rate rising from minus 1.9% in October to a rise of 1.6%. US consumer price inflation is also likely to move into positive territory for the first time since February 2009, with the headline measure expected to rise from minus 0.2% in October to a rise of 1.8%. Core inflation, though, remains low and could sink below 1% next year following a sharp slowdown in labour costs.

The BSE Sensex fell 21.48 points or 0.13% to 17,097.55. The Sensex rose 156.16 points at the day's high of 17275.19 in mid-morning trade. The Sensex fell 70.86 points at the day's low of 17048.17 in late trade.

The S&P CNX Nifty fell 11.60 points or 0.23% to 5,105.70. Nifty December 2009 futures were at 5,102.25, at a discount of 3.45 points as compared to the spot closing of 5105.70. Turnover in NSE's futures & options (F&O) jumped to Rs 73,694.26 crore from Rs 71,331.55 crore on Friday, 11 December 2009.

The market breadth, indicating the overall health of the market was weak. On BSE, 1163 shares advanced as compared with 1670 that declined. A total of 66 shares remained unchanged. The breadth was strong in early trade.

Among the 30-member Sensex pack, 13 rose while rest fell.

BSE clocked a turnover of Rs 4110 crore, lower than Rs 5226.42 crore on Friday, 11 December 2009.

A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex is up 7450.24 points or 77.22% in calendar year 2009, as on 14 December 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8937.15 points or 109.51% as on 14 December 2009.

Coming back to today's trade, the BSE Mid-Cap index fell 0.67% and the BSE Small-cap index fell 0.45% Both the indices underperformed the Sensex.

The sectoral indices on BSE showed a mixed trend. The BSE IT index (up 1.16%), the BSE Capital Goods index (up 0.95%), the BSE Auto index (up 0.78%), the BSE PSU index (up 0.63%), the BSE Power index (up 0.27%), the BSE Healthcare index (up 0.17%), the BSE Teck index (up 0.15%), the BSE Oil & Gas index (up 0.07%), the BSE Realty index (up 0.01%), outperformed the Sensex.

The BSE FMCG index (down 1.43%), the BSE Consumer Durables index (down 1.18%), The BSE Bankex (down 1.13%), the BSE Metal index (down 0.83%), underperformed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) fell 0.24% to Rs 1066.35. The stock came off the day's high of Rs 1083.50. Reliance Industries' (RIL's) attempt to take over the world's third-largest independent chemical company, LyondellBasell Industries, reportedly faces its first hurdle when the beleaguered company's management argues its rescue plan for the company before the special bankruptcy court of New York South District.

Despite getting feelers from RIL for an acquisition and cash-infusion into the company, the LyondellBasell management on Friday 11 December 2009, filed an updated rescue plan centred around a $2.5 billion cash infusion by the company's former owner and two investors. Ratification of the plan would significantly dampen RIL's chances of acquiring the company.

Banking shares fell on a likely monetary tightening by the RBI after a sharp jump in inflation. India's largest private sector bank by net profit ICICI Bank fell 1.49% as its ADR fell 2.66% on Friday, 11 December 2009. ICICI Bank has launched a home-loan scheme under which 8.25% interest rate will be fixed for the first two years. The floating rates will apply after 2 years. These rates will be applicable to loans sanctioned between December 2009 and January 2010.

India's second largest private sector bank by net profit HDFC Bank fell 1.53% as its ADR fell 2.63% on Friday.

India's largest bank by net profit and branch network State Bank of India fell 0.77%. The UPA government recently cleared the introduction of State Bank of India (Amendment) Bill in the current session of Parliament. The Bill seeks to bring the government's holding in the country's largest public sector bank on a par with other public sector banks at 51 %. Currently, the Union government holds 59% stake in SBI. At present, the stake of the promoter, that is Government of India, cannot fall below 55 %.

India's largest mortgage lender by total income Housing Development Finance Corporation (HDFC) fell 0.38%, extending recent losses triggered by investor worry a dual interest rate scheme on home loans introduced by the company would hit margins.

HDFC recently announced a dual-rate loan scheme under which a borrower will be charged a fixed rate up to March 2012 and a floating rate thereafter. For a 20-year loan of Rs 30 lakh, a borrower will pay a fixed rate of 8.25% up to March 2012 and then a floating rate that's 500 basis points below the prime lending rate (PLR) - the institution's benchmark rate. Currently, the PLR is 13.75%.

Metal stocks reversed early gains on profit taking. Hindalco Industries fell 1.2%. Hindalco Industries is reportedly raising Rs 4500 crore ($966 million) in debt to fund a new alumina refinery. The 1.5-million-tonne per year refinery, in the eastern state of Orissa, is expected to start production in July 2011 and involves about Rs 6500 crore as capital expenditure.

Hindustan Zinc, National Aluminum Company, Sterlite Industries fell by between 0.05% to 0.91%.

Tata Steel, the world's eighth-largest steelmaker by sales, fell 0.17% in choppy trade on reports the company is in talks with investors to raise Rs 5000 crore ($1.1 billion) in equity and an equal amount in debt. The company said on 7 December 2009 its sales rose 34.5% to 498,000 tonnes, in November 2009 over November 2008.

FMCG shares fell on profit taking. ITC, Hindustan Unilever, Dabur India, Tata Tea, United Spirits fell by between 0.24% to 2.86%.

IT stocks rose after stronger-than-expected retail sales and consumer sentiment data in the US reinforced investor confidence in a steady economic recovery. US is the biggest market for Indian IT companies. India's second largest software services exporter Infosys Technologies rose 1.76% even as its ADR fell 0.25% on Friday, 11 December 2009. India's largest software services exporter TCS rose 0.18%. India's third largest software services exporter Wirpo rose 2.23% even as its ADR fell 1.48% on Friday.

Capital goods stocks rose on hopes of strong order flow. India's largest engineering and construction firm by sales Larsen & Toubro rose 0.85%. The company said on Tuesday 8 December 2009 that it got orders worth Rs 844 crore.

Among other capital goods stocks, Bharat Heavy Electricals, BEML, SKF India and ABB rose by between 0.19% to 6.88%.

Auto stocks rose on strong sales on the month of November 2009. India's largest small car maker by sales Maruti Suzuki India rose 1.06%. Germany's Volkswagen and Suzuki Motor, Maruti Suzuki 's parent, reportedly plan to develop a new small car for the Indian market. Japan's Suzuki Motor said on Wednesday 9 December 2009 it will sell a 19.9% stake to Volkswagen (VW) for $2.5 billion and use half the proceeds to buy shares in the German automaker, as the two firms form a formidable force in the auto industry. Japan's Suzuki has a 54.2% stake in Maruti Suzuki India

Suzuki's chief told the media recently that the company will cooperate with VW in India by sharing common components. VW's chief Winterkorn said the firm will pursue synergies in India between Suzuki, Volkswagen, Skoda brands.

Maruti's total vehicle sales spurted 66.60% to 87,807 units in November 2009 over November 2008. Domestic sales spurted 60.10% to 76,359 units, while exports surged 128.60% to 11,448 units in November 2009 over November 2008.

India's largest motorcycle maker by sales Hero Honda Motors rose 0.88%. The company's total vehicle sales jumped 32% to 3.81 lakh units in November 2009 over November 2008.

India's top tractor marker by sales Mahindra & Mahindra (M&M) rose 0.71%. Mahindra & Mahindra will reportedly launch its first truck under a joint venture (JV) with Navistar, North America's largest commercial truckmaker, next month. The company's domestic auto sales soared 105.1% to 21,387 units in November 2009 over November 2008. M&M sold a total of 22,587 vehicles (domestic plus exports) in November 2009 as against 11,515 vehicles sold in November 2008.

India's second largest bike maker by sales Bajaj Auto rose 3.47% after a leading foreign broker raised its rating on the stock to 'buy' from 'neutral', saying that demand for two-wheelers is growing. Bajaj Auto will reportedly stop producing scooters by March 2010 to focus on motorcycles.

Bajaj Auto on Wednesday 9 December 2009 launched a 135 cc Pulsar, pushing the Pulsar brand into the mass segment. Bajaj expects a sell a minimum 30,000 units per month of the new Pulsar model. The automaker had recently refreshed the entire Pulsar lineup and expects total Pulsar sales to cross 80,000 units per month.

The company's total vehicle sales rose 73% to 2.76 lakh units in November 2009 over November 2008. Motorcycles sales jumped 84% to 2.42 lakh units.

But, India's top truck maker by sales Tata Motors fell 0.1%. As per recent reports the company is negotiating to acquire Japanese conglomerate Sumitomo's 53.5% stake in the Punjab-based auto firm Swaraj Mazda in a deal worth up to $54 million. Tata Motors' total sales zoomed 65.49% to 54,108 units in November 2009 over November 2008.

Car sales in India rose an annual 61% to 1,33,687 in November 2009 over November 2008, boosted by improved consumer sentiment, easier availability of loans and a low sales base a year earlier, an industry body said on Tuesday. Sales of trucks and buses, a gauge of economic activity, doubled to 40,847 units in November from 20,631 a year earlier, data from the Society of Indian Automobile Manufacturers showed.

Telecom stocks fell on profit taking. Telecom minister A Raja said on Friday 11 December 2009 there is no change in 3G auction schedule. Meanwhile, the central bank, last week, allowed telecom firms to access oversees markets to fund their bids for 3G spectrum. India's largest mobile services provider by sales Bharti Airtel fell 3.47%. Bharti Airtel sees revenue pressured in the short term amid an intense price war in the country's wireless sector, director Akhil Gupta said on 7 December 2009.

India's second largest mobile services provider by sales Reliance Communications fell 1.33%. The company has reportedly won mgovernance contracts worth over Rs 500 crore. The government may impose a penalty on Reliance Communications after examining a state audit report that found the No. 2 telecoms firm under-reported revenue for two years, the telecoms minister A Raja said on Thursday.

Mobile operators including Bharti Airtel, Vodafone Essar and Reliance Communications are locked in a tariff war, raising concerns about telecom firms' profitability. The price war is aimed at grabbing new users as new firms enter the market.

India's largest thermal power generator by sales NTPC fell 0.53% The government is planning a 5% stake sale in the firm by March 2010. Among other power stocks, Reliance Infrastructure, Reliance Power, Toreent Power fell by between 0.52% to 0.76%.

Cement shares rose on expectations of a price hike. ACC, Ambuja Cements, Ultratech Cement and Birla Corporation rose by between 2.21% to 5.33%.

Cement prices are reportedly seen hardening in the January-March 2010 quarter as demand from state projects picks up and rural housing drives volume growth. Prices went up by Rs 8-10 for a 50 kg bag southern India late November to Rs 155-175, while a similar hike in Mumbai on 2 December 2009 raised prices to Rs 240-245 per bag.

Realty stocks fell on profit taking. India's largest realty player by market capitalization DLF was flat. DLF is reportedly set to acquire DLF Asset (DAL), a property trust owned by its promoters KP Singh and family, for around Rs 10,000 crore, as the country's largest real estate firm looks to consolidate its commercial assets under one company.

Among other realty stocks, Indiabulls Real Estate, Akruti City and Unitech fell by between 0.09% to 2.02%.

Oil exploration firms were mixed after US crude oil futures fell on Friday, hitting a two-month low, as the market slumped for the eighth straight day led by a stronger dollar. On the New York Mercantile Exchange January crude was down 68 cents, or 0.96 %, at $69.86 a barrel. Cairn India fell 0.5%. India's second biggest oil and gas exploration firm by revenue, Oil India, fell 0.11%. But, India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) rose 1%. Fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms.

Cals Refineries clocked the highest volume of 1.11 crore shares on BSE. Radhe Developers (0.86 crore shares), Unitech (0.73 crore shares), Anu's Lab (0.72 crore shares) and Cox & Kings (0.71 crore shares) were the other volume toppers in that order.

Cox & Kings clocked highest turnover of Rs 302.14 crore on BSE. Tata Steel (Rs 116 crore), State Bank of India (Rs 112.33 crore), Housising Development & Infrastructure (Rs 101.23 crore) and Reliance Industries (Rs 76.90 crore) were the other turnover toppers in that order.