Share prices still in a range: Wednesday Closing Report

The Nifty is yet to break past 5,900 levels, which is needed for an uptrend

The market closed with modest losses today, an indication that it is still in a range. Tepid quarterly earnings reports kept a lid on the market today. The Nifty is yet to break past the 5,900 levels, which is necessary for an uptrend. On the downside, support remains at 5,750 and then at 5,550.

Tracking good global cues, the local market opened higher with the Sensex gaining 66 points at 19,611 and the Nifty up 16 points to 5,884. The market was choppy, a feature ahead of the futures and options contract expiry tomorrow. Soon the indices touched the day's high, with the Sensex scaling 19,634 and the Nifty at 5,892.  However, the weak outlook from IT major Wipro disappointed the market, sending the indices into negative territory.

The see-saw movement continued till noon, when a huge bout of selling hurtled the indices further southwards. A mixed opening by key European bourses lifted investor sentiment a little in post-noon trade. But selling pressure pushed the market down once again to the day's lows in post-noon trade. At the intra-day low the Sensex was at 19,413, down 132 points, and the Nifty shed 48 points to 5,820.

Fluctuation continued till the end of trade with losses expanding today. The Sensex closed the session at 19,449, down 97 points from its previous close, and the Nifty lost 35 points to settle at 5,834. The advance-decline ratio on the National Stock Exchange was 574:817.

The broader indices ended flat. In the sectoral space, BSE PSU, BSE Fast Moving Consumer Goods gained 0.49% each and BSE Consumer Durables was up 0.26%. On the other hand, BSE Realty (down 1.55%), BSE Capital Goods (down 1.20%) and BSE Metal (down 0.81%) were the losers.

ONGC (up 1.57), Mahindra & Mahindra (up 1.61%), Maruti Suzuki (up 1.10%) were the top performers on the Sensex, whereas Wipro (down 2.86%), Jaiprakash Associates (down 2.66%) and BHEL (down 2.30%) were the major laggards.

The Reserve Bank of India (RBI) has imposed a total penalty of Rs1.95 crore on 19 banks, among them the State Bank of India, HDFC Bank, ICICI Bank and Citibank, for violation of norms on derivatives, an instrument that is commonly used to hedge financial risks.

According to the RBI, the lenders failed to carry out due diligence with regard to suitability of products and sold derivative products to companies not having risk-management policies. They also failed to verify the adequacy of eligible limits before selling derivatives.

Markets in Asia, which were trading higher for most part of the trading session, ended with key indices in the red. With policy announcements from the US Federal Reserve expected later in the day and from the Bank of Japan on Thursday, investors remained cautious. On the other hand, optimism on the news that 90% of Japanese factories will resume production by July, perked up spirits.

The Jakarta Composite gained 0.80%, the KLSE Composite was up 0.17%, the Nikkei 225 jumped 1.39%, the Straits Times rose 0.34%, the Seoul Composite added 0.02% and the Taiwan Weighted surged 1.13%. On the other hand, the Shanghai Composite declined 0.46% and the Hang Seng was down 0.48%.

Back home, foreign institutional investors continued to pull out funds from the equities segment on Tuesday, they were net sellers of stocks worth Rs554.03 crore. Conversely, domestic institutional investors were net buyers of shares worth Rs161.81 crore.


Cement firms’ earnings expected to be under pressure in FY12

Higher input costs are eating into margins of companies and cement makers will be particularly hurt by a demand-supply gap, analysts suggest

Indian cement companies' earnings will remain under pressure through the financial year 2011-12, on account of over-capacity, weak realisations and rising input costs, according to industry analysts.

"The cement sector faces an oversupply situation. The demand-supply gap is likely to remain significant, despite expected double-digital growth in FY12," Novonil Guha and Gurpreet Kaur, analysts with BRICS Securities, said in a report. "Cement prices should remain volatile as production arrangements among players are not likely to sustain over the medium term. This would mean uncertainty in cement earnings till FY13."

CRISIL researchers point to rising input costs that would likely eat into the margins of Indian companies in the current fiscal, and cement, shipping, real estate and textiles will witness a sharp decline in profitability.

Prices of imported coal have increased by around 30% to $141 per tonne compared with $110 per tonne in the corresponding period last year. While domestic coal prices have also surged by almost 150%. The impact of surging input costs, lower realisation, oversupply and depressed demand was evident in the fourth quarter results of cement companies.

On Tuesday, ACC, one of the country's largest cement producers, reported that consolidated net profit for the January-March quarter declined by 11% to Rs350 crore, against Rs393 crore in the year ago period, mainly due to high input costs. However, volumes increased to 6.16 million tonnes in the quarter from 5.58 million tonnes in the year-ago period.

Ambuja Cement also reported a 12% decline in net profit to Rs407 crore from Rs462 crore a year ago, while net sales stood at Rs2,207 crore, an increase of 11% from Rs1,990 crore a year earlier. In contrast, UltraTech Cement's net profit rose 218% to Rs727 crore in the January-March 2011 period, compared to Rs228 crore in the previous corresponding quarter, while net sales  surged 135% to Rs4,490 crore from Rs1,909 crore.

The decline in the margins is attributed to depressed demand, lower utilisation rates, and high supply. "FY11 recorded industry demand growth of 5.3%, the lowest in the last ten years," UltraTech said in a statement. "This was primarily on account of de-growth in various key cement consuming states, driven by lower infrastructure spending, a slowdown in the realty sector, an extended monsoon and non-availability of railway wagons."

The cement industry has seen around 80 million tonnes of fresh capacity addition in the last two years and that has led to lower capacity utilisation in past year. According to BRICS analysts the capacity utilisation is likely to be 77% and 85% in FY12 and FY13, respectively.

Oversupply in the market will put pressure on cement prices. Though cement makers adopt the supply discipline strategy to hold prices, it would not sustain over the long term, the analysts said. "The pricing environment may remain challenging and with the impact of surplus capacity, margins may continue to remain under pressure," UltraTech stated.

However, there is also a view that demand in the current fiscal could see an upward momentum as it is the final year of the Eleventh Plan, so infrastructure projects are likely to get some acceleration. "The cement industry is likely to grow more than 8.5% on the back of government initiatives in rural development, infrastructure and housing," UltraTech said.


BEL sales turnover touches Rs5,550 crore

Defence PSU Bharat Electronics (BEL) sales turnover has increased to Rs 5,550 in 2010-11 (provisional) from Rs 5,220 crore in 2009-10, registering a growth of 6.3 per cent

Defence PSU Bharat Electronics (BEL) today said its sales turnover has increased to Rs 5,550 in 2010-11 (provisional) from Rs 5,220 crore in 2009-10, registering a growth of 6.3 per cent.

The estimated profit before tax is at Rs 1,120 crore as against Rs 1,045 crore in 2009-10, BEL Chairman and Managing Director, Mr Ashwani Kumar Datt said, adding, the audited results were still awaited.

The PSU registered a growth of 77 per cent in its exports turnover from $23.65 million in 2009-10 to $41.89 million during 2010-11, he told media, after announcing the company's performance highlights during the year.

"Exports did better than targeted", he said.

All units continued to achieve profits, he said. BEL's order book grew from Rs 11,350 crore to Rs 23,600 crore as on April 1, 2011.

Supplies to defence contributed to 80 per cent of the turnover. The turnover from indigenously developed products was 78 per cent, he said.
Weapon Systems on account of Akash contributed to 4 per cent of the turnover and the segment was expected to grow in future. Communication contributed to 18 per cent, he added.

The new products for the year included Akash weapon system, Humsa-NG, Semi Ruggedised Automatic Exchange, Lower Power Jammer, Instant Fire Detection and Suppression System and Mobile Communication Terminal.

Talking about its export orders, he said BEL has an export order book of $66.36 million, including offset order of $42.28 million. The export target for 2011-12 is $47 million, he said.Mr Datt said the company is aiming to reach a turnover of Rs 6,200 crore during 2011-12.

It would work strategically on important projects like Akash weapon system for Indian army, Lightweight Portable Radar, Battlefield Surveillance System. "BEL is aiming to achieve increased growth in offset business exports", he said.

It is looking at diversifying into new areas of defence and civil segments and giving thrust to in-house development and strengthening its R&D capabilities.
BEL is in discussion with a reputed foreign OEM on forming an Indian JV in the area of civilian radars and select defence radars, he said.

The plans for setting up a JVC with BHEL for manufacturing solar PV wafers, cells and modules have been finalised. Both the companies are in the process of obtaining approvals from their respective boards, Mr Datt said.

BEL is working on establishing a company for the design, development and manufacture of RF and microwave components and subsystems, he added.
On Wednesday, BEL ended 0.17% up at Rs1,828.90 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.49% to 19,448.69.


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