Indian equities trim losses; trade continues in red

Indian equities trimmed its losses but continued to trade in red in the late afternoon session. The pessimism in the market was due to depressing cues from domestic money markets along with global risk aversion from riskier asset classes like equities. Traders were seen piling up position in Auto and Health Care sector while selling was witnessed in Metal, Capital Goods and Bankex sector. Stocks from the cement sector traded on a somber note with majors like JP Associates, ACC and Ambuja Cement plunging as Competition Commission of India (CCI) imposed a penalty of around Rs 6,000 crore on 11 cement companies for forming price cartel. Besides, investors have gone on to overlook the reports from Meteorological Department indicating that India’s crucial monsoon rains are still expected to be average in 2012, despite the scanty rainfall in the first three weeks of June which had raised concerns over farm output in the major producer and consumer of food stuffs. In the scrip specific development, Cox & Kings is seen trading firm in green on reports that the company is in talks with PE players for a stake sale in its UK unit to repay debt.

On the global front, the Asian markets were trading in red barring KLSE Composite while the European markets were too trading in red on pessimistic note. Investors were cautious as signs of a deepening global economic slowdown and Moody's downgrade of world's 15 biggest banks, wiped away risk appetite. On the home turf, the NSE Nifty and BSE Sensex were trading above their psychological 5,100 and 16,900 levels respectively. The market breadth on BSE was negative in the ratio of 1135:1422 while 135 scrips remained unchanged.

The BSE Sensex is currently trading at 16,947.56 down by 85.00 points or 0.50% after trading as high as 16,984.10 and as low as 16,807.80. There were 8 stocks advancing against 22 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index dipped 0.15% while Small cap index shed 0.12%.

On the BSE sectoral space, Auto up 0.30% and Health Care up 0.01% were the only gainers, while Metal down 1.56%, Capital Goods down 0.68%, Bankex down 0.59%, FMCG down 0.32% and Oil & Gas down 0.32% were the major laggards in the space.

Maruti Suzuki India up 1.68%, Cipla up 1.36%, ONGC up 1.27%, TCS up 0.91% and Hero MotoCorp up 0.77% were the major gainers on the Sensex, while Hindalco Industries down 3.79%, Tata Steel down 2.84%, Jindal Steel down 1.56%, HDFC down 1.45% and RIL down 1.40% were the major losers in the index.

Meanwhile, the Competition Commission of India (CCI) has imposed a penalty of around Rs 6,000 crore on 11 cement companies for forming price cartel. The penalty accounts for 50% of their net profit for the fiscal years ending in March 2010 and March 2011. Even the industry body Cement Manufacture Association (CMA) was also fined with Rs 73 lakh.

The companies, on which penalty have been imposed are  ACC, Ambuja Cements, Ultratech Cement, Grasim Cements now merged with Ultratech Cements, JK Cements, India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India and Jaypee Cements.

While imposing the fines, the CCI has taken into effect the coordinated behavior of cement companies in pushing up prices and inadequate dispatch and supply in the market. It also found that cement companies have not used the available capacity in order to reduce supplies and increase the price in times of higher demand.

This act by the cement companies in limiting and controlling supplies in the market and determining prices through an anti-competitive agreement is not only harmful to consumer but also to the whole economy as cement is an important input in construction and infrastructure industry, which is very essential to the economic development of the country.

The cement companies are being told to pay the fine within 90 days. They have been further told not to indulge in any wrong doing related to pricing and supply and demand in the market. The CMA has been asked not to associate itself in collecting wholesale and retail prices through member cement companies. India is the second biggest producer of cement after China with more than 50 companies operating around 125 large plants.

Meanwhile the cement companies are denying any involvement in price cartel and they are likely to challenge the CCI order of imposing hefty penalty before the Tribunal.

Earlier in April, the CCI heavily fined agrichemical companies United Phosphorous and Excel Crop Care, among others, after they were charged with conspiring while submitting bids for a tender for a government project.

The S&P CNX Nifty is currently trading at 5,138.05, lower by 26.95 points or 0.52% after trading as high as 5,148.15 and as low as 5,094.00. There were 20 stocks advancing against 29 declines while 1 stock remained unchanged on the index.

The top gainers on the Nifty were Maruti Suzuki up 1.80%, Cipla up 1.55%, ONGC up 1.42%, TCS up 1.08% and Hero MotoCorp up 1.01%.

JP Associates down 5.23%, Hindalco Industries down 3.63%, Ambuja Cement down 3.46%, ACC down 3.25% and Tata Steel down 2.57% were the major losers on the index.

In the Asian space, Hang Seng plunged 1.40%, Jakarta Composite declined 0.64%, Nikkei 225 shed 0.29%, Straits Times Index fell 0.33%, KOSPI Composite Index got lacerated by 2.21% and Taiwan Weighted slumped 0.78%. On the other hand only KLSE Composite rose 0.11%.

The European markets were trading in red with, France’s CAC 40 sank 0.83%, Germany’s DAX dropped 1.14% and the United Kingdom’s FTSE 100 plunged 0.99%.