Markets sustain the momentum; Cement stocks reel ahead of CCI’s verdict on cartelization case

Indian equity markets, trading in fine fettle, have sustained their momentum as Prime Minister’s assurance of taking tough decision for the revival of the economy is working wonders for investor’s, which hinging on optimistic global leads, have piled up aggressive bets in Auto, Capital Goods and Consumer Durable counters. 30 scrip sensitive index, Sensex, adding over 0.30% points is trading comfortably over the 16900 psychological level, while the widely followed 50 share index, Nifty, too holding onto gains, was oscillating above the 5100 crucial mark. The broader indices, meanwhile, gained additional traction in comparison to frontline indices, as both Midcap and Smallcap index were trading higher over 0.50%.

Fresh stimulus hopes to stimulate the world's biggest economy from US Federal Reserve seems to be driving bulls across the global markets. Asian pacific shares, shrugging off the Spain’s bail out fears, where the borrowing cost spiked to danger levels on concerns over the nation’s stricken banks and fast-raising debts, built on the expectation that the central bank will extend its bond-buying programme dubbed 'Operation Twist'. Meanwhile, the US future indices continued to show downtick in the screen trade.

Closer home, converse to the optimism across the board, stocks from Information technology, Technology and Fast Moving Consumer Goods counters were the weak links of the trade. Additionally, even cement stocks in the likes of Ambuja Cements, Ultratech Cement, ACC, Grasim Industries and India Cements, were reeling under pressure ahead of Competition Commission of India (CCI)’s verdict on an alleged cartelization case. According to a report, the penalty could be about 7% of the average turnover in the last three years and could lead to a de-rating of stocks. Meanwhile, CCI is likely to impose a penalty on 11 top cement companies for cartelization.

The BSE Sensex is currently trading at 16,924.37, up by 64.57 points or 0.38%. The index has touched a high and low of 16,940.55 and 16,864.64 respectively.   There were 20 stocks advancing against 10 declines on the index.

The broader indices gained additional traction; the BSE Mid cap and Small cap indices were trading higher by 0.70% and 0.86% respectively.

The top gaining sectoral indices on the BSE were, Auto up by 1.23%, CG up by 1.16%, CD up by 1.11%, Power up by 1.02% and Health Care (HC) up by 0.93%. While IT, TECk were down by 0.18% and FMCG down by 0.02% remained the few losers on the index.

The top gainers on the Sensex were Tata Motors up by 2.87%, Jindal Steel up by 2.15%, Dr Reddy up by 2.08%, Hero Moto Corp up by 1.88% and BHEL up by 1.87%.

On the flip side, Coal India was down by 1.40%, ITC down by 0.76%, Bharti Airtel down by 0.62% and TCS down by 0.53% and Infosys down by 0.44% were the top losers on the Sensex.

Meanwhile, defending the Reserve Bank of India’s (RBI) status quo on key interest rates in its mid-quarter monetary policy review, Governor D Subbarao explained that the central bank chose to keep its focus on reining in the inflationary pressure on the economy rather than stimulating economic momentum since inflation at 7.55% in May was above tolerance levels. In order to lead the economy on a sustainable growth path in the long run, he pointed that some sacrifice in growth was an unavoidable price to pay and liquidity tightening was essential to support growth in the medium-term with low and stable inflation.

Subbarao opined that the rate of price rise in food products was not cyclical but structural as consumption is not likely to increase in the same proportion with the rise in income levels. According to him, reigning in inflationary pressure was the top priority of the RBI as persistent inflation, irrespective of the drivers, runs the risk of unbalancing inflation expectations. Hitting out at the critics he stated that contrary to popular perception, the RBI studies all inflation indicators at disaggregated level to assess the inflation dynamics, highlighting that core inflation is higher than the recent long period average of 4 percent while, consumer price inflation was at 10.4 percent in May 2012 which was high and still on the uptrend.

On June 18, the RBI, often regarded as one of the world's most aggressive central banks, lived up to the tag as they dashed all hopes of slashing key interest rates by leaving them unmoved in its recent mid-quarter monetary policy review meet. The RBI maintained status quo on the repo rate, rate at which banks borrow money from RBI, keeping it unchanged from its 8 percent levels. Consequently, the reverse repo rate, rate at which Reserve Bank borrows money from banks, under the liquidity adjustment facility (LAF) remained unchanged at 7.0 percent.

The central bank’s move defied wider market expectations of a cut in key interest rates by 25 basis points as they expected RBI to employ monetary easing measures to bring the economy out of doldrums. The policy decision had stunned financial markets and even the Commerce and Industry Minister Anand Sharma had vowed to take up the matter with the Finance Minister and the RBI Governor.

The RBI Governor also underscored that apart from global financial woes, deteriorating domestic factors have triggered the sharp depreciation in rupee against the US dollar. The beleaguered Indian currency has fallen 19.3 percent since August 2011 and has been Asia's worst performing currency so far this year. Among the currencies in the BRIC bloc, he said the Brazilian Real had witnessed the largest depreciation followed by the rupee during this period. The growing current account deficit, the relative inelasticity of imports and high inflation had negatively impacted the rupee. In 2011-12, while exports sniffed at $304 billion, imports crossed $486 billion, out of which $155.6 billion were crude and $66.1 billion were gold imports.

The S&P CNX Nifty, after touching a high and low of 5,126.35 and 5,106.10 respectively, is currently trading at 5,116.00, higher by 12.15 points or 0.24%. There were 35 stocks advancing against 15 declines on the index.

The top gainers of the Nifty were Tata Motors up by 2.71%, Hero Moto Corp up by 2.44%, HCL Technologies up by 2.04% and Sesa Goa up by 1.95%.

On the flip side, Ambuja Cement down by 2.57%, Coal India down by 1.48%, ITC down by 1.12%, DLF down by 0.95% and Bharti Airtel down by 0.87%, were the major losers on the index.

Most of the Asian markets were trading in the green; Hang Seng soared 0.79%, Jakarta Composite added 0.88%, KLSE Composite added 0.16%, Nikkei 225 surged 1.26%, Straits Times shot up by 0.47%, KOSPI Composite expanded by 0.51% and Taiwan Weighted was up by 0.54%.

On the flip side, Shanghai Composite down by 0.09% was the sole loser on the index.