Sensex ricochets from intraday lows to end with moderate cuts; outclasses global peers

Stock markets in India showcased a remarkable turnaround on the week’s last trading session as the frontline equity indices, after hitting the lowest point of day in early afternoon trades, took a turn for the better, trimming the session’s over a percent losses and eventually settling with moderate cuts of around one third of a percent.

The frontline gauges’ failed to extend their gaining streak as they halted their three session uptrend amid depressing cues from domestic money markets along with global risk aversion from riskier asset classes like equities.

After the gap down opening not many had hoped that Indian bourses would stage such a bounce back especially on a day when stock markets across the Asian region got thrashed as investors in the region remained influenced by disappointing cues from overnight US markets while weak manufacturing activity indications from the US, Europe and China stoked worries about global economic slowdown.

The upside in domestic markets was also capped following the pessimistic cues from European markets, which extended their downtrend amid growing uncertainty over global economic growth prospects, while reports showing global rating agency Moody's downgraded 15 banks in the US too augmented the selling pressure on equities globally.

However, the psychological 5,150 (Nifty) and 17,000 (Sensex) levels proved as strong support levels for the key indices, which closed just below those levels. Sentiments were undermined by the discouraging cues from money markets were the beleaguered rupee extended its streak of depreciation and went on to hit historical lows of 57.23 against a dollar amid increased demand for the greenback. But the late recovery in Indian currency from intraday lows provided the much needed support to domestic bourses.

Moreover, the concerns over farm output in India, one of the major producers and consumers of food products too eased to some extent after reports from Meteorological Department indicated 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.

However, stocks from the cement sector traded on a somber note with majors like JP Associates, ACC and Ambuja Cement plunging between 2-5% as Competition Commission of India 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.

On the BSE sectoral space, value buying was evident in the high beta Realty counter, which closed with over half a percent gains and remained the top gainer in the space followed by marginal gains in Auto and Power sectors. On the flip side, hefty selling pressure was seen in the Metal counter which got pummeled by over one and half a percent. Moreover, the fall in Capital Goods and TECk sectors of around half a percent each also exerted some pressure on the bourses.

On the global front, markets in Asia settled largely on a pessimistic note with the benchmark in South Korea leading the laggards in the space after getting pummeled by over two percentage points. On the other hand, the European markets too traded on a weak note with most markets in the region trading with over half a percent loss.

Back home, the NSE’s 50-share broadly followed index Nifty, dropped by around one third of a percent to settle just below the psychological 5,150 support level while Bombay Stock Exchange’s Sensitive Index - Sensex shed sixty points to finish below the crucial 17,000 mark. However, the broader markets showed some resilience as they extended gaining streak and settled with marginal gains, outperforming their larger peers.

The markets eased on large volumes of over Rs 2.31 lakh crore while the turnover for NSE F&O segment also remained on the higher side as compared to that on Thursday at over Rs 1.63 lakh crore. The market breadth largely remained flat as there were 1,363 shares on the gaining side against 1,392 shares on the losing side while 129 shares remained unchanged.

Finally, the BSE Sensex lost 60.05 points or 0.35% to settle at 16,972.51, while the S&P CNX Nifty declined by 18.95 points or 0.37% to close at 5,146.05.

The BSE Sensex touched a high and a low of 17,016.06 and 16,807.80 respectively. The BSE Mid cap index was up by 0.13% and Small cap index up by 0.04%.

ONGC up 1.47%, Cipla up 1.26%, Maruti Suzuki up 1.00%, TCS up 0.73% and Hero MotoCorp up 0.53% were the major gainers on the Sensex, while Hindalco Industries down 3.34%, Tata Steel down 2.70%, Jindal Steel down 1.63%, Coal India down 1.24% and HDFC down 1.19% were major losers on the index.

The top gainers on the BSE sectoral space were Realty up 0.41%, Auto up 0.10% and Power up 0.04%, while Metal down 1.48%, Capital Goods down 0.63%, TECk down 0.30%, IT down 0.24% and FMCG down 0.21% were top losers on the BSE sectoral space. 

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 touched a high and low 5,159.80 and 5,094.00 respectively.

The top gainers on the Nifty were ONGC up 1.74%, Kotak Bank up 1.48%, Bank of Baroda up 1.42%, Cipla up 1.21% and Maruti up 1.02%. On the flipside, JP Associates down 4.63%, Hindalco down 3.30%, ACC down 3.29%, Ambuja Cement down 2.79% and Tata Steel down 2.64% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 down 0.47%, Germany's DAX down 0.59% and United Kingdom’s FTSE 100 down 0.66%.

Most of the Asian indices closed in red on Friday and erased most of week’s gains due to fall in sales of US homes indicating that the economy is weakening. Financial markets started falling after Moody’s cut the credit rating of global banks such as Credit Suisse Group AG, Morgan Stanley Inc, Bank of America Merrill Lynch Inc, Goldman Sachs Group Inc, Citigroup Inc with 11 other banks.

Shanghai Composite remain closed today due to the Dragon boat festival.