Profit booking takes toll

Fri, 5 Mar 01:30 pm

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Profit booking took its toll on the Indian markets as the benchmark indices witnessed selling pressure across the board during the previous two hours of trade. Currently selling activity is being witnessed in stocks from the banking, auto and consumer durable sectors. However, stocks from the realty and capital goods spaces are still seeing some interest. The overall decline to advance ratio is poised at 1.4 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are currently trading lower by around 20 points and 10 points respectively. Stocks from the midcap and small cap spaces are however trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 0.5% and 0.8% respectively. The rupee is trading at 45.78 to the US dollar.

Cement stocks are currently trading firm led by Prism Cement, Ambuja Cement, Shree Cement and ACC. A leading business daily has reported that the cement industry is expected to see 12% YoY increase in dispatches during the month of February 2010. This would be the industry’s third consecutive double digit growth on a year on year level. There are three key factors for the same - the low base effect, strong demand from the construction industry and the commissioning of new capacities. During the preceding month, the dispatch growth stood at about 13% YoY.

The management of select cement companies expect this trend to continue during the next month as well considering that the demand for cement is strong. It must be noted that this is despite the cement prices being on a rise since the past three to four months. In addition, it is expected that the cement prices are set to get dearer on the back of the recent excise duty rollback announced in the budget. While sale volumes may continue to remain robust at present, we expect the demand to slowdown during the second half of the calendar year due to the overall slowdown in the construction industry due to the monsoons. Plus, with additional capacities set to go on stream over the next few months, they are likely to exert pressure on cement prices going forward.

Engineering stocks are currently trading firm led by Suzlon Energy, ABB, Punj Lloyd and Thermax. It was recently reported that the Australian Government introduced measures to improve the operations of the country’s Renewable Energy Target (RET). This would be a positive development for wind energy major Suzlon Energy, which is believed to have welcomed this announcement as it believes that this would build confidence among investors and enable investments in the clean energy market in Australia. Suzlon is the world largest wind turbine maker with over 50% market share, and is likely to benefit with increased order coming in the future. It may be noted that the company earned nearly 16% of its revenues from the Australian & New Zealand markets last year. This region is the company’s second largest revenue contributor (region wise), after the US.