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Strong Start to the Week; Cement Stocks Rally
Mon, 24 Apr Closing

Share markets in India finished on a strong footing tracking positive trend in global markets after the market's favored candidate, Emmanuel Macron, won the first round of the French presidential election. At the closing bell, the BSE Sensex closed higher by 291 points, whereas the NSE Nifty finished higher by 99 points. The S&P BSE Midcap ended up by 1% while the S&P BSE Small Cap Index ended up by 0.8%.

Among the BSE sectoral indices, only healthcare sector witnessed selling pressure. Gains were largely seen in stocks from realty sector and capital goods sector.

ACC Ltd share price gained as much as 7.4% to reach a six months high level. The company reported better-than-expected profit for March 2017 quarter, helped by stronger cement sales volume. Quarterly sales volume at ACC's cement segment rose 4% as impact from government's move of notebandi declined, the reports noted.

Cement stocks were among the biggest gainers today with the share prices of India Cements and Prism cement leading with gains of 7.1% & 7% respectively.

IT stocks fell on continued concerns over US President Donald Trump's order last week to a review the country's visa program to encourage hiring Americans. Tata Consultancy Services Ltd, Infosys Ltd and Wipro Ltd dropped more than 1% each.

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Indian firms like TCS, Infosys, and Wipro are top beneficiaries of the H1B visa program, using it to send computer engineers to service clients in the US, their largest overseas market.

Stock markets in Asia finished mixed as of the most recent closing prices. The Nikkei 225 gained 1.37% and the Hang Seng rose 0.41%. The Shanghai Composite lost 1.37%. European markets are sharply higher today with shares in France leading the region. The CAC 40 is up 4.32% while Germany's DAX is up 2.86% and London's FTSE 100 is up 1.79%.

The rupee was trading at Rs 64.48 against the US$ in the afternoon session. Oil prices were trading at US$ 50.11 at the time of writing.

As per an article in a leading financial daily, L&T Finance has decided to sell off its mutual fund L&T Mutual Fund, and is now looking for buyers to take over the asset management company.

L&T Finance is said to be seeking a valuation of close to Rs 20 billion for the mutual fund arm, in which it had initially sought to divest a minority stake.

One must note that, L&T Mutual Fund had Rs 393 billion of assets under management as of 31 March 2017. The mutual fund industry managed assets worth Rs 18.3 trillion.

Earlier, L&T Finance had planned to sell 26% or 49% in the mutual fund as part of its restructuring plans. However, it could not attract buyers for the minority stake, leading to L&T now considering sale of the entire business, the reports noted.

Speaking of mutual fund space, the Indian mutual fund industry is not a big fan of index funds. They are not marketed well. These funds don't have a lot of assets under management. Few investors are aware of them. And those who are do not invest in them.

Are Fund Managers Struggling to Beat the Index?

As the chart above shows, a majority of funds, across categories, underperform their respective indices. As per an article in the Business Standard, it's getting really hard for fund managers to beat the market. This is understandable. As competition increases, more money chases the same number of stocks.

In the meanwhile, L&T has also signed a deal with South Korea's Hanwha Techwin to supply artillery guns to the Indian army. The deal is estimated to be Rs 4.5 billion (US$696.38 million).

As per the agreement, the first 10 guns will be imported from South Korea and the rest would be manufactured by L&T in India. This is the second major deal for artillery guns concluded by the Army recently. Last year India signed a deal for 145 Ultra-Light Howitzers with the US under the Foreign Military Sales program.

L&T share price finished the day up by 2.5%.

Moving on to news from economic sector. After projecting India's growth to rebound to 7.2% in 2017 and 7.7% in 2018, in its recent report, International Monetary Fund (IMF) sees signs of recovery in the country's economy post demonetization and has said that the impact of demonetization has abated and about 75% of the cash has been replaced in the economy, it pointed that indicators such as index of industrial production (IIP) and the purchasing managers' index (PMI) have also shown a nice recovery.

However, the global multilateral agency expressed the need of quick replacement of the defunct currency in order to restore missing transactions and support the peoples' spending capacity, as cash is an important element in the Indian economy. It further stated that in general it supports the Indian government's efforts to combat the illicit financial flows, and to produce the share of the informal economy.

IMF in their forecast, reflecting the temporary dislocation associated with the notebandi scheme had lowered the growth target by almost a full percentage point compared to October, owing about a half a per cent for growth this year and half a percent for growth next year.

In news from oil & gas sector, ONGC share price finished the trading day on an encouraging note after it was reported the company is planning to increase gas production by nearly 30% over the next three-four years with an investment of around US$11 billion.

The company will put its blocks in the Krishna Godavari basin (KG-DWN-98/2) and Ratna and R-Series oilfields in Mumbai offshore into production by 2019. The coal bed methane (CBM) blocks in Jharkhand will begin production by 2020, while the Daman offshore fields, which have been pressed into production this month, will be ramped up next year.

In another development, GAIL share price also surged 3% in today's trade after the company's subsidiary GAIL Gas has signed a Business Transfer Agreement (BTA) with Rajasthan State Gas. This could be a significant step towards setting up of retail gas infrastructure in Rajasthan and opening CNG corridors connecting key cities.

The BTA is a momentous occasion, which will pave the way for transforming Kota to a smart city by providing clean energy to boost up industrialization and setting up CNG corridor between Kota & Jaipur and Kota - Baran - Jhalawar besides providing green energy to the industrial clusters at Baran - Jhalawar adjoining areas of Kota. RSGL is also carrying out necessary activities to provide clean energy solution for the proposed smart cities Kota, Ajmer, Udaipur and Jaipur.

And here's a note from Profit Hunter

The cement stocks are on fire today. The top gainers amongst the sector are ACC (7.40% up), India Cement (7.05% up), Shree Cement (5.50% up), Ultratech Cement (4.40% up) and Ambuja Cement (3.15% up),

ACC announced its Q4FY17 results on Friday evening and Ultratech Cement announced its results today. A favorable result from them might be a possible reason for the entire sectors rally.

Let us have a look at the chart of ACC ltd - the top gainer in the cement sector today.

ACC Soared 7.4% for the Day
ACC Soared 7.4% for the Day

The stock topped out in August 2016 at Rs 1,736 and fell sharply to a low of Rs 1,297 in November 2016. The stock made a smart recovery, trading 27% up from this low.

But when plotted with Nifty 50 Index, the stock is still an underperformer. The Nifty is 3% up from its September 2016 top while ACC is 5% down from the same top.

Today, the stock is up 7.70% with healthy volumes taking cues from the quarterly results.

It will be interesting to see if the Q4 result act as a kicker for ACC to match the broader index returns or will it continue to underperform.

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Nov 24, 2017 (Close)