Banks & energy stocks push markets

Tue, 3 Aug 11:30 am

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After starting today's session on a positive note, indices started to climb higher into the green in the previous two hours of trade. Other key Asian markets are trading mixed, with Japan leading the gains. Stocks from realty and oil&gas space are witnessing strong buying interest while stocks from IT and consumer goods space are trading in negative territory.

The BSE-Sensex is trading up by around 33 points, while the NSE-Nifty is up by about 8 points. Buying interest is also visible amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.5% and 0.7% respectively. The rupee is trading at 46.21 to the US dollar

Food stocks are mainly trading positive with United Spirits and Tata Global Beverages leading the gains. Lakshmi Energy and Foods recently declared its 3QFY10 results. The company reported a 97% growth in sales. The sales were higher mainly due to higher offtake in the agri business. The sales in the agri business grew by 165% YoY while the sales of the energy business fell by 30% YoY. Consolidated operating margins declined by 17.7% due to higher growth in operating expenses as compared to sales. Consolidated net profits fell by 29% YoY as a result of lower operating income.

Cement stocks are trading in the red with Ambuja Cement and Mangalam Cement leading the pack of losers. However, Dalmia Cement and Prism Cement are trading flat. As per a leading news daily,Ultratech Cement Ltd, a subsidiary of Aditya Birla Group, is likely to buy around 80% stake in Dubai's Star Cement company. The deal is pegged at an EV of US$380 m (Rs 17.5bn). The purchase will be made through Ultratech Cement's wholly owned subsidiary in Middle East. It should be noted that Star Cement has an annual capacity of 3.2 m tonnes while Ultratech has annual cement capacity of 23 m tonnes. So the acquisition is not going to expand the overall capacity of Ultratech to a great extent. However, it is deemed to be strategic as far as logistics advantage is concerned.   

The deal will give Birla group a direct access to the West Asian markets which up till now was catered through exports. The company used to export 0.3 m tonnes of clinker to the UAE market. Now the company will have its own plant over there and this is likely to result in substantial savings in freight, a major cost component for cement companies.