Lower inflation fails to enthuse mkts

Thu, 5 Jan Closing

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At the end of a rather buoyant session today, the benchmark indices in Indian stock markets failed to sustain the momentum and nosedived into the negative territory in the final hours. The markets began the day's proceedings on an optimistic note. However, selling pressure in energy, power and realty stocks dragged the indices lower. Lower food inflation numbers for December also failed to enthuse market participants. While the BSE-Sensex closed lower by around 25 points (down 0.2%), the NSE-Nifty ended flat. The BSE Mid cap and BSE Small cap indices also ended the session close to the dotted line.

As regards global markets, most Asian indices closed lower today while most European indices have opened in the red. The rupee was trading at Rs 52.88 to the dollar at the time of writing.

Cement major, Associated Cement Companies (ACC) has reported an increase of 6.3% YoY in cement production in December 2011 at 2.03 million tonne, as against 1.9 m tonne in the corresponding period last year. The company's despatches in the month were up by 8.9% at 2.1 m tonne, as against 1.9 m tonne in same month last year. On cumulative basis, for the January-December period of 2011, its production increased 11.6% Yoy at 23.7 m tonne as against 21.2 m tonne in 2010, while its despatches for the same period surged 11.9% YoY at 23.7 m tonne as against 21.2 m tonne in 2010.

However, the cement industry is still in the throes of significant overcapacity and the same is expected to plague the industry for 2-3 years. At the same time, the inflationary environment has led to a slowdown in construction and infrastructure spending, thus, affecting demand. Though the good monsoon would bring in some demand, the overall slowdown in the economy will have its negative effects. To further add, the significant rise in the cost of inputs such as coal, petroleum products, slag and fly ash will continue to weigh on the margin front.

Textile major Raymond's auto components subsidiary - Ring Plus Aqua (RPAL) has agreed to acquire a majority equity stake in Trinity India (TIL), based in Pune, Maharashtra. Trinity India is engaged in the manufacturing and marketing of Forged Auto Components with presence in the domestic and international markets. Raymond is largest manufacturer of steel files in the world accounting 30% of market share. Ring Plus Aqua witnessed surge in sales during 1HFY12 backed by growth in domestic as well as export market, however margins lower due to higher input costs. The company is also expanding ring gears capacity. The stock of Raymond closed 1% lower today