The bears continue to rule

Fri, 5 Feb 01:30 pm

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Selling activity has forced the benchmark indices to move deeper into the red during the previous two hours of trade. Currently, extensive selling activity is being witnessed across the board led by stocks from the realty, metal, and banking sectors.

The BSE-Sensex is trading lower by around 440 points and the NSE-Nifty is down by around 135 points. Midcap and small cap stocks too are bearing the brunt of profit booking. Currently, the BSE-Midcap and BSE-Smallcap indices are trading down by 2.9% and 3.3% respectively. The Rupee is trading at 46.52 to the Dollar.

Cement major Ambuja Cements announced its full year CY09 results yesterday. Its revenues grew by 13% YoY largely led by higher volumes and realisations. The company reported 6% YoY growth in sales volume during CY09. While operating profits grew by 7.5% YoY, EBITDA margins contracted by 1.4% as cost of operation grew at a faster rate as compared to the topline. Net profits declined by 12% YoY, despite higher other income and lower interest cost. This is because of absence of extraordinary income. Excluding extraordinary income, the bottomline reported a 12% YoY growth. The company's Board of Directors have recommended a final dividend of Rs 1.2 per equity share. It may be noted that the total dividend for the year along with interim dividend works out to Rs 2.4 per equity share. This translates into a dividend yield of about 2.4% at the current levels.

The prospects of the cement sector for the long term remain intact. This is mainly on account of government initiatives in the infrastructure and housing sectors that are likely to be the main drivers of growth for the industry in the long run.

It what may come as a delight to Indian power equipment manufacturers, the Central Electicity Authority (CEA) has now made it compulsory for winning bidders to order core equipment for supercritical power plants from indigenous manufacturers. It will implement this by asking state and central utilities to incorporate an ‘indigenous manufacturing clause' for all equipment bids. This will effectively shut out Chinese equipment manufacturers. Chinese power equipment companies have been the bane of their Indian counterparts, as their products are 10% to 15% cheaper. Interestingly, this move comes on the back of another recent move by the empowered group of ministers barring the import of supercritical power plants for future ultra mega power plants (UMPP). Apart from BHEL which will benefit from this, numerous other players who are readying their own power equipment capacities in joint ventures with foreign partners will also receive boost of confidence. This includes L&T which has tied up with Mitsubishi Heavy Industries to indigenously manufacture such equipment.