Negative sentiments sink markets

Mon, 17 May 01:30 pm

   Previous Close   

   Pre-Open   

   09:30 am   

   11:30 am   

   Closing   

Markets continue to languish in the red as negative sentiments continue to drag the markets. However, the markets pared some of its opening loss during the last two hours of trade. Stocks from IT and realty space were the biggest losers while stocks from the FMCG space were trading marginally in the red.

BSE-Sensex is trading down by 328 points while NSE-Nifty is trading 93 points below the dotted line. BSE-Midcap index is trading lower by 1.3% while the BSE-Smallcap index is trading 1.7% below Friday's closing. The rupee is trading at 45.7 to the US dollar.

Banking stocks are currently trading weak with Axis Bank the biggest loser. As per a leading daily, Axis Bank has entered into an agreement with Prizm Payment Services and AGS Infotech. These companies have signed a contract to set up and manage 5,000 ATMs for the bank. With this agreement, Axis bank would have more than 9,000 ATMs in the next 18 months. As per the contract, Axis Bank would not incur any capital expenditure and would be responsible for cash settlements. The fees for cash withdrawal would be Rs 13-15 and for balance enquiry would be Rs 3-5. For third party transaction the fees would be higher. These fees would be split between the bank and the service provider. With setting up of ATMs becoming a costly affair, more and more banks are looking to outsource the setting up and maintenance of their ATM network to a third party. With this addition to its ATM network, Axis bank would have the second largest ATM network in India after SBI. This would help the bank increase its distribution reach while keeping a check on costs.

Cement stocks are trading lower lead by heavy weights like ACC and Dalmia Cements. As per a leading business daily, cement prices are expected to soften by 7% to 10% in June on account of two counts. First being the effect of upcoming capacities leading to oversupply. Second, the slowing down of construction activity due to onset of monsoon season. This in turn would lead to lower demand for cement. Thus, in the near to medium term, margin of the cement manufacturers are likely to come under pressure on account of softening of cement prices. Managements of top cement manufacturers have also indicated their concern regarding fall in cement prices. A few of them have informed dealers too with regards to lower demand particularly during monsoon season.

Thus, accordingly companies and dealers are preparing for the slack season (typically June to September). To push volumes, dealers are likely to sell below the maximum retail price. The companies have even agreed to adjust the difference in margin in the next order. Currently, cement prices are hovering at around Rs 255 per bag. Cement prices are expected to settle at around Rs 235 per 50 kg bag in the medium term. The fall in cement prices are expected to vary region on region. It may be noted that India expects to add 60 MT of new cement capacity by the end of December. This would be due to companies, which had reined in plans during the liquidity crisis, resuming expansion. This addition will take India's total capacity to 300 MT.