Gains sustained till the end

Thu, 26 Aug Closing

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The Indian markets threatened to close below the breakeven point during the closing hours. However, they recovered just in the nick of time and thus, enabled the indices to close the day with some sort of gains. The BSE Sensex logged in gains of around 50 points (up 0.3%), whereas NSE Nifty closed higher by around 15 points (up 0.3%). BSE Midcap and small cap indices witnessed contrasting trends with the former edging marginally higher and the latter ending marginally lower. Nearly 2 stocks gained for every 1 that declined on the Sensex today. It were the financial institutions like HDFC and SBI that contributed in a big way to the gains on the Sensex.

Most Asian indices also closed in the positive today whereas Europe too has opened on a strong note. The rupee was perched at Rs 46.8 to the dollar at the time of writing.

As per a leading daily, (small cement companies) are likely to face the heat in the near to medium term. This is because the best days for the industry seem to be behind it and going forward, it will be a battle for survival. It should be noted that the Indian cement industry is highly consolidated with the top two groups accounting for 40% of the industry’s capacity. These large entities are better placed as they have a pan Indian presence and hence, slowdown in one region can be compensated to some extent by the growth in other regions. However, smaller players with presence concentrated in just one region, do not have any such luxury.

Thus, if prices were to tumble in their region, their profitability is likely to take a significant hit. A lot of midsized companies are looking at expanding in other regions but with cement being a long gestation project, there aren’t many who would like to take the bet. Looks like the smaller players will increasingly be at the mercy of the larger players. Sector stocks closed mixed today with Birla Corp and Ultratech amongst the gainers whereas smaller players like Prism and Mangalam Cement ending up on the losing side.

Telecom stocks also closed mixed today with two biggies Bharti Airtel and Reliance Communications ending higher and lower respectively. Meanwhile, Vodafone Essar, India’s 3rd largest company has shelved for now, its plans of getting listed on the bourses. As per a daily, the decision comes after consultations with various investment banks who last month participated in a beauty parade to bag a mandate for the IPO. If successful, the IPO would have raised close to US$ 1.5 bn for the company and its promoters combined. Although the company has not spelled out the reasons for not going ahead with the IPO, it may have to do with the volatile nature of the markets currently and the slew of other IPOs that it would have had to compete with. Furthermore, with telecom stocks not exactly catching fire these days, enthusiasm for a huge telecom IPO could well have been pretty muted.