Indian Markets Wednesday Wrap-Up: Energy and Banking Pull Markets Down

Includes: EPI, IFN, IIF
by: Equitymaster

Heavy selling pressure led to the markets slipping back into the negative territory during the closing hours of trade and thus, ending the day in the negative. While Sensex closed lower by around 120 points today (down 0.8%), decline in NSE Nifty was seen at around 40 points (down 0.7%). BSE Midcap and Small cap indices also came off their day’s highs and closed virtually flat today. Advance to decline ratio on the Sensex was heavily in favour of the latter today with four stocks declining for every one that gained.

While majority of the Asian indices closed in the positive today, Europe is also witnessing buying interest currently. The rupee was seen trading Rs 46.6 to the dollar at the time of writing.

Greece is doing to global asset markets what Dubai did to them a few months back i.e. keep them on the edge. However, those fears were diluted a bit today amidst speculation that the European nation would indeed be given aid of some kind and not allowed to fail. Certainly, with the global economy far from being able to stand on its own feet, an event like Greece defaulting on its debt indeed has the potential to push it back into the depression era. Thus, it looks like the authorities will do whatever it takes to save Greece. And this confidence manifested itself across most stock markets today as they staged a strong rally. Indian markets though fell behind as problems with some of its own corporate heavyweights in the energy and banking space took centre stage and investors chose to ignore the Greece bailout story.

The cement pack were amongst the surprise gainers today with most big companies like Ultratech Cement Madras Cements and India Cements witnessing strong buying interest. The optimism towards these counters was fueled by a report in a leading daily that despatches during January touched a new monthly high. The industry sold nearly 18.2 m tonnes of cement during the month, beating previous high of 18.1 m tonnes registered during March 2009. On a YoY basis, the growth rate stood at an impressive 12.8%. It is not just the volumes that are showing strength, even cement prices have been on a high with most manufacturers hiking prices by Rs 3-5 per kg from the start of the current month. Thus, with both volumes as well as realizations showing buoyancy, cement counters were witness to heightened activity during today’s trading session.

Iron ore miners like Sesa Goa and GMDC were amongst the other prominent gainers from the BSE A group today. Interest in these counters gained traction on the back of news that Brazil, the world’s second largest exporter of iron ore is looking to levy additional duty on iron ore exports so that domestic manufacturing of steel can be boosted. This is obviously good news for Indian ore exporters as the gap left by Brazil’s exports to major ore consuming nations like China could be expected to be filled up by India. However, some experts have ruled out any such benefits accruing to Indian ore exporters. For one, there aren’t adequate infrastructure facilities to handle increased exports from India and secondly, the Indian government too is looking to levy a similar tax on exporters, which would make Indian ore less cost competitive as compared to say the Australian ore. Given this backdrop, the rally in mining stocks comes as a bit of a surprise.