Cement shares rally on government's infrastructure boost

After registering fresh intraday low in afternoon trade, key benchmark indices continued to see divergent trend. While the barometer index S&P BSE Sensex, languished in red, the 50-unit CNX Nifty was trading with marginal gains. The market breadth indicating the overall health of the market was negative. The Sensex was currently off 65.70 points or 0.22% at 29,295.80. Meanwhile, the outcome of a survey showed that Indian manufacturing activity expanded at its slowest pace in five months in February.

Cement stocks gained with shares of cement majors ACC, Ambuja Cements and UltraTech Cement scaling record high in anticipation that huge spending on infrastructure sector unveiled by the government in the Budget would boost demand for cement makers.

Meanwhile, global credit rating agency Standard and Poor's reportedly said today, 2 March 2015, that a relatively heavy general government debt burden and large budgetary subsidies could constrain its sovereign credit ratings on India. The rating agency said that India's budget for 2015/16 highlighted the government's commitment to keeping the fiscal deficit low.

Meanwhile, the Government of India and the Reserve Bank of India (RBI) have signed an agreement on monetary policy framework whereby the two sides have officially decided inflation targeting by the RBI.

Earlier, the Sensex and the 50-unit CNX Nifty, both, hit their highest level in more than four weeks in morning trade.

Foreign portfolio investors (FPIs) bought shares worth a net Rs 614.03 crore during the previous trading session on Saturday, 28 February 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) sold shares worth a net Rs 740.74 crore on Saturday, 28 February 2015, as per provisional data. A special live trading session was held on that day due to presentation of the Budget.

In the foreign exchange market, the rupee edged lower against the dollar.

Brent crude oil futures edged lower after previous trading session's sharp rally.

In overseas markets, Asian stocks edged higher, buoyed by an interest rate cut in China.

At 13:24 IST, the S&P BSE Sensex was down 65.70 points or 0.22% at 29,295.80. The index fell 101.73 points at the day's low of 29,259.77 in afternoon trade. The index jumped 214.82 points at the day's high of 29,576.32 in morning trade, its highest level since 30 January 2015.

The CNX Nifty was up 2.30 point or 0.03% at 8,904.15. The index hit a high of 8,972.35 in intraday trade, its highest level since 30 January 2015. The index hit a low of 8,885.45 in intraday trade.

The BSE Mid-Cap index was up 70.47 points or 0.65% at 10,881.32. The BSE Small-Cap index was up 52.62 points or 0.47% at 11,319.06. Both these indices outperformed the Sensex.

The market breadth indicating the overall health of the market was negative. On BSE, 1,364 shares declined and 1,241 shares advanced. A total of 113 shares were unchanged.

Cement stocks gained in anticipation that huge spending on infrastructure sector unveiled by the government in the Budget would boost demand for cement makers.

ACC surged 3.63% to Rs 1,744.35 after scaling a record high of Rs 1,748 in intraday trade.

Ambuja Cements gained 3.77% to Rs 281.75 after scaling a record high of Rs 282 in intraday trade.

UltraTech Cement jumped 5.18% to Rs 3,300 after scaling a record high of Rs 3,307.15 in intraday trade.

Shree Cement gained 2.56%.

Grasim Industries was up 3.73% at Rs 3,899.35. Grasim has exposure to the cement sector through its subsidiary UltraTech Cement.

All clearances and linkages will be in place before the project is awarded by a transparent auction system. Similar plug-and-play projects in other infrastructure projects such as roads, ports, rail lines, airports etc will also be considered, Finance Minister Arun Jaitley said in his first full-fledged Union Budget 2015-16 announced on Saturday, 28 February 2015.

According to reports, cement prices could go up by Rs 15-20 a bag. The government had announced hike in excise duty on cement by Rs 100 per tonne to Rs 1000 per tonne in Union Budget 2015-16 on 28 February 2015. Earlier, in the Railway Budget presented on 26 February 2015, the government had announced hike in freight rates for select commodities including coal, cement, iron ore and steel from 1 April 2015. Cement freight rate was increased by 2.7% and coal rates were raised by 6.3%. Coal is an important raw material used in cement production.

Coal India shed 0.51%. Coal during market hours today, 2 March 2015 reported production and offtake performance figures for February 2015. Coal India said that the company and its subsidiary companies' production on provisional basis was 103% of targeted production at 47.98 million tonne in February 2015. Coal India and its subsidiary companies' offtake on provisional basis was 100% of targeted offtake at 43.17 million tonne in February 2015.

Tata Motors fell 2.59%. Tata Motors during market hours today, 2 March 2015 said that the company saw strong growth in certain key segments, as passenger cars (excluding UV's) and M&HCV grew by 31% and 34%, respectively in February 2015 over February 2014. The total commercial and passenger vehicles sales (including exports) rose 11% to 44,225 vehicles in February 2015 over February 2014. The company's domestic sales of Tata commercial and passenger vehicles rose 14% to 40,314 units in February 2015 over February 2014.

Tata Motors said that passenger vehicles recorded rose 22% to 13,767 in February 2015 over February 2014. The trend of growth in passenger vehicles continued with the strong Zest sales and the good response to the all-new Bolt. Sales of the passenger cars in February 2015 rose 31% to 11,805 units in February 2015 over February 2014. UV sales declined 15% to 1,962 units in February 2015 over February 2014.

Tata Motors' sales of commercial vehicles in the domestic market rose 11% to 26,547 units in February 2015 over February 2014. LCV sales fell 4% to 14,357 units in February 2015 over February 2014. M&HCV sales rose 34% to 12,190 units in February 2015 over February 2014. Exports fell 16% to 3,911 units in February 2015 over February 2014, Tata Motors said.

Jindal Steel & Power lost 2.94% to Rs 190.05 on profit booking after the stock jumped 7.52% in the preceding four trading session to Rs 195.80 on 28 February 2015, from a recent low of Rs 182.10 on 24 February 2015.

Atul Auto rose 3.74% after the company's total sales rose 9.57% to 3,402 units in February 2015 over February 2014. The company made the announcement during market hours today, 2 March 2015.

In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 61.885, compared with its close of 61.83 during the previous trading session on Friday, 27 February 2015.

Brent crude oil futures edged lower after previous trading session's sharp rally. Brent for April settlement was off 43 cents at $62.15 a barrel. The contract had jumped $2.53 a barrel or 4.21% to settle at $62.58 a barrel during the previous trading session on Friday, 27 February 2015.

The Government of India and the Reserve Bank of India (RBI) have signed an agreement on monetary policy framework whereby the two sides have officially decided inflation targeting by the RBI. A document dated 20 February 2015 published on the finance ministry's website today, 2 March 2015, showed that the two sides have set consumer price inflation target of 4% with a band of plus or minus 2 percentage points for the financial year 2016-17 and all subsequent years. The RBI will first aim to have consumer inflation fall below 6% by January 2016. The RBI governor will determine the main lending rate viz. the repo rate and any other measures needed to achieve the inflation target. The central bank will be deemed to have missed its target if consumer inflation is at more than 6% for three consecutive quarters, starting from the financial year 2015-16. The central bank will also be deemed to have missed its target if consumer inflation is less than 2% for three consecutive quarters, starting from the financial year 2016-17. If the central bank fails to meet the inflation target, it will have to submit a report to the Government of India stating therein the reasons for the RBI's failure to achieve the inflation target, the remedial actions proposed to be taken by the RBI and an estimate of the time-period within which the inflation target will be achieved pursuant to the timely implementation of the proposed remedial measures.

Meanwhile, the outcome of a survey showed that Indian manufacturing activity expanded at its slowest pace in five months in February, with output and new orders expanding at softer rates than those seen in the past four months. The HSBC Manufacturing Purchasing Managers' Index, compiled by Markit, fell for the second consecutive month, to 51.2 in February from 52.9 in January. A reading above 50 separates growth from contraction. The moderation in the growth rate was evident across the three monitored market groups. Subsequently, employment decreased, reversing the marginal rise seen in January. Output charge inflation was historically muted as some manufacturers offered discounts due to a competitive environment. Furthermore, costs fell for the first time in almost six years. On a positive note, foreign orders rose at a strong and accelerated pace, while the PMI remained in positive territory. These factors brighten the prospects for a rebound in output and employment in coming months, said Pollyanna De Lima, Economist at Markit.

Meanwhile, global credit rating agency Standard and Poor's reportedly said today, 2 March 2015, that a relatively heavy general government debt burden and large budgetary subsidies could constrain its sovereign credit ratings on India. The rating agency said that India's budget for 2015/16 highlighted the government's commitment to keeping the fiscal deficit low.

Finance Minister Arun Jaitley provided a thrust on the infrastructure sector, sharply increased the government's capital expenditure for 2015-16 and announced a road map for cut in corporate tax rate by five per cent over four years when he presented Union Budget 2015-16 in parliament on Saturday, 28 February 2015.

Asian stock markets edged higher today, 2 March 2015, buoyed by an interest rate cut in China. Key indices in China, Japan, Hong Kong, South Korea, and Indonesia were up 0.15% to 0.78%. Key indices in Taiwan and Singapore were off 0.03% to 0.22%.

China's central bank cut benchmark interest rates for the second time in three months as disinflation gives room to step up support for the nation's slowing economy. The People's Bank of China on Saturday, 28 February 2015, cut the benchmark interest rate by 25 basis points (bps) to 5.35% and reduced the benchmark saving rate by a similar margin to 2.5%.

HSBC's final reading of China's manufacturing sector in Febuary came in at 50.7, much higher than the flash reading of 50.1 and the official February reading announced over the weekend, latest data today, 2 March 2015 showed.

Trading in US index futures indicated that the Dow could gain 25 points at the opening bell today, 2 March 2015.

In Europe, German finance minister Wolfgang Schaeuble reportedly softened his hard-line attitude towards Greece, saying its new Left-wing Syriza government needs a bit of time but appears to be able to work towards resolving its debt crisis.

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