Crack in Cement
NIFTY50 16,584 43 (-0.26%) SENSEX 55,769 84 (-0.09%)
3 June 2022
Hello Traders !
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Onto the stories of the day. Markets started off on a high note, but then slumped towards the end of the day. Let’s find out why.
Despite a strong opening, markets closed in the red as profit-booking erased all of the early gains.
Among the Nifty50 stocks, 39 closed in the red.
Investors now await jobs data from the US due later in the day. Meanwhile, all eyes are now on the outcome of the RBI's monetary policy next week.
Among the Nifty sectoral indices, IT (+0.3%) and Oil and Gas (+0.1%) saw meager gains, while Auto (-1.8%) and Media (-1.5%) were the top losers.
Gainers Change(%) Losers Change(%)
Reliance +1.9% Grasim -6.5%
Infosys +0.9% Ultratech Cement -5.5%
L&T +0.7% Shree Cement -4.6%
Today’s Action
Cement stock’s Fall
Cement stocks were under pressure on Friday after Ultratech Cement announced a capacity expansion plan as competition heats up. Stocks like ACC, Shree Cements and JK Cement were down as much as 8%. This news comes amid rising energy costs and slowing demand due to increasing cement prices. Additionally, a good monsoon could slow down construction work and further dampen the demand for cement.
Suzlon Energy
A group of lenders led by the State Bank of India has sold over ₹8,000 crore worth of Suzlon Energy (-7%) loans to the Rural Electrification Corp (REC) and state-owned Indian Renewable Energy Development Agency (IREDA). This will benefit both the banks and the company, as the banks will be offloading a troubled account, while Suzlon will get better repayment terms under the new lenders.
GR Infra
Shares of construction company GR Infraprojects rose by 4.3% intraday after its subsidiary received an order worth ₹1,577 crore from the National Highways Authority of India. The project entails four-laning of the 55.9 km long NH-71 from Madanpalli to Pileru in Andhra Pradesh. It will be completed in about two years from the date of appointment.
Investment in UP
Prime Minister Narendra Modi said that investment deals worth ₹80,000 crore have been signed across sectors in Uttar Pradesh. It will help create thousands of employment opportunities for the youth of the state. The projects include various sectors like agriculture, IT and electronics, MSME, manufacturing, renewable energy, pharma, among others.
Sugar prices
Retail prices of commodities including sugar have witnessed a downward trend. This is on the back of the government’s measures to curb the rising inflation. On 13 May, the government had placed a cap of 10 million tonnes on sugar exports. While this has brought some relief to consumers, sugar stocks have taken a beating Shree Renuka and Dwarikesh Sugar falling 10-12% in the last one month.
FIIs selling Indian stocks?
Foreign investors have been fleeing Indian shores in 2022. The month of May has been especially brutal, witnessing reportedly the worst sell-off (₹44,000 crore) by FPIs since March 2020 – when the pandemic brought the global as well as the Indian economy to a grinding halt.
What’s the reason behind this pessimism? Elevated prices, interest rate hikes and geopolitical uncertainty could be listed as some of the key reasons for the sell-off. Even though these challenges persist, the Indian economy is now picking pace. In fact, several economic or macro indicators are showing robust growth in April and May.
In May, the Goods & Services Tax (GST) collection soared by 44% to ₹1.4 lakh crore. Since GST is charged on a finished product or service, it indicates growth in economic activity and consumption.
Which also explains why companies are placing more orders for raw materials and components. Take a look at India’s Purchasing Managers’ Index (PMI), which also expanded (54.6%).
Similarly, the core sector growth (eight key industries including electricity, steel, and coal) rose to a six-month high of 8.4% in April. These core sectors are the key drivers of the Indian economy and tend to have an impact on other industries.
Also, exports surged 30% in April, led by petroleum products, electronic goods and cereals, signaling rising demand globally.
Then why are foreign investors pulling out of their investments in India? Blame it on greener pastures. Rising interest rates in the US means these foreign investors get higher returns there and also enjoy the relative safety of investing in the US government bonds.
But let that not spook you. The India growth story remains intact.
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