Market ends in red; RIL, Wipro suffer most

• Due to reports claiming Reliance Industries might be penalised for falling short in production in the KG Basin D6 block, most of the stocks, including Reliance (down 1.56%) gave way. The BSE Sensex closed the day at 19,448.69, down 96.66 points, while the NSE Nifty was down 36.75 points at 5831.65.

[caption id=“attachment_2777” align=“alignleft” width=“380” caption=“Moving stocks: Brokers monitoring the screen at BSE. Reuters”] [/caption]

• Among the gainers for the day were oil sector stocks, which got a boost after news that there is likely to be an upside price revision of diesel by Rs 2 per litre. ONGC was up 2.57% at Rs 311.55 per share, IOC was up 2% at Rs 332.35. Auto stocks M&M (up 1.62%) and Maruti (up 1.18%) rose on news of Tata Motors (down 1.1%) cutting down production.

• Wipro remained the biggest loser falling by 2.86% at Rs 450.75 post its results. Though the results were in line the guidance given by the company was disappointing. Capital goods stock like BHEL (2.3%), L&T (1.5%) saw some institution selling. Cement counters which announced their results were beaten down with most of the analyst reports pointing towards a margin reduction going forward.

• Morgan Stanley has come out with a report on Ultratech Cement and ACC with an ‘Equal Weight’ (neutral) rating for both.

• Ultratech Cement came out with better than expected numbers with sales turnover posting a 21% jump to Rs 4,500 crore, resulting from 9% higher sales of cement and 11% from higher prices of cement. Operating profit (profit before depreciation, interest and tax but after expenses) of the company grew by 44% to Rs 1,000 crore. Operating profit per tonne for the company improved sharply from Rs 720 to Rs 950. Ultratech posted a profit of Rs 730 crore supported by a tax reversal of earlier year of Rs 120 crore. Adjusted for this the profit doubled sequentially to Rs 620 crore.

• Morgan Stanley is of the view that cement prices will soften in the current quarter as demand cools off from the seasonally strong month (Mar-11). Coupled with coal cost headwinds, this could lead to some margin pressure. Based on these factors the broking firm prefers to remain ‘Equal Weight’ (Neutral) for now as it prefers to wait for better valuation and/or better earnings outlook before upgrading the recommendation. The stock closed the day at Rs 1045 up by 0.22%.

• As with other cement companies ACC too has posted good numbers backed on higher cement prices. ACC reported sales growth of 23% to Rs 2390 crore over the previous quarter on the back of a 10% growth of volume of cement sold and 13% improvement in cement prices. Operating profit increased to Rs 520 crore as margin almost doubling to 23%. Operating profit per tonne shot up from Rs 390 to Rs 900. ACC’s volume growth has been double than that of the industry which grew by 5%. With the commissioning of the 3 million tonne capacity in South India, ACC is well positioned to grow volumes much faster than the industry average.

• As in the case of Ultratech Cement, Morgan Stanley is maintaining an ‘Equal Weight’ (Neutral) rating on the company. The company recommends investors to book some profit given the rich valuation and uncertainty over near term earnings. The report said it would wait for the valuations to turn attractive or gain visibility on better demand. The stock closed lower by 1.46% at Rs 1,105.

Ambuja Cement was the worst performing stock in the cement sector which was down by 4.63% at Rs 150.2.

• Being the penultimate day before the roll over of futures trades, where open derivative positions either have to be wound up or rolled over to the next month, most of the stocks moved in a very narrow range. Positions in Nifty futures have been shifted from April to May to the extent of 52%, the fall in the market has slowed down the shifting of position which was already at a level of 45% yesterday. A trending market (either upward or downward) makes it difficult for positions to be rolled over. Tomorrow being the last day for the position to be cleared from April, markets can be expected to be volatile.

• Meanwhile, European markets have been in the positive zone since their opening with UK’s FTSE trading 0.1% higher at 6,075, CAC trading at 4,069.37 up by 0.6% and DAX trading at 7,403.54 up by 0.64%.