NIFTY started the day at 19,345 with a gap-up of 115 points (near the 50% Fibonacci rejection levels). After facing initial resistance at 19,380 levels, the index fell to 19,310. The earlier resistance acted as support. Then, Nifty gradually continued the up-move to 19,420 levels. Niftyclosed at 19,411, up by 181 points or 0.94%.
BANK NIFTY (BNF) started the day at 43,627 with a big gap-up of 310 points. There was an immediate sell-off to 43,400 levels. But the earlier resistance now acted as support, and the index moved up till the opening levels. BNF closed at 43,619, up by 301 points or 0.7%.
All indicesexcept Nifty PSU Bank (-1.09%) closed in the green. Nifty Metal (+1.36%), Nifty Pharma (+1.28%), and Nifty Realty (+1.2%) moved up the most.
Major Asian markets closed well in the green (Japan’s Nikkei rose nearly 2.3%). European markets are currently trading mixed.
Today’s Moves
Divi’s Labs (+4.6%) was NIFTY50’s top gainer despite reporting a 29% YoY fall in net profit to ₹348 crore in Q2.
Shares of Aarti Industries (+10.7%) surged as investors cheered the management’s positive commentary and improved sequential performance in Q2.
JK Cements (+8.6%) moved up with strength after the cement manufacturer posted robust Q2 results yesterday.
SBI (-0.66%) was NIFTY50’s top loser.
Krsnaa Diagnostics (-6.04%) fell sharply after the diagnostic company’s net profit declined 32% YoY to ₹10.5 crore in Q2 due to higher operational expenses.
Markets Ahead
The Indian stock market has been showing a consistent pattern lately. It opened with a gap-up and either continued to rise or remained steady for the last three trading sessions. The markets have now closed above significant Fibonacci levels – 50% at 19,300 in Nifty and 43,400 in Bank Nifty.
This suggests a potential shift in the market trend to bullishness. However, there’s a concern regarding the increase in India VIX, which has risen by 2% despite the upward movement. So, it’s important to be cautious in case the market experiences a downturn tomorrow.
Nifty: A breakout from 19,420 may take the index up to 19,500, which will be the next major resistance to watch out. Meanwhile, the immediate support for Nifty is near 19,360 levels. A breakdown from there could take Nifty down to 19,300 and 19,240 levels.
Bank Nifty: The major resistance for BNF is near 43,700 levels. A breakout from there might take the index up to 43,900 and 44,000 levels. On the other hand, the immediate support for the index is near the 43,500 round levels. A breakdown from there may take the index down to 43,300 and 43,000.
Key resistance levels are being breached mainly due to the gap-ups, and we haven’t seen much intraday price action to reach our targets. As long as the market remains above these resistance levels, it may be a good strategy to buy on dips. However, if an unexpected gap-down occurs in the coming days, you may consider selling when the market rises.
What levels are you watching out for FIN NIFTY expiry tomorrow? Let us know in the comments section below!
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Here are some of the major updates that could move the markets tomorrow:
Larsen & Toubro to construct India’s tallest commercial building in Mumbai
Larsen and Toubro (L&T) Construction has secured an order to construct commercial towers in Mumbai. The exact value of the projects has not been disclosed, but they fall within the range of Rs 1,000 crore to Rs 2,500 crore. One of the orders involves building the tallest commercial building in India, with a height of over 300.05 metres. The project includes four-level basements and two towers with 70 and 50 floors, totaling a built-up area of 3.4 million square feet.
Aditya Birla Group forays into branded jewellery retail business
Aditya Birla Group is entering the jewellery retail business with a Rs 5,000 crore investment. This is their third venture in two years, following paints and business to business (B2B) e-commerce. The new business, called ‘Novel Jewels Ltd’, will open big jewellery stores in India and feature their own jewellery brands.
GTPL Hathway plans capex of Rs 1400 crore over the next three years
GTPL Hathway plans to invest Rs 1,400 crore in the next three years in capital expenditure (capex). They will allocate around Rs 450-500 crore annually for capex. The investment will be evenly split between their cable TV and broadband businesses. In FY22, they spent Rs 468.5 crore on capex, with Rs 225 crore for broadband and the remainder for cable TV.
The United States Food & Drugs Administration (USFDA) is currently inspecting IPCA Laboratories’ API facility in Ratlam. This inspection is important because the facility has been under import alert since FY15, affecting supplies to the US. Three major facilities of Ipca, including Ratlam, Silvassa, and Pithampur, are still under import alert. In April 2023, the USFDA inspected Ipca’s formulation facility in Silvassa, resulting in three observations.
JK Cement to buy 100% stake in Toshali Cements for Rs 157 crore
JK Cement Ltd announced its plan to acquire a 100% stake in Toshali Cements Private Ltd for Rs 157 crore. The company aims to expand its presence in the eastern region with this acquisition. The Board of Directors approved to sign a Share Purchase Agreement for the acquisition. Toshali currently operates two manufacturing units, one in Odisha with a clinker capacity of 0.33 MTPA and a grinding capacity of 0.198 MTPA.
KEC International receives two orders for train collision avoidance systems
KEC International has received two large orders worth Rs 600 crore for its Train Collision Avoidance System (TCAS) called Kavach. The recent tragic train collision in Odisha has highlighted the urgent need for TCAS implementation. With these orders in hand, the company anticipates more tenders and increased demand for their TCAS systems.
Sonata Software partners with SAP Commerce to drive digital innovation, e-commerce solutions
Sonata Software has partnered with SAP Commerce to drive digital innovation and support businesses. The collaboration aims to offer customized e-commerce solutions and seamless experiences to customers. Sonata Software will provide implementation, customisation, and maintenance services, including integration with third-party systems. The partnership will enable customers to benefit from storefront design, services across multiple channels, and ongoing support and maintenance.
Man Infra receives another redevelopment project in Mumbai’s Ghatkopar
Man Infraconstruction Ltd’s subsidiary MICL Creators LLP has announced a new residential project in Ghatkopar East, Mumbai. By acquiring development rights from neighboring societies, the company will work on a total area of approximately 13 lakh square feet. The project is expected to be completed in the next 3.5 to 4 years, with a saleable carpet area of around 4 lakh square feet.
Bank Nifty weekly options contract to now expire on Fridays
The National Stock Exchange (NSE) has changed the weekly options expiry day for Nifty Bank contracts based on feedback. Starting from July 7, 2023, Nifty Bank’s weekly options contracts will expire on Fridays instead of Thursdays. If Friday is a trading holiday, the expiry will occur on the previous day. Monthly contracts will also expire on the last Friday of each month, except when it coincides with a trading holiday, in which case the expiry will be on the previous Thursday. Existing F&O contracts will have their expiry and maturity dates rescheduled to Fridays from July 6.
Here are some of the major updates that could move the markets tomorrow:
IOCL selects Jio’s managed network services for its petrol pumps
Indian Oil Corp Ltd (IOCL) has selected the enterprise arm of Reliance Jio Infocomm, JioBusiness, to deploy and manage Software Defined Wide Area Network (SD-WAN) solutions across its 7,200 retail outlets for five years. Jio’s SD-WAN solutions will be used to power IOCL’s retail automation and critical business processes. This includes payment processing, daily price updates, remote desktop protocol (RDP) software, and network monitoring.
Maruti Suzuki signs 5-year pact with Kamarajar port for PV exports
Maruti Suzuki India Ltd (MSIL) has signed a five-year pact with Kamarajar Port Ltd in Chennai for exporting its passenger vehicles (PVs) to international markets. Under this agreement, Kamarajar Port will be used to export cars to Africa, the Middle East, Latin America, ASEAN, Oceania, and SAARC regions. A car-cum-general cargo berth has been developed and commissioned by Kamarajar Port for handling automobile units.
JK Cement buys controlling stake in Acro Paints for ₹153 crore
JK Paints & Coatings, a wholly-owned subsidiary of JK Cement Ltd, has acquired a controlling stake in Acro Paints for ₹153 crore. Acro Paints is a leading manufacturer of architectural, high-performance paints and coatings in north India. This acquisition is a step towards fast-tracking JK Cement’s entry into the paints segment, expanding its product offerings, and potentially foraying into new markets.
Reliance Retail acquires Metro AG’s India business for ₹2,850 crore
Reliance Retail Ventures Ltd (RRVL) has signed definitive agreements to acquire a 100% equity stake in Metro Cash and Carry India Pvt. Ltd, which operates under the ‘Metro India’ brand, for ₹2,850 crore. Through this acquisition, RRVL will get access to a network of Metro India stores located in prime locations across key cities, a large base of registered kiranas & institutional customers, and a strong supplier network.
Viacom18 acquires media rights to Olympic Games 2024 for $31 million
Viacom18 Media has secured exclusive media rights to broadcast the Olympic Games Paris 2024 in the Indian subcontinent. It has also bagged the non-exclusive rights to the Winter Youth Olympic Games in Gangwon 2024. According to reports, Viacom18 is believed to have paid roughly $31 million (~₹256.6 crore) to secure the rights. The company will provide multi-platform coverage of the games and ensure free-to-air television coverage within the region.
Tata Communications to acquire US-based Switch Enterprises for ₹486 crore
Tata Communications Ltd will acquire New York-based end-to-end live video production company The Switch Enterprises (TSE) in an all-cash deal for ₹486 crore. With both companies coming together, Tata Communications will support TSE’s customers with global reach to over 190 countries and territories. Meanwhile, TSE will bring live production capabilities to help organisations produce high-quality immersive content faster and more efficiently.
Jio deposits ₹3,720 crore in SBI escrow account to buy Reliance Infratel: Report
As per an Economic Times report, Reliance Jio has deposited ₹3,720 crore in an SBI escrow account, marking another step towards completing the acquisition of Reliance Infratel Ltd (RITL). RITL is the tower business of Reliance Communications, which is under an insolvency process.
In November 2022, the National Company Law Tribunal (NCLT) in Mumbai approved the acquisition of RITL by Reliance Project & Property Management Services Ltd (RP&PMSL), a subsidiary of Reliance Jio that looks into the tower business.
CIL can pursue overseas acquisition of coal mines after detailed study of blocks: Parliamentary Panel
The Standing Committee on Coal, Mines, and Steel said Coal India Ltd (CIL) can still pursue the overseas acquisition of mines after a detailed study and analysis of the blocks, especially for low ash coking coal. The committee is of the view that this will not only reduce the import of fossil fuels but also open new avenues of mining abroad.
[In 2009, CIL had acquired prospecting licences for coal blocks in Mozambique through one of its wholly-owned subsidiaries. However, it was found that the quality of coal in the allocated blocks was inferior and extraction was commercially unviable.]
NTPC, GE Power signs pact to enable more usage of low carbon fuel in plants
NTPC and GE Power India Ltd have signed a Memorandum of Understanding (MoU) to reduce the amount of coal used in power plants and replace it with low-carbon fuels like methanol, agriculture waste, biomass, and ammonia. The two entities will also develop, test, and demonstrate technologies that allow total co-firing with lower carbon fuels in coal-fired power plants.
Adani Group enters into cement business; incorporates Adani Cement
The Adani Group, which has a strong presence in the ports, airports, power, gas distribution, and other businesses, is all set to enter the cement sector in India. Adani Enterprises announced that it has incorporated a new wholly-owned subsidiary, Adani Cement, with an authorized share capital of Rs 10 lakh and paid-up capital of Rs 5 lakh. The new subsidiary will operate as a manufacturer, producer, and processor of all types of cement. This development is likely to cause some disruption in the highly competitive Indian cement industry.
SEBI looks into Rs 4,000 deal between PNB Housing Finance, Carlyle
PNB Housing Finance Ltd’s Rs 4,000 crore deal with US-based private equity firm Carlyle Group has come under the scanner of the Securities and Exchange Board of India (SEBI). The development comes after proxy advisory firm Stakeholders Empowerment Services (SES) red-flagged the deal structure. In a report, SES stated that the deal was an abuse of minority shareholder rights and questioned why PNB willingly surrendered its control over its housing finance arm to the Carlyle Group without extracting a fair compensation control premium.
J K Cement Q4 Results: Net profit rises 32% YoY to Rs 216 crore
J K Cement Ltd reported a 32.76% YoY increase in consolidated net profit to Rs 215.91 crore for the quarter ended March (Q4). Net profit has declined by 1.58% when compared to the previous quarter. Its total income rose 37.84% YoY to Rs 2,168.18 crore during the same period. Net profit for the financial year ended March 31, 2021 (FY21) increased by 44.14% YoY to Rs 709.71 crore. The cement manufacturer’s board has recommended a dividend of Rs 15 per share.
India’s fuel demand slips to nine-month low in May
India’s fuel demand fell to its lowest level in nine months in May 2021 as restrictions to curb the second wave of Covid-19 infections affected mobility and muted economic activity. Total fuel demand fell 11.3% to 15.1 million tonnes (MT) in May, compared to April. Petrol consumption in May declined by 16% to 1.99 MT over the previous month. Diesel sales declined by 17% to 5.53 MT when compared to April. The data was released by the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Oil.
Indian Hume Pipe Q4 Results: Net profit rises 51.7% YoY to Rs 38 crore
Indian Hume Pipe Company reported a 51.74% YoY increase in net profit to Rs 38.45 crore for the quarter ended March (Q4). Net profit has jumped 767.95% when compared to the previous quarter. Its total income rose 20.8% YoY (or 70.5% QoQ) to Rs 481.03 crore during the same period. However, net profit for the financial year 2020-21 (FY21) declined by 42.78% YoY to Rs 42 crore. The concrete pipe manufacturing company’s board has recommended a dividend of Rs 2 per share.
Info Edge India Ltd has entered into an agreement to acquire 100% share capital of Zwayam Digital Pvt Ltd. The Bengaluru-based firm operates Zwayam, an artificial intelligence (AI) and machine learning-powered recruitment management software platform. It helps enterprises streamline and automate their entire recruitment workflow from sourcing to onboarding. Info Edge’s Managing Director said this acquisition will complement the company’s current recruitment offerings and help it cement its position as a leader in the enterprise recruitment solutions market.
BPCL seeks exemption from open offer for listed joint ventures
Bharat Petroleum Corporation Ltd (BPCL) has written to market regulator SEBI, seeking an exemption to the regulation that its new owner would have to make an open offer to minority shareholders of two companies which it is a promoter of— Petronet LNG and Indraprastha Gas Ltd (IGL). BPCL holds a 12.5% stake in Petronet LNG and a 22.5% stake in IGL and is a promoter for both companies. This means that potential buyers of BPCL would be required to make an open offer for the two promoter firms, which would cost them more.
VRL Logistics Q4 Results: Net profit declines 6.5% QoQ to Rs 37.16 crore
VRL Logistics Ltd reported a 6.5% quarter-on-quarter (QoQ) decline in net profit to Rs 37.16 crore for the quarter ended March 2021 (Q4 FY21). Net profit has jumped 1,644% when compared to the corresponding quarter last year (Q4 FY20). Its total income rose 6% QoQ (or 20.54% YoY) to Rs 603.02 crore in Q4 FY21. Net profit for the financial year 2020-21 (FY21) declined by 50% YoY to Rs 45.06 crore. The company’s board has recommended a dividend of Rs 4 per share.
Inox Leisure allots Rs 96.77 lakh shares to QIBs at Rs 310 per share
The Board of Directors of Inox Leisure Ltd has approved the issue and allotment of 96.77 lakh equity shares to eligible qualified institutional buyers (QIBs) at an issue price of Rs 310 per share. The issue price is a ~5% discount to Friday’s closing price. The QIP was opened on June 8 and closed on June 11. Thus, the multiplex operator has raised Rs 300 crore via the QIP.
Anupam Rasayan Q4 Results: Net profit jumps 113% YoY to Rs 22 crore
Anupam Rasayan India Ltd reported a 113.29% YoY jump in consolidated net profit to Rs 22.14 crore for the quarter ended March (Q4). Net profit has increased by 2.31% when compared to the previous quarter. Its total income rose 65.9% YoY (or 44.63% QoQ) to Rs 274.16 crore during the same period. Net profit for the financial year 2020-21 (FY21) increased by 32.12% YoY to Rs 70.29 crore. The Board of Directors of the specialty chemicals manufacturer has recommended a dividend of Rs 0.5 per share.
As you may have noticed, major cement stocks saw a fall on Thursday (10 December 2020). The shares of major players such as ACC, Ambuja Cement, UltraTech Cement, and JK Cements declined by over 2-3%. The reason behind such a fall can be attributed to an investigation that was initiated by the Competition Commission of India on each of these companies. In fact, this is not the first time that such an investigation was conducted on cement manufacturers. Let us have a deeper understanding as to why these companies are in trouble.
What is Happening Now?
Over the last decade, major cement companies in India have been frequently accused of cartelisation. A cartel is an organisation created through a formal agreement between a group of manufacturers. They work collectively to manipulate the prices of their product by regulating its supply. Thus, all the companies involved in a cartel will be able to increase their profits and dominate the market. Unfortunately, cartelisation is a common practice conducted by cement companies all over the world.
Many associations in the Indian construction sector have constantly warned government officials and regulatory bodies against unfair practices being conducted by major cement companies. They have stated that such companies are making huge amounts of profit by entering into agreements with each other and controlling the prices.
The CCI Investigation in 2012
Way back in 2012, the Builders Association of India (BAI) accused cement manufacturers of fixing prices. After receiving BAI’s complaint, the Competition Commission of India (CCI) conducted a thorough investigation into the operations of cement companies. This was one of the first signs that Indian authorities were taking a proactive role in eliminating cartelisation.
As per their investigation, the CCI found 10 cement manufacturers guilty of cartelisation. They booked the companies under Section 3 of the Competition Act that prohibits anti-competitive agreements. The CCI found that the Cement Manufacturers Association (CMA) was the main platform for cartelisation. After CMA meetings were held in January 2011, the companies suddenly increased cement prices. These cement manufacturers also posted super normal profits during FY12. With all this proof, the CCI ordered 11 companies to pay a fine of Rs 6,300 crore. The penalty amount to be paid by the cement companies was 50% of their profits of 2009-10 and 2010-11.
Given below is a graphic showing the fine imposed by CCI on the major cement companies:
Source: Economic Times
What Happened Next?
The Competition Appellate Tribunal (COMPAT), in 2015, set aside CCI’s orders as there were irregularities with respect to certain procedures. The tribunal asked CCI to take up the case once again. After a few months, the CCI re-examined the matter and stuck to its original conclusion that the companies were guilty of cartelisation.
In 2018, the National Company Law Appellate Tribunal (NCLAT) heard the matter again and agreed with the points made by the CCI. (By then, the Competition Appellate Tribunal had merged with NCLAT). It upheld the Rs 6,300 crore fine imposed by CCI on the group of cement companies. The tribunal stated that it found no merit in the plea filed by the cement companies. Even then, the companies kept challenging the judgment made by NCLAT and moved the Supreme Court. In October 2018, the apex court stayed the penalties imposed by CCI and asked them to deposit only 10% of the total amount. Thus, even after the CCI provided evidence of cartelisation, the cement manufacturers were able to get away with it.
The Latest Probe by CCI
On December 9, the CCI initiated a fresh investigation against cement companies in India, regarding alleged anti-competitive behaviour. This comes after Nitin Gadkari, the Roads and Highways Minister hinted at possible cartelisation and “black marketing techniques” in the cement industry in September. Also, the Builders Association of India (BAI) wrote a letter to PM Modi to constitute a cement regulatory authority to put an end to ‘undue profiteering’ by manufacturers. Due to all these accusations, the CCI has agreed to conduct an in-depth investigation into the matter.
Reports have stated that the CCI conducted searches on the premises of leading cement producers. The offices of UltraTech Cement Ltd, ACC Ltd, Ambuja Cements Ltd, Dalmia Cement (Bharat) Ltd, Shree Cement Ltd and of Cement Manufacturers Association (CMA) to find evidence of price collusion. The raids signify how serious the allegations of anti-competitive behaviour in the cement industry are.
We also saw that major listed cement companies came out with their disclosures to the stock exchanges on Thursday. ACC, Ambuja Cement, and Shree Cement have stated that “they have acted and will continue to act in compliance with competition laws and are fully cooperating with investigations”. The probe is still underway and the CCI is collecting data for its report.
What Will Happen Now?
Cement is one of the most vital substances required in the construction sector. The builders are facing problems due to the huge increase in cement prices over the past few years. The construction sector has seen a major revival after the lockdown restrictions were removed. Thus, the demand for cement has increased, and cement companies have used this opportunity to collectively increase their prices. This is a prime example of why the Government needs to take a more proactive role in ensuring that such anti-competitive practices are stopped at all costs.
We have now seen that cement companies have faced multiple accusations of cartelisation or anti-competitive behaviour over the last 10 years. The stocks of these companies had shown a decline when CCI had imposed the Rs 6,300 crore fine. However, we saw that they only had to pay 10% of the total amount. And now, with the new investigation underway, we can see that the stock prices have fallen again.
Let us look forward to seeing what the CCI reveals through its latest investigation. Will the cement companies be in big trouble? Or, will they be able to get away from all allegations and keep accumulating more profits? Do keep a close watch on the stock prices of the companies that have been mentioned above.
