Market loses track; Sensex in the red
The market slipped into the clutches of bears, on fresh selling at every small rise. Let it not be forgotten that volatility is at its apex.
At 11:14 IST the BSE Sensex was down 56.48 points, at 12,881.60. It had slipped to a low of 12861.35, as selling heightened. Earlier today it opened firm, at 13,013.74, and also surged to a high of 13,080.37, as bargain-hunting lifted battered index pivotals.
The total turnover on BSE amounted to Rs 1262 crore.The market-breadth turned weak after opening strong. Over 2 scrips were declining for every gainer on BSE. Against 1445 shares in the red, only 697 were in the green. Just 60 scrips remained unchanged.Among the 30-Sensex pack, 19 declined while the rest advanced.
Budget sops keep food processors afloat in a weak market
Sops extended to the food processing sector saw Britannia Industries firm up 0.43% to Rs 1241.10, Nestle India rising 0.14% to Rs 959.70 and ITC edge up 0.20% to Rs 172.20 in an overall weak market.
Britannia Industries clocked just 233 shares and Nestle a mere 1,814 shares. However, ITC clocked a huge 7.99 lakh shares on the BSE.
The finance minister, in the Union Budget 2007-08, offered various sops to the food processing industry such as full exemption of excise duty on biscuits whose retail price does not exceed Rs 50 per kilogram, lifting of excise duty on all kinds of food mixes, including instant mixes, such as idli and dosa mixes, while cutting duty on food processing machinery from 7.5% to 5%, and slashing customs duty on plastics and PTA/MEG from 10% to 7.5% .
The exemption of excise duty on biscuits will have no effect on biscuits whose MRP exceeds Rs 50 per kilograms. Thus, low-end biscuits like Parle-G brand of Parle and Tiger brand of Britannia, which cost Rs 4 per 100 gms (Rs 40 per kg), and some of ITC’s biscuits will manage to benefit.
Further, this will give cost advantage to small players, including the unorganized ones in the industry.
While customs duty on crude sunflower oil has been reduced from 65% to 50%, that on refined sunflower oil has been reduced from 75% to 60%. This should lead to reduction in cost of sunflower oil, and hence a reduction in cost of fats and oils used in biscuits.
Also, a reduction in the peak customs duty of plastics from 10% to 7.5%, should facilitate reduction in packaging costs.
The food-processing sector has got the right push in the current Budget. A growing population, powered by rising disposable incomes and rising popularity of processed foods point to a better future for the food processing industry.
IT pivotals strike back as additional tax seen harmless
IT pivotals recovered from Wednesday’s meltdown under the reckoning that their earnings will be impacted only to a small extent following an increase in their tax burden.
While Satyam Computer rose 4% to Rs 429, Wipro gained 2.9% to Rs 577. Top software firm TCS added 2.7% to Rs 1221, and heavyweight Infosys gained 1.2% to Rs 2105.
IT pivotals had shrunk on Wednesday: Satyam Computers had fallen 8.4% to Rs 412.50, Wipro had lost 7% to Rs 560.85, Infosys had shed 5% to Rs 2078.35 and TCS had lost 6% to Rs 1188.45.
IT pivotals had already began correcting ahead of Wednesday (28 February 2007)'s Budget, in a weak market. From the recent peak of Rs 485.45 on 15 February 2007, Satyam Computer had slipped to Rs 450.45 by 27 February 2007. Infosys had slipped to Rs 2187.85 on 27 February 2007 from a high of Rs 2377.50 on 19 February 2007.
In the Budget 2007-08, the Union Government has extended minimum alternate tax (MAT) to income in respect of which deduction has been claimed under sections 10A and 10B, to the IT sector.
Currently, tax exemption under section 10A is available for units set up in software technology parks (STP). The benefit under this sector expires in 2009. Effective tax rates for IT companies as a result will go up and impact earning. However, those companies paying tax outside India will get some respite, on account of double taxation avoidance treaty. Such firms can set off the tax paid outside India against MAT.
Moreover, the government has brought employee stock options under the fringe benefit tax (FBT). FBT will now be charged on the difference between market price and exercise price of the option. This will, consequently, increase the tax outgo of companies that have an ESOP scheme.
CLSA has forecast a small cut in its projected FY-2008 EPS of three IT firms: TCS, Wipro and Satyam Computer, by 1 - 1.5%. It had kept its projected EPS of Infosys for FY-2008 unchanged at Rs 88.10.
The outlook for the IT sectors remain strong with strong demand for outsourcing. Indian IT firms are increasingly getting large outsourcing deals. The IT services industry is expected to achieve 31% growth in FY-2007. Exports alone are expected to grow by more than 33%, to $31 billion.
Cement scrips continue to bleed
Cement scrips continued their southward journey despite news reports that producers had raised prices.While Gujarat Ambuja Cements dropped 6% to Rs 108.40, Grasim lost 4.4% to Rs 2114 and ACC shed 3.7% to Rs 866.70.
Cement scrips had tumbled on Wednesday (28 February 2007), when the government announced differential excise duty structure for the commodity based on retail prices. ACC had lost 6.3% to Rs 900.05, Grasim 5% to Rs 2212.60 and Gujarat Ambuja Cements 7.7% to Rs 115.95.
Cement scrips have turned bearish with the government keeping a tab on spiralling cement prices. In late-January 2007, the Central Government had abolished 12.5% import duty on cement, in a bid to rein in domestic cement prices.
As per reports, cement firms have raised prices. Prices in western and northern India have been raised by Rs 12 per 50 kilogram bag from 1 March 2007. The average wholesale price of cement in Mumbai, after the increase, will be Rs 233 per 50 kg bag, and the retail price Rs 245 per bag.
Cement makers hiked prices as the differential excise duty raised the excise duty burden for cement makers by Rs 12 per 50 kg bag. The excise duty has been raised to Rs 600 per tonne against a retail price of above Rs 190 per bag. Just before the latest hike, the average retail cement prices in India hovered at Rs 210 per bag, necessitating a price rise following the hike in excise duty. The current demand-supply situation distinctly favours the cement sector. While no major supply is expected for some time, demand remains strong.
The passing of the additional excise duty burden to customers will protect margins, which are currently quite high due to firm year-on-year cement prices, but may not be enought to bring down inflation. This may force the government to take more stringent steps such as a ban on exports, analysts reckon.
Analysts also opine that the Budget's thrust on farming and infrastructure augurs well for cement firms. Moreover, the abolishing of customs duty on import of coking coal will result in saving the power cost of cement companies. It will thus enhance the efficiencies of cement companies.
Strong prices enabled cement companies report robust financial performance in the December 2006 quarter. ACC’s net profit jumped 107% in to Rs 358.46 crore, on 50% growth in sales to Rs 1619.90 crore. Gujarat Ambuja Cements’ net profit jumped 287% to Rs 337.76 crore, on 72% growth in sales to Rs 1329.10 crore.
At 11:14 IST the BSE Sensex was down 56.48 points, at 12,881.60. It had slipped to a low of 12861.35, as selling heightened. Earlier today it opened firm, at 13,013.74, and also surged to a high of 13,080.37, as bargain-hunting lifted battered index pivotals.
The total turnover on BSE amounted to Rs 1262 crore.The market-breadth turned weak after opening strong. Over 2 scrips were declining for every gainer on BSE. Against 1445 shares in the red, only 697 were in the green. Just 60 scrips remained unchanged.Among the 30-Sensex pack, 19 declined while the rest advanced.
Budget sops keep food processors afloat in a weak market
Sops extended to the food processing sector saw Britannia Industries firm up 0.43% to Rs 1241.10, Nestle India rising 0.14% to Rs 959.70 and ITC edge up 0.20% to Rs 172.20 in an overall weak market.
Britannia Industries clocked just 233 shares and Nestle a mere 1,814 shares. However, ITC clocked a huge 7.99 lakh shares on the BSE.
The finance minister, in the Union Budget 2007-08, offered various sops to the food processing industry such as full exemption of excise duty on biscuits whose retail price does not exceed Rs 50 per kilogram, lifting of excise duty on all kinds of food mixes, including instant mixes, such as idli and dosa mixes, while cutting duty on food processing machinery from 7.5% to 5%, and slashing customs duty on plastics and PTA/MEG from 10% to 7.5% .
The exemption of excise duty on biscuits will have no effect on biscuits whose MRP exceeds Rs 50 per kilograms. Thus, low-end biscuits like Parle-G brand of Parle and Tiger brand of Britannia, which cost Rs 4 per 100 gms (Rs 40 per kg), and some of ITC’s biscuits will manage to benefit.
Further, this will give cost advantage to small players, including the unorganized ones in the industry.
While customs duty on crude sunflower oil has been reduced from 65% to 50%, that on refined sunflower oil has been reduced from 75% to 60%. This should lead to reduction in cost of sunflower oil, and hence a reduction in cost of fats and oils used in biscuits.
Also, a reduction in the peak customs duty of plastics from 10% to 7.5%, should facilitate reduction in packaging costs.
The food-processing sector has got the right push in the current Budget. A growing population, powered by rising disposable incomes and rising popularity of processed foods point to a better future for the food processing industry.
IT pivotals strike back as additional tax seen harmless
IT pivotals recovered from Wednesday’s meltdown under the reckoning that their earnings will be impacted only to a small extent following an increase in their tax burden.
While Satyam Computer rose 4% to Rs 429, Wipro gained 2.9% to Rs 577. Top software firm TCS added 2.7% to Rs 1221, and heavyweight Infosys gained 1.2% to Rs 2105.
IT pivotals had shrunk on Wednesday: Satyam Computers had fallen 8.4% to Rs 412.50, Wipro had lost 7% to Rs 560.85, Infosys had shed 5% to Rs 2078.35 and TCS had lost 6% to Rs 1188.45.
IT pivotals had already began correcting ahead of Wednesday (28 February 2007)'s Budget, in a weak market. From the recent peak of Rs 485.45 on 15 February 2007, Satyam Computer had slipped to Rs 450.45 by 27 February 2007. Infosys had slipped to Rs 2187.85 on 27 February 2007 from a high of Rs 2377.50 on 19 February 2007.
In the Budget 2007-08, the Union Government has extended minimum alternate tax (MAT) to income in respect of which deduction has been claimed under sections 10A and 10B, to the IT sector.
Currently, tax exemption under section 10A is available for units set up in software technology parks (STP). The benefit under this sector expires in 2009. Effective tax rates for IT companies as a result will go up and impact earning. However, those companies paying tax outside India will get some respite, on account of double taxation avoidance treaty. Such firms can set off the tax paid outside India against MAT.
Moreover, the government has brought employee stock options under the fringe benefit tax (FBT). FBT will now be charged on the difference between market price and exercise price of the option. This will, consequently, increase the tax outgo of companies that have an ESOP scheme.
CLSA has forecast a small cut in its projected FY-2008 EPS of three IT firms: TCS, Wipro and Satyam Computer, by 1 - 1.5%. It had kept its projected EPS of Infosys for FY-2008 unchanged at Rs 88.10.
The outlook for the IT sectors remain strong with strong demand for outsourcing. Indian IT firms are increasingly getting large outsourcing deals. The IT services industry is expected to achieve 31% growth in FY-2007. Exports alone are expected to grow by more than 33%, to $31 billion.
Cement scrips continue to bleed
Cement scrips continued their southward journey despite news reports that producers had raised prices.While Gujarat Ambuja Cements dropped 6% to Rs 108.40, Grasim lost 4.4% to Rs 2114 and ACC shed 3.7% to Rs 866.70.
Cement scrips had tumbled on Wednesday (28 February 2007), when the government announced differential excise duty structure for the commodity based on retail prices. ACC had lost 6.3% to Rs 900.05, Grasim 5% to Rs 2212.60 and Gujarat Ambuja Cements 7.7% to Rs 115.95.
Cement scrips have turned bearish with the government keeping a tab on spiralling cement prices. In late-January 2007, the Central Government had abolished 12.5% import duty on cement, in a bid to rein in domestic cement prices.
As per reports, cement firms have raised prices. Prices in western and northern India have been raised by Rs 12 per 50 kilogram bag from 1 March 2007. The average wholesale price of cement in Mumbai, after the increase, will be Rs 233 per 50 kg bag, and the retail price Rs 245 per bag.
Cement makers hiked prices as the differential excise duty raised the excise duty burden for cement makers by Rs 12 per 50 kg bag. The excise duty has been raised to Rs 600 per tonne against a retail price of above Rs 190 per bag. Just before the latest hike, the average retail cement prices in India hovered at Rs 210 per bag, necessitating a price rise following the hike in excise duty. The current demand-supply situation distinctly favours the cement sector. While no major supply is expected for some time, demand remains strong.
The passing of the additional excise duty burden to customers will protect margins, which are currently quite high due to firm year-on-year cement prices, but may not be enought to bring down inflation. This may force the government to take more stringent steps such as a ban on exports, analysts reckon.
Analysts also opine that the Budget's thrust on farming and infrastructure augurs well for cement firms. Moreover, the abolishing of customs duty on import of coking coal will result in saving the power cost of cement companies. It will thus enhance the efficiencies of cement companies.
Strong prices enabled cement companies report robust financial performance in the December 2006 quarter. ACC’s net profit jumped 107% in to Rs 358.46 crore, on 50% growth in sales to Rs 1619.90 crore. Gujarat Ambuja Cements’ net profit jumped 287% to Rs 337.76 crore, on 72% growth in sales to Rs 1329.10 crore.
posted by SY at 12:37 PM
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