Todays Market from Equitymaster The happenings in the stock markets, including a pre-open and closing commentary. Todays Market from Equitymaster Dull End to the Week
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After trading near the dotted line in the noon session, Indian markets finished the trading day marginally higher amid mixed global markets. At the closing bell, the BSE Sensex closed higher by 38 points, whereas the NSE Nifty finished up by 30 points. Meanwhile, mid-caps and small caps rallied in today's trade. The S&P BSE Midcap & the S&P BSE Small Cap finished up by 2% and 2.1% respectively. Gains were largely seen in realty and oil & gas stocks.

Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.21%, while the Hang Seng led the Nikkei 225 lower. They fell 1.86% and 1.46% respectively. European markets are lower today with shares in France off the most. The CAC 40 is down 1.42% while Germany's DAX is off 1.10% and London's FTSE 100 is lower by 0.98%.

The rupee was trading at Rs 66.66 against the US$ in the afternoon session. Oil prices were trading at US$ 47.25 at the time of writing.

According to an article in The Economic Times, Tata Steel plans to produce 11.3 million tonnes (mt) of steel this fiscal year. The company had an output of 10.3 million tonnes last year. It is expecting to produce 9.8 mt of crude steel from its 10 mt plant at Jamshedpur. Tata Steel has committed to production of 1 mt at the 3 mt plant commissioned this May at the company newest steel plant at Kalinganagar in Odisha.

The year hasn't been the best for Tata Steel which continued to report consolidated losses (Subscription Required). The company's Managing Director wants the two Tata Steel operations, Europe and India, to be judged as separately as their respective challenges and markets are. In a year when steel prices remained under intense pressure, Tata Steel India managed to post an operating profit margin of 20-21%.

After a subdued first quarter, Tata Steel is reportedly taking solace in positive demand it is seeing from areas such as railways and power transmission. Demand is also improving in the rural areas as sales of tractors and motorcycles have been on the rise for the last three months. Indian steel consumption is expected to increase 5-6% this financial year.

While iron ore prices have fallen significantly, those of met coal, another key raw material, have doubled in the last few weeks. Tata Steel imports about two-thirds of its coal requirements, while the rest being met by its coalmines at Jharia in Jharkhand.

The Indian steel industry has been able to persuade the government to introduce a minimum import price to discourage dumping of steel, mainly by China. But the minimum price didn't really do much for domestic steel prices that has remained subdued. Tata Steel finished up by 1.8% on the BSE.

Moving on to news from power sector. NTPC is reportedly on course to implementing the country's largest 1 GW (1000 MW) solar photo-voltaic power generation park at Kadiri in Anantapur district of Andhra Pradesh (AP). Phase one of the project of 250 MW has been completed and has commenced power generation. The balance 750 MW will be completed by next fiscal, once all the clearances are secured and power purchase agreements inked.

The power generation major NTPC has an installed capacity of 265 MW of solar photo-voltaic power generation in the South, which includes a 250 MW solar PV unit at Anantapur, a 5 MW unit at Port Blair in the Andaman & Nicobar Islands and a 10 MW solar PV plant in Ramagundam.

When completed, the Anantapur solar power park will be the largest single location solar unit in the country with an installed capacity of 1 GW. Another mega solar park of 1 GW is also being co-developed near Kurnool in Andhra Pradesh, where NTPC will be engaged with the state government and its utilities.

The company is also at an advanced stage of evaluating potential in setting up wind power projects with the southern states offering immense scope in wind energy. The company soon expects to finalize the plans.

The company recently announced the listing of its Rs 20 billion Green Masala Bonds on the Singapore Stock Exchange. The Masala bonds will be used for financing renewable energy projects. NTPC finished the day down by 0.7% on the BSE.

Power stocks finished on a firm note with Torrent Power Ltd and PTC India Ltd leading the gains.

This article (Dull End to the Week) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 30 Sep 2016 10:30:00 GMT
Metal & FMCG Trade in the Red
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Indian equity markets are trading marginally lower during the post-noon trading session. Major sectoral indices are trading on mixed note with stocks from realty, oil & gas leading the pack of gainers. While, metal & FMCG are leading the losses.

The BSE Sensex is trading lower by 52 points (down 0.2%) while the NSE Nifty is trading lower by 10 points (down 0.1%). The BSE Mid Cap index is trading up by 1.1% and BSE Small Cap index is trading up by 1%. Gold prices, per 10 grams, are trading at Rs 31,146 levels. Silver price, per kilogram is trading at Rs 45,730 levels. Crude oil is trading at Rs 3,168 per barrel. The rupee is trading at 66.67 to the US$.

Pharma stocks are trading on mixed note with Elder Pharma and Aarti drugs leading the gains. As per an article in Business Standard, Lupin Ltd has received final approval from United States Food and Drug Administration (USFDA) for selling Memantine Hydrochloride extended-release capsules. It is a generic version of Allergan's Namenda XR capsules used for the treatment of moderate to severe dementia of the Alzheimer's disease.

Further, Lupin got approval for 7 milligram (mg), 14mg, 21mg and 28mg capsules. These are the AB rated generic equivalent of Allergan's Namenda XR Capsules, 7 mg, 14 mg, 21 mg, and 28 mg. One must note that, Actavis Inc. bought Namenda from Forest Laboratories in July 2014. Last year, Actavis acquired Allergan and it changed its name to Allergan Plc.

According to IMS data, Namenda XR capsules had US sales of US$ 1.22 billion. Our pharma sector analyst, Bhavita Nagrani, is of the opinion that Lupin was able to insulate its growth despite rising pressures in the sector. She has recently shared a detailed view on the company and valuations in the latest recommendation report of The India Letter. Click Here to know more.

In another news update, it was reported that, Zydus Cadila will tie-up with Medicines for Malaria Ventures (MMV) to develop the investigational antimalarial compound. The aim of the collaboration is to provide an effective alternative to the current front-line anti-malarial drugs for treatment of uncomplicated malaria and artemisinin-based combination therapies (ACTs).

As per the WHO estimate, 214 million malaria cases and 438,000 malaria deaths occurred worldwide in 2015. By collaborating with Medicines for Malaria Venture in this initiative, whether Zydus Cadila brings the change in the treatment of this deadly disease will be the key thing to watch out for going forward.

As the M&A activity has been heating up globally, the M&A activity in the Indian pharma space has been on the rise in recent times. At the end of the day, whether the company is able to derive value from the acquisitions and augment the overall performance will be the key thing to watch out for going forward.

Moving on to the news from IT sector. The Economic Times recently reported that, HCL Technologies Ltd and IBM have entered into a 15-year partnership to build Automation and Development & Operations (DevOps) solutions.

With automation, organizations will efficiently be able manage their workloads. DevOps is now an essential part of the software development process. It improves the speed, quality and predictability of development projects, the company stated.

Reportedly, HCL will build features and functions on top of existing IBM platforms and products including Tivoli Workload Scheduler, Rational Testing. In addition, the firms will also work on Rational Modeling & Construction and software for on-premises, hybrid and public cloud and software as a service (SaaS) platforms. According to the company, these tools will enable to interact better with today's dynamic environment of new cloud platform and cognitive solutions.

India is an information technology powerhouse. In an extremely challenging global economy, western corporations are now expecting Indian IT firms to deliver a more compelling value proposition in terms of growth prospects. Going forward, whether the Indian IT firms are up to the task will be the key thing to watch out for.

HCL Technologies was trading up by 0.6% at the time of writing.

This article (Metal & FMCG Trade in the Red) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 30 Sep 2016 08:00:00 GMT
Indian Indices Trade Marginally Lower
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After opening the day flat, the Indian indices have continued to trade near the dotted line. Sectoral indices are trading on a mixed note with stocks from the metal and telecom sector witnessing maximum selling pressure. Oil & gas and realty stocks are, however, trading in the green.

The BSE Sensex is trading down 24 points (down 0.1%) and the NSE Nifty is trading down 5 points (down 0.1%). The BSE Mid Cap index is trading up by 1.1%, while the BSE Small Cap index is trading up 1.2%. The rupee is trading at 66.60 to the US$.

Japan saw the outcome of weaker-than-expected consumption and inflation data for the month of August. Spending among Japanese households tumbled last month and consumer prices fell again.

Government figures showed that household spending in August contracted 4.6% from a year ago. This was way below expectations of a drop of around 2%. Core consumer prices, excluding volatile fresh food prices, contracted 0.5% YoY during the month of August. This was the sixth straight month of fall and way below the Bank of Japan's (BOJ) 2% inflation target.

Some respite, however, was found on the employment front. The labor market in Japan remained tight during the month of August with unemployment at a multi-decade low of 3.1%. Also, factory output rose a stronger-than-expected 1.5% in August.

The disappointing data raised concerns for the Japanese economy. Economists and market participants were seen questioning the BoJ's policy measures. The BoJ still has plenty of work to do to reach its 2% inflation target.

Last week, the BoJ issued a plethora of fresh changes to its policy approach. The bank said it would introduce a new policy tool control the yield curve known as quantitative and qualitative monetary easing(QQE). The bank further announced it would expand monetary base until inflation gets stable above 2%.

The bank, however, stood pat on interest rates and kept them in the negative territory. Along with the Fed and the BoJ, the monetary policies and low interest rates by other central banks have made things far worse than before for the global economy.

The concern is that global financial markets are behaving obsequiously to Fed and central banks cues. They are highly dependent on central bank behavior. Bill Bonner, in a recent article from the Vivek Kaul's Diary, wrote on how the Fed and the BoJ keep investors on the edge of their seats.

If you're interested in knowing what's really happening in the world of man and money, you can claim your free copy of Bill Bonner's latest book, Hormegeddon (just pay Rs 199 for shipping and handling).

In another news update, China's manufacturing Purchasing Managers' Index (PMI) came in at 50.1 for the month of September. This was seen a touch above the 50 reading recorded in August but below July's 50.6 reading. The data showed activity at China's small and mid-sized firms expanded this month.

Reportedly, output and total new orders expanded marginally. Also, firms raised their purchasing activity for the third month in a row. However, cost-cutting initiatives contributed to lower employment during the month of September.

While the above data flagged optimism about the manufacturing activity in China, the property market ignited worries. Real estate market in China, which contributes as much as a third to gross domestic product, is on the cusp of a bubble. This is seen as average home prices in 70 major cities spiked 9.2% YoY in August. This was recorded way higher than July's 7.9% increase.

We believe China needs to do a lot better to come out of the ongoing slowdown phase. Sluggish demand and excess capacity are threatening to slow down China's economic engine, which had been growing at a frenzied pace in the past. And lack of transparency in the government and banking entities in China have made it difficult to decipher the reasons for the grown decline.

The need of the hour is to have more credible and trustworthy reports on economic developments. And that is where Nitin Gregory fills the gap. In one of his articles, he gives his on-the-ground outlook at what drives the real estate in China and how it will fare in the short and the long term.

This article (Indian Indices Trade Marginally Lower) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 30 Sep 2016 06:00:00 GMT
Indian Indices Open Flat
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Major Asian stock markets have opened the day on a negative note with the stock market in

Japan and Hong Kong are trading lower by 1.3% and 1.4% respectively. Stock markets in US too ended their previous session in red with benchmark indices in US ending the day lower by 1.1%.

The rupee depreciated in yesterday's trade owing to geopolitical tensions between India and Pakistan and is currently trading at 66.85 per US$.

Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading marginally higher by 50 points (up 0.2%) and NSE Nifty is trading higher by 16 points (up 0.2%). Both, BSE Mid Cap and BSE Small Cap are trading higher by 0.6% and 0.8% respectively.

Major sectoral indices have opened the day on a mixed note with stocks from information technology sector witnessing buying interest. While stocks from telecom sector are facing selling pressure.

As per an article in Business Standard, Tata Steel is planning to expand its steel output capacities in India through a brownfield project. The company plans to add 6 million tonne of steel capacity at its existing plants in Jamshedpur and Kalinganagar.

Reportedly off the proposed expansion, 1 mt would be added at Jamshedpur and 5 mt would be added to the newly commissioned plant at Kalinganagar.

While, a land clearance for expansion for the Jamshedpur plant has been obtained, it is still pending for Kalinganagar. However, the management stated that the issues at Kalinganagar are expected to get resolved within a period of two months.

However, the management declined to comment on the exact time frame and cost of the expansion at both these sites.

In FY16, domestic sector was adversely affected by a spurt in imports from China. As a result, imports accounted for 15% of consumption. Prices were therefore impacted and benefits of incremental consumption growth did not flow to domestic producers.

Further, finished steel consumption for Q1FY17 dropped by 0.3% YoY. Domestic realisations recovered at relatively lower rates on subdued demand, increasing supply side pressures and continued imports from pre-MIP contracts.

However, the operating environment has become relatively better owing to protectionist measures resulting in better prices and reduced import pressure. However, at a macro level, shrinking global steel demand, overcapacity and low-priced exports by China continue to post threat.

In a scenario wherein the demand does not improve, the excess capacities could possibly dent the return ratios of the company. The stock of Tata Steel is trading higher by 0.03%.

In another news update, passenger vehicle sales are expected to post a robust double digit growth in the month of September.

The growth is expected be led by the industry leader- Maruti Suzuki, which enjoys a 47% market share in India. Reportedly, Maruti is likely to report a sales growth in excess of 15% due to strong demand for its variants such as Baleno and Brezza.

Further, companies such as Hyundai, Mahindra & Mahindra and Renault too are expected to pitch in to the increased growth.

The industry looks well-placed to post a double-digit growth in FY17 after a five-year gap with positive triggers from a good monsoon and the implementation of the seventh pay commission.

This article (Indian Indices Open Flat) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 30 Sep 2016 04:00:00 GMT
Mr Market Gets Jittery on Indo-Pak Tension
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Mr Market was nervous yesterday. News of geo-political tensions between India and Pakistan made it so. Reports state that India conducted surgical strikes at some terror bases in Pakistan. The equity benchmark Sensex tanked over 500 points intraday on the news. The kneejerk was also seen in broader markets. As per news reports, by 1 p.m. yesterday, none of the BSE Midcap index's 84 stocks was trading in the green. Further, among the 761 BSE Small cap stocks, only 27 were trading higher.

The fear among market participants was also palpable. This was seen as the Volatility Index (VIX), a gauge for trader's expectations of near-term risks in the market, based on Nifty options values, spiked some 29%. This was a three-month high.

Volatility, and short-term fear ruled. But this is not something new. Indian stock markets have seen many such instances. And there may also be similar instances in the future. This begs the question: How can one make the most of these situations?

What is important to understand is markets are prone to volatility in the short term. However, one can beat this volatility by taking a long term view and playing by the fundamentals.

The intelligent investor understands that volatility is not his enemy, but his response to volatility is. He ignores the ups and down in markets and simply focuses on good companies.

So here's the crux: When you invest, don't obsess too much over factors that drive stock prices in the short term.

At the same time, the short-term movements in the markets could be a positive if one knows how to channel his greed and fear right. Whenever markets suffer panic attacks and fear-driven sell-offs, long-term value investors will have the rare opportunity to pick solid stocks at a discount.

Speaking of long-term value investing, our research in March revealed that, in aggregate, the profit margins of Sensex companies were trading at ten-year lows. So, if profit margins were to revert to their long-term averages, the Sensex may likely hit 40,000 three to four years down the line.

To know more, we recommend you to download our premium report, Sensex 40,000: 4 Stocks to Profit from the Coming Stock Market Wave.

This article (Mr Market Gets Jittery on Indo-Pak Tension) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 30 Sep 2016 03:00:00 GMT