Todays Market from Equitymaster The happenings in the stock markets, including a pre-open and closing commentary. Todays Market from Equitymaster Final Hour Sell-Off
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After trading flat for the majority part of the day, Indian equity markets witnessed selling activity in the final hour of trade to finish lower amid mixed international markets. At the closing bell, the BSE Sensex closed lower by 119 points, the NSE Nifty finished lower by 45 points. The S&P BSE Midcap finished up by 0.2%, while the S&P BSE Small Cap finished down by 0.7% respectively. Losses were largely seen in realty and auto stocks.

Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.14% and the Hang Seng rose 0.62%. The Nikkei 225 lost 1.43%. European markets are trading mixed today. The FTSE 100 is up 0.24%, while the DAX gains 0.14%. The CAC 40 is off 0.16%.

The rupee was trading at 67.37 against the US$ in the afternoon session. Oil prices were trading at US$ 42.77 at the time of writing.

FMCG stocks finished the day on a negative note with Godrej Consumer and Lakshmi Overseas Industries leading the losses. According to an article in The Economic Times, Hindustan Unilever (HUL) plans to launch a range of baby care products under its Dove brand in the next few months. The company will be launching a range of baby care products under Dove to compete head-to-head with the market leader, Johnson & Johnson in the Rs 40 billion market. HUL's decision is part of a strategy to expand Dove, which had transformed itself from being just a bathing bar in 1993 to shampoo, deodorants, lotions, body and face wash in the last decade.

HUL has a 50-50 joint venture with Kimberly-Clark that has been making and selling brands such as Kotex and Huggies since 1995. However, the company last week said it plans to divest its entire stake in the venture to focus on core products.

As per the reports, Dove has been leading HUL's agenda of moving towards expensive products. From annual sales of Rs 1 billion in 2007, the brand's revenues have risen to about Rs 15 billion, becoming the fastest-growing brand in the company's portfolio.

Demand for baby and child-specific products are expected to remain high due to a host of factors, including rising disposable incomes, the increasing number of nuclear families in urban centers, rising awareness of baby products, and the expected rapid growth of modern retailers. Baby personal products category has reported huge potential as it largely remains under-penetrated despite an estimated 26 million children born every year in the country. HUL finished the day down by 0.5% on the BSE.

Moving on to news from the steel sector. According to a leading financial daily, Steel Authority of India (SAIL) has requested the government to continue with the minimum import price (MIP) on steel. With this step, the company aims to check cheap imports in the country in order to protect the domestic steel industry.

In a recent meeting with new steel minister Chaudhary Birender Singh, the company said that continuation of the trade barrier was required as global markets are highly volatile and threat of cheap import persists.

Tata Steel, Jindal Steel & Power Limited and others have already stressed the need for continuation of the MIP. Steel imports to India reportedly increased to 12.7 MT, at an average of over 1 MT a month, in 2015-16 from 10.2 MT in 2014-15 and 5.7 MT in 2013-14. China, Japan and Korea accounted for three-fourth of total steel imports last fiscal (Subscription Required).

The steel ministry hopes that anti-dumping duty on both Hot Rolled Coil and Cold Rolled Coil would be imposed before scheduled expiry of MIP on August 4.

SAIL reported Rs 41.37 billion loss in 2015-16, its first in 13 years. The average net sales realization for the company in the last fiscal was at Rs 28,150 per tonne, down from Rs 35,341 a tonne in the 2014-15 fiscal.

Buying was seen across majority of the steel stocks with Jindal Steel & Power Ltd and JSW Steel leading the gains.

This article (Final Hour Sell-Off) 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.]]>
Tue, 26 Jul 2016 10:30:00 GMT
Realty & Auto Stocks Under Pressure
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Indian Indices are trading flat during the post noon trading session. Sectoral indices are trading on a mixed note with stocks from metal and consumer durables leading the gains while auto and realty stocks bearing the maximum brunt.

The BSE Sensex is trading flat while the NSE Nifty is trading lower by 10 points (down 0.2%). The BSE Mid Cap index is trading higher by 0.7% while the BSE Small Cap index is trading higher by 0.2%. Gold prices, per 10 grams, are trading at Rs 30,890 levels. Silver price, per kilogram, is trading at Rs 46,426 levels. Crude oil is trading at Rs 2,917 per barrel. The rupee is trading at 67.34 to the US$.

As per an article in a leading financial daily, a combined mission carried out by India and the U.S. discovered a major deposit of natural gas in the Indian Ocean. The U.S. Geological Survey (USGS) said it has assisted the Government of India in the discovery of large, highly enriched accumulations of natural gas hydrate in the Bay of Bengal.

Moreover, natural gas hydrates, an icy form of the fuel is potentially the first producible reserve of its kind in the waters.

The research is the result of a partnership between the Government of India, the Government of Japan, and U.S. scientists.

Reportedly, the next step is to determine whether production from the Bay of Bengal site is economic. Although it is possible to produce natural gas from gas hydrates, there are significant technical challenges.

However, USGS said that the discovery will help unlock the global energy resource potential of gas hydrates as well help define the technology needed to safely produce them.

One shall note that, the discovery also comes as countries like India and China seek to reduce their reliance on energy sources like coal. Such resources release twice the heat-trapping emissions as natural gas when burned.

Going forward, whether the results from this expedition benefit the world in terms of energy resource production (Subscription Required) would be a key thing to watch out for.

Moving on to the news from cement sector... According to an article in The Economic Times, Ultratech Cement is planning to raise Rs 3 billion through secured redeemable Non-Convertible Debentures (NCDs).

In a regulatory filing, the company said it will issue 3,000 secured, redeemable NCDs carrying a coupon rate of 7.57% per annum on a private placement basis.

The NCDs, with a tenure of 3 years and 17 days, will be allotted on 27 July 2016. It will mature on 13 August 2019. The debentures will be listed on the NSE Ltd, the reports stated.

Recently, Ultratech Cement announced its financial results for the first quarter of the financial year 2016-17. The company has posted a 29% growth in its consolidated net profit at Rs 7.8 billion during the quarter compared to the net profit at Rs 6 billion in the same period last year.

This article (Realty & Auto Stocks Under Pressure) 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.]]>
Tue, 26 Jul 2016 08:00:00 GMT
Listless Gains for Indian Indices
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After opening the day on a flat note, the Indian stock markets have continued to trade near the dotted line. Sectoral indices are trading on a positive note with stocks from the metal and consumer durables sectors leading the gains.

The BSE Sensex is trading up by 25 points (up 0.1%), while the NSE Nifty is trading up by 4 points (up 0.04%). The BSE Mid Cap index and the BSE Small Cap index are also trading marginally higher, up by 0.6% and 0.4% respectively. The rupee is trading at 67.35 to the US$.

Stocks in the aviation space are trading on a negative note with Jet Airways and Interglobe Aviation leading the losses. As per an article in the Economic Times, the Prime Minister's Office (PMO) doesn't seem convinced about Air India's revival story. While the flight carrier was able to improve its financial performance on the back of low fuel prices, the PMO has asked the airline to improve its performance on all fronts.

As reported, the PMO wants the airline's on-time performance improved to at least 85%, revenues increased by 10% and industry standard met on load or capacity utilisation. It has also asked the airline to carry out a proper survey before inducting new aircraft.

During the PMO's first official review of the airline, which was held early this month, Air India chairman Ashwani Lohani said that the airline needs more manpower and the government should allow it to hire. He also asked the retirement age at Air India to be increased to 60 from the current 58. The PMO didn't approve this but asked the aviation ministry to look into the demands.

One must note that Air India's operational parameters have fallen short of industry standards. Its on time performance was recorded as the lowest in the industry - at 74.3% - for May 2016. Its passenger load factor was 84.7% during the above month. Reportedly, the flight carrier's performance has improved for the year ending 2015-16. However, that is on the back of lower oil prices. As Vivek Kaul, editor, Vivek Kaul's Diary, states in one of his articles that as soon as fuel prices start to go up, losses at Air India will increase.

We have also written on the sorry state of affairs at Air India in one of our editions of The 5 Minute WrapUp titled Why Does the Government Keep Supporting Air India?

In another news from the automobile space, Bajaj Auto has said that it is going to ramp up production of motorcycle Bajaj V starting September. This is in order to meet the demand of the said motorcycle.

Notably, the company, which started deliveries of Bajaj V earlier in March this year, has sold 1,00,000 units of the bike in the last four months. The management said that the ramp up in production comes as they are very positive that these numbers will only continue to grow and sustain the Bajaj V as one of the bestselling premium commuter motorcycles in the country.

The motorcycle has helped Bajaj Auto to increase its overall market share in the premium commuter 125cc+ segment by 10%.

Bajaj Auto is the flagship company of the Bajaj Group. It is ranked as the world's fourth largest two- and three- wheeler manufacturer. The Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia.

Presently the stock of Bajaj Auto is trading flat on the BSE.

This article (Listless Gains for Indian Indices) 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.]]>
Tue, 26 Jul 2016 06:00:00 GMT
Indian Indices Open Flat
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Major Asian stock markets have opened the day on a mixed note with stock market in Japan trading lower by 1.4%. While, stock markets in China is trading higher by 0.5%. Benchmark indices in Europe ended their previous session in green with stock market in Germany ending the day higher by 0.5%. The rupee is trading at 67.24 per US$.

Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading marginally lower by 3 points (down 0.01%) and the NSE Nifty is trading lower by 7 points (down 0.1%). While, BSE Mid Cap and BSE Small Cap have moved upwards and are trading higher by 0.3% and 0.4% respectively.

Major sectoral indices have opened the day on a positive note. Stocks from metal and power sector are witnessing buying interest.

As per an article in Livemint, the government has laid out a plan to divest its stakes in companies it holds through The Specified Undertaking of the Unit Trust of India (SUUTI). SUUTI has holdings in 51 listed and unlisted companies on behalf of the government.

Beneath the plan, the government has decided to pare its stake in ITC Ltd, Larsen and Toubro Ltd (L&T) and Axis Bank Ltd in the first phase. Taking yesterday's closing prices these three companies can fetch the government around Rs 607.8 billion.

Reportedly, the government has split the divestment programme into three parts. Group A, which includes its holding in ITC, L&T and Axis Bank, will be up for divestment first. Group B will include the eight unlisted firms in which SUUTI owns shares. Group C will hold the remaining 40 listed firms held by SUUTI.

Now the interesting fact is that the government has asked Life Insurance Corporation to buy securities worth Rs 300 billion from SUUTIs holdings. That is almost half of SUUTIs holding.

Once again, the government has asked LIC to rescue it to meet its ambitious divestment target. Here is Vivek Kaul's take on LIC coming to the rescue of the government:

  • "The government treats LIC as a sovereign wealth fund, which keeps coming to its rescue whenever required. But the money LIC has and manages is not the government's money. The LIC manages the hard earned savings of the people of India and given that these savings need to be treated with a little more respect."

In another news update, Biocon recently announced that Mylan NV's marketing authorization application for biosimilar pegfilgrastim has been accepted for review by the European Medicines Agency. Biocon and Mylan are partners in this project.

This medicine is used to treat neutropenia (low white blood cells), which occurs due to chemotherapy. Provided, the company gets the approval, it will bring in significant revenues for the company.

Further, the company also expects more applications for biosimilars to be accepted in the current financial year.

Earlier this year, the company had announced receiving approval to launch biosimilar insulin glargine in Japan. All these positive developments coupled with good quarterly results have led to sharp surge in the stock price.

However, if the company does not get the expected approvals it could be deterrent for the company. The stock is trading higher by 1%.

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.]]>
Tue, 26 Jul 2016 04:00:00 GMT
India After a Quarter Century of Liberalisation Reforms
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The path breaking reforms that were laid on 26 July 1991 by Manmohan Singh - then the Finance Minister - helped India become one of the fastest growing economies in the world. A lot of other factors also helped the India earn this status, although there were considerable challenges as well. Despite the Indian economy slowing down during the reign of the erstwhile UPA government, lot of hopes have been pinned on PM Modi's promise for structural reforms. So, going by these developments, India should be well on its way to ride the growth story ahead. Unfortunately, there appears to be enough evidence that suggests otherwise.

If one has to rewind, a quarter of a century has passed since the reforms in 1991 were introduced. However, one thing that remained constant is that India continues to underperform. True that the country still continues to be one of the fastest growing in the world. But it has the potential to grow faster. Policy paralysis and lack of reforms have kept it from tapping its true potential.

An article in Livemint has made a similar case. As per the article, the reform process in India remains woefully incomplete.

While many reforms have been introduced since 1991, only a few have been actually implemented.

If we have to limit our focus to the present state, there are many areas of the economy that are weighing heavy on India's growth story.

Take agriculture for instance. The sector, despite its importance to the Indian economy, is largely untouched by change. There are many middlemen in the process of marketing. These middlemen have become monopoly buyers and are the real cause behind the food inflation that is witnessed every now and then in India. Vivek Kaul, editor, Vivek Kaul's Diary, has explained this issue in detail in one of his recent articles.

Another major issue that has weighed on the Indian economy comes from the ill state of the PSUs. There are rarely any major reforms seen here. In fact, the government keeps on wasting billions of taxpayer money to keep these loss-making PSUs going.

Talking of the public sector, we have public sector banks that are drowning in NPAs. Poor credit appraisal, over leveraging, the practice of taking fresh loans to pay off old ones, and leaving the mess for the successor to clear up are some of the factors that depict the government's apathy towards reforms.

Then there is the problem of labour laws. The present laws make it very difficult for companies with 100 employees or more, to fire an employee without the permission from the government. This prevents entrepreneurs from expanding. And this is a binding constraint on manufacturing expansion too.

Manufacturing expansion is often halted on account of erratic power supply, wretched roads, bureaucratic regulations, and inadequate credit.

India may very well be the fastest growing economy. But there are considerable challenges that lie ahead that the government seriously needs to address. RBI governor, Raghuram Rajan was right when he said that India is a one-eyed king in the land of the blind. He was right because the common man in India doesn't seem to be doing much better now than he did a few years ago. One of our editions of The 5 Minute WrapUp confirms this fact while stating the common thread between most of India's economic problems.

We believe that the need of the hour is for the government to embrace reforms and remove all the binding constraints that lie in the implementation process. This would be critical in ensuring a sustained high GDP growth for the country in the long-term. Is Mr Modi listening?

This article (India After a Quarter Century of Liberalisation Reforms) 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.]]>
Tue, 26 Jul 2016 03:00:00 GMT