Industrial & Inflation data weighed over markets

Indian markets sank as Industrial and Inflation data over weighted the growth of stock markets on Monday. Key benchmark indices of India broke its steepest slide in one trading day from its previous lowest record in on August 8.

Market indicators fell short of optimism from investors, as the news of falling Indian Industrial growth in July, fogged long-term view of the market. Further, market indices declined further as unexpected falling charts of Chinese growth hurt world market sentiment. China posted another report showing a weak economic performance over last month raising doubts about top world's economies.

Investors in the day lost interest in the market with lack of attraction in the market, exaggerated with the hiking risk as US Federal Reserve two-day meeting to discuss interest rate hike is starting tomorrow.

The 30-share Sensex lost 245 points holding level at 26,816, below its previous rally above 27,000 level, and 50-share broader index, Nifty shed 63 points closing below 8100 level at 8,042.

Though, both the key indices of Indian markets fell over a percent, broader markets continued to pick up pace as they expanded with growth. BSE small-cap index soared 0.6 percent in the day today as BSE Mid-cap index added another 0.1 percent to its portfolio, performing over expectation of analysts. 

On the sectoral front, Health-care and Realty held their investors closer still continuing in green, when all other sectors posted losses. Health care industries accumulated growth at 0.2 percent and Realty investors helped push the index 0.4 percent higher.

Other sectors including Capital goods, Oil & Gas, Metals, Consumer durable slid over 1 percent capping losses at 2 percent.

While metal shares fell following negative China's economic reports showing its lowest trend in about 6 years. World's second largest economy is downgrading its economy which is turning the viewpoint of investors bringing in rumors of sharper fall in the trading levels. Companies recorded a fall between 1.7 percent and 3.3 percent holding big names like Hindalco, Tata Steel and Sesa Sterlite in the list of Sensex losers.

State-owned bank shares gained in the falling day reporting 4 percent higher after Governor of Reserve Bank of India Raghuram Rajan raised a concern to change appointment procedure in state-owned banks. Andhra Bank, IDBI Bank, Dena Bank, Corporation Bank, Allahabad Bank, and Indian Bank added over 2 percent retaining level with a hike at 4 percent.

ONGC, CI and NHPC correcting stock values with divestment

Top share losers in the market today highlighted blue chip companies of India bringing Oil and Natural Gas Corporation Limited (ONGC) to first place, followed by Coal India Limited and National Hydroelectric Power Corporation (NHPC) Limited. All the three companies are main subsidiaries of Government of India (GOI) where government is holding major stake in the companies. Stocks of the companies dropped after the results of cabinet committee meeting declared selling off partial holdings in the companies to public and private investors. ONGC dropped 2 percent in its share value, Coal India fell over 2.9 percent and the steepest fall recorder is NHPC with 4 percent drop. GOI is selling 5 percent of total holdings in ONGC which is India's largest energy explorer, 10 percent of stake in Coal India is diluting allowing public to buy stock of World's largest coal producer, and about 11.36 percent in NHPC a state-owned power producing plant on hydropower technology.

As per the latest data, government is holding 68.94 percent of total capital invested in ONGC, about 90 percent (exactly 89.65 percent) of holdings in Coal India and 85.96 percent of entire stake of NHPC. At prevalent prices, Indian government can raise total amount of about Rs 43,800 crore from the market consolidating divestment from all the three companies. In segregation, ONGC's 5 percent stock is having current value of Rs 18,000 crore, 11.36 percent of NHPC amounts up to Rs 2,800 crore and maximum cash generator is Coal India gaining over Rs 23,000 crore from 10 percent of its capital holdings.

Prime Minister Narendra Modi's headed government is planning to hedge fiscal deficit of the country using the funds generated from the proceeds of approved divestment sales. Basic two applications for utilization of the raised funds to escalate economic growth of the country are: one hedging fiscal deficit and second funding of new public projects. Both the aims of GOI are in line with its bigger goal to pick up economic growth in the country which will lift standard of living, reduce inflation, increase employment and others.

In a flashing recall, NHPC announced a fall in its current financial year earnings sending a memo to Union power ministry of India. The memo played the first cue to government blowing a plan of divestment to the table, when National Democratic Alliance (NDA) approved the plan expecting growth after divestment.

NHPC is running down with losses as its construction projects lack empowerment in monetary terms. The latest news of failure of the company to commence its working on Lower Subansiri project for development in Arunachal Pradesh presented a picture of the company hitting rock bottom.

The company is struggling with delayed payments from Jammu and Kashmir government allowing very low tariffs on its projects is sinking the boat of NHPC as it is unable to recover its investment worth Rs 988 crore. 

“All these issues are likely to affect total share value of the company in the stock exchanges and worse, it will harshly bring down the value of divestment deals affecting the prices of the company with a significant downward pull. The board of directors is hoping that power ministry of India looks at these issues and formulates all the possible solutions before sale proceeds,” NHPC said.

The finance ministry is willing to capitalize with development of optimistic sentiments in investors, which is ruling the markets with the stabilization in governance is surging economic growth and peaking market indices. The budget pre-decided a disinvestment target at Rs 58,425 crore, consisting of Rs 15,000 crore from the selling of residual stakes in the erstwhile government companies.

Interest rate hike spooked foreign investors

Indian market indices recorded low for second day in a row as investors are booking down profits amid escalating concerns over hike in US interest rates as per the latest study released from US Federal Reserve.

Nifty broke below the narrow benchmark level of 8,150 contracting 58.85 points in the day coming 0.72 percent down to 8,094.10. Sensex tipped 207.91 points down recording an inch over 27,000 level at 27,057.41 falling over 0.76 percent. Domestic market growth in India poised at a strong position but global news spooked foreign investors. Indian markets declined as early foreign movers sold their holdings in equity derivatives markets as sentiments dimmed down. Exchange recorded data posted foreign investors index future sales amounting to Rs 267.63 crore and Rs 149.83 crore selling in stock futures in the last trading session. The accounts show trading in the range of 48 hours after Federal Reserve posted its report on study of investors sentiments which is forcing US central bank to push country's interest rate.

The report suggests that new hiked interest rate are likely to come up in next policy meeting which will be held from September 16 to 17. Inside sources of various media groups and signals from Fed officials are expecting an early interest rate rise to curb dollar gains and balance US economic data.

In market analysis of India, key benchmark indices posted their highest fall since 8 August 2014, which is almost a month's break in growing trend. 

Sesa Sterlite Limited climbed 1.6 percent up to Rs.286.25 along with Tata Power Co. Limited which posted a same hike rising its share value to Rs.89.90. The credit of standing among gaining shares in falling market is attributing to the company's announcement, "We gained our awaited approval to supply full module requirement for the 10MW project set in Rajasthan."

Hero MotoCorp Limited recorded steepest falling among companies listed on indices at 2.4 percent rate to Rs.2,682.15 followed by ITC Limited shedding 1.9 percent to Rs.351.05 as latest news quoted that government is likely to ban the selling of loose cigarettes.

S&P BSE Mid-cap index gained 0.1 percent and S&P BSE Small-cap index added 0.6 percent. In sectoral analysis, S&P BSE Realty index became a star player as it headed sectoral gainers list, climbing 0.6 percent, S&P BSE Power index stood at second position with a close gaining call at 0.11 percent.

Other indices followed the falling trend reporting lower in the market. 

S&P BSE Consumer Durables stepped 1.6 percent down, close to S&P BSE FMCG and S&P BSE Oil and Gas index's fall at 1.5 percent each. S&P BSE IT, S&P BSE Capital Goods and S&P BSE Teck indices bellowed 1.1 percent, 1 percent and 0.9 percent, down respectively. S&P BSE Auto Index sank 0.4 percent.


Power Stock stumble ahead of SC's ruling

India's power sector is riding a dangerous tide as policy paradigm hits its trading amid coal block allocation case which ruined the sentiments of the markets. Indian market representatives, Nifty and Sensex framed in slower movements as power stocks stumbled ahead of Supreme Court's (SC) ruling today.

The new pro-reform government under the leadership of Prime Minister Narendra Modi is working faster to sort out cases held in court blocking growth in industries. As the new government marked 100-days of successful governance, Coal and Power Minister, Piyush Goyal announced, "Effective management and rationalization of coal supplies are holding the next priority in line to improvise long-term outputs from power sector of India."

Major question of looking at the change is an affirmative as top analytical and research firms quote. Asia's leading equity brokers and investment group CLSA said, "A comprehensive study of 11 power companies asset and liability data disclosed that most of the companies are reducing their capex with aggressive measures as 35 to 40 percent of the credit is outstanding in the sector."

On the other hand, the growth from the sector is booming with new projects developing their plants in the country with their previous investments. A major boost is coming in EBIDTA (Earnings Before Interest Depreciation and Tax) according to the CLSA published report.

Market researchers are citing gains from the present outlook of the companies as net debt and net gearing is improving it's ratio over EBIDTA and is likely to record better balance sheet review in the coming years. Coal India, the biggest coal company of India is powering up for a bull run and is likely to record one of highest growing stocks with the growing power demand in the country.

Though, according to SC's decision some companies are facing temporary troubles because of compensatory tariffs, all the companies surviving further will enter the race to succeed. 

Though coal companies are fearing SC's final decision which might not favor them if all the coal allocations are canceling pulling down their EBIDTA growth as per their plans. Private power majors are standing on a bridge where SC's ruling will decide their destination to grow as independent power producers (IPPs) at slower or faster rate.

Tata Power, Adani Power and other power sector companies will be encircling a down trend in their EBIDTA if a ban on compensatory tariffs forms a part in SC's verdict.

Among top advices CLSA is marking Power Grid on a buying note with a targeted price of Rs 162 per share as it is hoping record 17 percent bump in the compounded annual growth in EPS over FY15-17.

Among Independent Power Producers, JSW Energy and CESC are blinking at the top listed companies. CLSA said, "JSW Energy is hovering with its key strength in international thermal coal prices with its strong merchant power tariffs."


Indian Bull Run looking at Correction

Wall street traders are enjoying the bull run in the market as Nifty recorded above 8,000 level and Sensex broke 27,000 mark. Key market indices continued to gain in the markets today as Nifty and Sensex surged 1.08 percent each accommodating 8173.90 level and 27,319.85 on Monday beginning the second trading week of September 2014.

As both the market indices make their lifetime high hits, cynical viewpoint questions the correction point of the flourishing market indices. There is no designated pinpointed answer as when the correction will start in the market, but an investor has to look at the wider definition of correction in order to point commencement of it.

Market corrections are of two types, one is where a stock price records a steep fall in the market marking a consecutive hit downward to balance hiking market gains. Another is when there is a sideways correction, i.e. when the prices trend in a range bound trading without forming an inflating or depreciating trend.

In Indian markets, benchmark indices are experiencing the second type of correction, i.e. sideways shift where there are narrow range bounds inhibiting movement. Therefore, if a break out occurs in the running markets, a further upward shift is likely to come in the picture soon.

Experts advised traders to flow with the trend rather than contradicting their positions in short-term before the market indicates a reversed trend.

Global markets are pushing up Indian equity valuations as Indian market is among the top growing markets in the world economy. Foreign portfolio investors paused their investment in the beginning of September but inflows surged the trading as the week advanced, overall their investments stand higher at $13.7 billion in the current fiscal.

The risk taking appetite of Foreign investors in the emerging equity market of India is recording high and awaiting more opportunities from the robust economy.

According to EPFR Global, a global fund tracker, commitments to Emerging Markets Equity Funds, crossed 82-week highest peak in last week. It recorded as the 14th week of net inflows in the category in record of past 15 weeks.

Global Market Factors to keep an eye on this week:

Most global indices held on to their gains last week. European stocks surged after the ECB announced a stimulus package.

The Germany DAX, the France CAC and the UK's FTSE recorded strong gains last week. Though, FTSE dropped down as the news of Scotland's independence hit the market, CAC and DAX continued to rise today.

The DJ Euro STOXX 50 index rallied 3 per cent and is moving close to its recent peak at 3325.

The portfolio trading in the Dow index is like formation of Sensex and the Nifty. It is trading in sideways correction, i.e. holding up in narrow band near its highest levels. It is waiting for a break to 17,830 range bound level.

Most Asian indices including the Shanghai Composite are trading up since the last the week's closing note and opening on Monday.

Nymex crude recorded lowest at the price of $ 92.7 in the last week. It is holding near hiking strong support at $90 region where it is likely to stop. But if the fall continues, crude might come down to $85 barging the value of Indian Rupee.