Unstable power stocks pull down market indices

Power sector stock dragged down Nifty and Sensex by 0.5 percent each though metal stocks pillared the pressure and kept Nifty 2 points above 7900-level and Sensex at 26,442.81.

Major power generating companies shares like Tata Power, Reliance Power and Adani Power lost out in the trade on Tuesday. Tata Power shed 3 percent, Reliance Power lost 4 percent and Adani topped the losing rate with 6 percent downfall.

The losing struck Adani and Tata after Supreme Court launched a stay order to stop compensatory tariff benefits to the companies under Appellate Tribunal's argument.

Two of the power majors gained approval from Central Electricity Regulatory Commission to gain favorable tariff charges in their Gujarat plant set up in Mundra Power Plant in February end.

Government of India (GOI) signed an approval allowing the companies to extend the charges of power supply over the existing rates set by State power distribution utilities. The additional charges over the normal rate of power supply meant to compensate the companies as profits are now on hold.

Companies are paying for high costing coal, imported to India to produce power. Tata and Adani requested GOI for collecting compensation over the prices to repay their expenses. Appellate Tribunal received a challenging report from the state distribution authorities which opposed the action.

Supreme Court decided to put a hold on the order and asked Appellate Tribunal’s court to take a decision at the earliest possible remark.

The unattributed stoppage in the hike of prices brought down the cited growth in companies' profit and earnings per share. 

Tata Powers biggest project Mundra ultra-mega power plant having an installed capacity of 4,000 MW accounts for more than half of its total power producing capacity is affecting its entire power sector vertical. The plant commissioned in FY 2012-13 is struggling to keep up as the cost of imports of coal, its major source from Indonesia rose invariably after the country changed export laws in 2011.

Before supreme court's declaration imposing a stop on its previous dealing allowing power companies to collect compensatory amount, Tata Power planned to collect Rs 690 crore for recovering losses in Mundra plant in the previous fiscal. Company did not account for the amount in the planning until they received the final put orders. Therefore, Tata Mundra project recorded accumulated net loss of Rs 260 crore in the year ending 31 March 2013. 

In Adani Power, Mundra plant is holding 4,620 MW capacity, which faced similar problems of recovering over primary costs. The company recorded aggregate loss of Rs 291 crore in the same time period. In case of Adani, the company recorded the loss after considering the compensatory amount offered of Rs 1,013 crore including an accumulated amount of Rs 830 crore for losses recorded at the end of last fiscal.

If supreme court decides to cancel the move then Adani will have to move down its profits, i.e. report a higher net loss further losing market shares.

 

USD fall equals Gold price decline

Gold continues to fall; investors expect drowning prices.

Precious metal commodity, specifically Gold future positional exchanges contracts fell in early morning trade in European markets on Monday. Commodity traders and investors are holding in their bets expecting strengthening of the economy backed by interest rate jump in the US.

World's most dominant reserve currency, USD picked up on the market cues after US Fed Chairperson Janet Yellen read out the analytical discoveries of the Jackson Hole two-day meeting on Friday. US dollar poised expanding gains to cross over 13-month highest record.

At 0820 hours GMT, Gold futures with a delivery quote of December exchanged at $ 1,278.0 for one troy ounce in New York on Comex, lowered at 0.17 percent from its previous trading between $ 1,276.1 and $ 1,280.8 for a troy ounce. In the bird eye view, the yellow metal reported a fall of 2 percent in previous week of August.

Precious white metal, Silver which is highly traded in India with a delivery option in September shed 0.21 percent coming down to $ 19.418 per troy ounce. Palladium tumbled 0.44 percent valuating at $884.80. Platinum was the only precious metal which gained as buyers continue to buy, at 0.22 percent trading at $ 1,421.60.

News from Singapore precious metal analysis, the reporter commented, "Buyers are still there in the market but it is not the right time to trade. Smart investors are holding in their cash until the prices fall further and record higher gains for them."

Yellen in her speech on Friday cited a pre-mature rise in the interest rates if US economy fails to perform to analytical estimates. A macroeconomic expert talked about the economy stating, "It is the strict measures listed on US monetary policy which are forcing the price of precious metals especially gold down."

Fed's Chairperson gleamed with confidence on positive outcomes from the economy which boosted USD's value in the basket of world currencies. ECB President Mario Draghi supported European economy quoting "Quantitative Easing is coming to Europe" which would mean lowering value of the consolidated currency, i.e. euro over the support of US dollars.

US dollar values form an essential base for pricing of gold in the world markets. All the dollar denominated commodities like gold have a direct proportion equation with USD, i.e. if US$ rises the commodity rises and vice-versa.

The simple analytical judgment is an eye opener for investors who can now project the futures of gold, with economic data which will decide the value of US currency.

 

India's gold premium likely to come down to $3

Gold premium in Indian market will amount between $3 and $4 additionally to prices of the precious metal in London, where the world's gold benchmark price declares, Head of India's largest gold refinery said on August 21. 

 

On yearly comparison it is a positive sign as in the last year premiums on Indian gold doubled because of rising demand. In the Financial Year 2014-15, gold's demand moderated over the year bringing down the overall price of the commodity in the market. The credit of weakening gold demand in Indian market is attributing to the import restrictions which are going to continue in the current fiscal.

India faced a widening trade deficit problem which continued over the last few years as the country stood as the biggest importer of gold. High trade deficit posed a serious problem and threatened the economic growth of the country, therefore Indian government along with the central banking authority RBI imposed 10 percent charge on import of gold.

Along with an increase in import duty, another measure to curb down trade deficit is compulsory export of one fifth of accumulated bullion imports in the trade. India imports 70 percent of oil from the middle east which tops the list of importers before gold which is useful as the world's currency.

Such strict actions on inflated the price of gold is making the commodity an unattractive investment as the premiums climbed to $ 160 per ounce. Premium refers to the difference in global benchmarked price of a commodity or stock under the local prices of the commodity in the country. Premiums are representative of demand and supply of a country's market.

Managing Director of the top Indian refiner, Rajesh Khosla said, "A decline in demand is citing a fall in premiums in the yellow metal price to average from $3 to $4 per ounce over the world's benchmark price, which is more than 50 percent reduction in price from last year's premium, which stood between $7 and $10."

Khosla supported the restriction and quoted, "Quantity of gold imports restrictions is going to stay." He explained that India is a country where demand for gold is never-ending and therefore, it is essential to control it. The reason behind importance of restriction in India is the country's insufficiency to provide funds for allowing unlimited free import of gold.

Alliance of India's MMTC Ltd and Swiss refiner PAMP gave birth to MMTC-PAMP, a gold refinery company which closed down its functioning in August 2013 after the Indian government and RBI launched policy of controlling gold imports.

Looking at the concern of refineries in India, the government alloted special licenses to these companies to buy in 15 percent of licensed quantity subscribed to them, i.e. 150 Kilograms.

The World Gold Council said, "Continuation of import restrictions means that gold demand in India will amount to 850-950 tonnes in FY 14-15, bringing down previous year's record of 974.8 tonnes."

 

Micromax & Uninor great investment deals with 4G operators

Telecommunication sector expanded at 11 percent in financial year with budgeted service provider like Micromax and Uninor recording highest sales record.

Telecom majors recorded high growth variants from 2005 to 2010 but failed out on performance in the last fiscal due to unfavorable economy, rupee depreciation and unstable government. The changes in the market scenario with a growth oriented monetary policy revived telecoms.

Indian telecom sector is back on the track showing robust growth in the market. Telecom industries are growing fast and will continue to grow following their previous trend which blocked due to economic slowdown in the country, with reference to disclosures in Voice&Data annual survey.

The sector published cumulative growth of 10.8 percent in the previous 4 months of FY 2014. In comparative analysis, total revenue registered by Indian telecom sector consolidated to Rs. 4,29,087 crore adding Rs. 41,789 crore to last year's net profit of Rs. 3,87,298 crore. 

In overview we can see that profits are climbing at a much higher percent as compared to other sectors. Telecom industries are having a wide arena of growth with coming in of 4G data connection and expansion of data connections in India exploring areas geographically.

Telecom giants in the Indian markets: Idea, Airtel and Vodafone together earned more than 50 percent of consolidated net profits in the sector.

Considering the wider picture of the sector, Uninor came out as the star player in the industry as it gained more than 21 percent in year-on-year analysis of revenue. Telenor group's Indian venture proved profitable not only in revenues but expansion as it excelled at joining in most customers racing over larger competitors like Tata Docomo and Reliance in the current fiscal year.

Looking at Uninor's expansion backed up with effective sales and expansion plans for the future, investors in the stocks of the company are recording profits at higher share price and growing dividends. 

In the equipment manufacturers, Samsung came in the top list with best phones followed by Nokia which is growing backed up by Windows and Indus towers. Above mentioned top suppliers recorded 30 percent of total earning in the FY 2014 cumulatively. 

Micromax made a special mark among telecoms as it reported 115 percent growth in earning in the first four months of FY 2014. The company is growing tremendously in trades and will continue to do so, analyst said. Shares of Micromax are looking positive as it has captured most of the markets with its affordable and trendy phones.

As the company records, higher growth in revenues it benefits its shareholders as demand is rising pushing up the stock price of Micromax. Investors in the stock of the company are hoping to gain high dividends from the phenomenal growth chart.

Experts are looking into more acceleration in growth market of telecoms in the later half of the year. As Reliance Jio Infocomm is launching 4G services in the Indian market after winning the license in the beginning of the year. Heavy investments of telecom operators in providing 4G arena to their customer are surely to pay off in higher profits in the later half of the financial year.

 

 

Rupee at 60's level; Copper & Nickel climbed Rs 2/kg

INR regained values standing stable at 60 points against 1 US dollar. Indian stock markets spread an optimistic wave across the world especially affecting domestic equity, commodity and forex traders. Global markets surged on positive cues from Iraq which started balancing the price of Crude oil in the world showcasing a relaxed environment recovering from geopolitical conflict.

Forex investors looked optimistically at the opening rate of INR/USD as the market opened after four days of break from Friday to Monday. At 1430 hours, regained its position at 60.675 rising 0.16 percent from its last closing at 60.77.

The currency opened at the same level it closed down without gaining or losing any points in the trade. Further, as the day commenced and markets struck sky-high crossing their life time gains, Rupee gained the position at 60.6575.

INR valuating at 60.6575 against one US dollar is the highest point reached in August by the currency till date. The currency reported reviving falling crude oil prices which play a very important role in the imports of the country.

Market Analyst said, "As global crude oil prices fell down in the last four days when rupee did not trade, it is obvious that rupee is gaining on the benefits now."

In the trading market today, Brent crude with delivery tag of October priced $ 101 per barrel falling down by $ 12 per barrel as the geopolitical situation improved since June to August in the western part of Asia. In the first 7 months of 2014, rupee grew 1.86 percent in the exchange values. 

Dollar Index,  measurement of US currency among the major currencies of the world, traded 0.1 percent higher at 81.659, with reference to its last record at 81.576. The 10-year bond values climbed from 8.52 percent to 8.53 percent after opening at 8.51 percent.

Base metals traded on multi commodity exchange of India (MCX) priced higher in the trade on Tuesday. Copper and Nickel led the gain as their prices hiked at Rs 2 per kg. Commodity traders bought in non-ferrous metals looking at the strengthening global markets and the need for the metals. 

Investors and traders quoted, "Copper traded at its weekly high in the global market which cued us to buy in more of the commodity to retain profits." The confidence level amongst foreign and domestic traders build up with overall positive outlook of the Indian economy and recovering global trends.

Copper dated delivery after three months rose 0.30 percent in terms of USD amounting to $ 6,926.75 per metric tonne according to the script in London Metal Exchange.

In Delhi, copper mixed scrap traded at Rs 430 and nickel (4x4) traded between Rs 1,092 and Rs 1,098 per kg.