As long as Nifty stays above the day's low, the index may book some gain
We mentioned on Wednesday that if the Indian indices rally, they will be met by selling.
The indices traded for a few minutes in the green initially on Thursday after which it started going lower. The launch of the “Make in India” initiative also did not stop the indices from going further lower for the third consecutive session.
The S&P BSE Sensex opened at 26,809 while the NSE's CNX Nifty opened at 8,003.
Sensex moved lower to the level of 26,350 after reaching up to 26,814 while Nifty moved from 8,019 to the level of 7,877. Sensex closed at 26,468 (down 276 points or 1.03%) while Nifty closed at 7,912 (down 91 points or 1.13%). India VIX rose 6.08% to close at 13.2975.
Prime Minister Narendra Modi on Thursday launched the 'Make in India' campaign which is aimed at making the country a global manufacturing hub.
The Cabinet Committee on Economic Affairs (CCEA) once again deferred a decision on revising gas prices. It has been deferred for a third time in view of next month's assembly elections in Maharashtra and Haryana.
Reserve Bank of India Governor Raghuram Rajan said in a speech at Mumbai that India suffered from persistent inflation and we have got to break this persistence. "Once we do it we can be much more comfortable," he said. All the banking stocks in the Sensex 30 stock were among the losers today. Axis Bank (4.64%), SBI (4.38%), ICICI Bank (3.28%), HDFC Bank (0.31%) were among the losers.
Dr Reddy's Lab (2.52%) was among the top three gainers in ‘A’ group on the BSE and it was the top gainer in the Sensex 30 pack. The stock hit its 52-week high today. It has launched the Levalbuterol Inhalation Solution, USP 0.31 mg /3 mL, 0.63 mg /3 mL, 1.25 mg / 3 mL Unit-Dose Vials, a therapeutic equivalent generic version of XOPENEX® (levalbuterol hydrochloride) inhalation solution in the US market. The XOPENEX® (levalbuterol hydrochloride) inhalation solution brand and generic combined had US sales of approximately $269.7 Million MAT for the most recent twelve months ending in June 2014 according to IMS Health. Levalbuterol Inhalation Solution, USP is only for use with a nebulizer.
Jaiprakash Associates (19.15%) and Jaiprakash Power Ventures (13.92%) were among the top two losers in ‘A’ group on the BSE. Both the stocks hit their 52-week lows today.
Reliance Power called off its discussions with Jaiprakash Power to buy three hydropower projects. Jaiprakash Power announced that for reasons not attributable to any regulatory uncertainties but due to difference of commercial aspects, discussion with Reliance Power has been called off.
US indices closed in the positive on Wednesday. The data showed new-home sales in US surged in August to the highest level in more than six years.
Asian indices showed mixed performance. Nikkei 225 (1.28%) was the top gainer while Taiwan Weighted (0.96%) was the top loser.
European indices were showing mixed trading while US Futures were trading flat.
European Central Bank President Mario Draghi said the ECB could use additional unconventional policy measures if it felt that its inflation target was under threat.
Smaller power and steel companies, whose profitability was largely driven by the now cancelled coal blocks, have debt of around $10 billion and would face bigger challenges, while servicing these debts, says Nomura
The Supreme Court on Wednesday cancelled all but four coal block allocations and
also imposed a penalty of Rs295 per tonne on any coal extracted since allocation of these mines. While large power and steel companies will not face much issues while servicing their debts, it is the smaller one who would face significant challenges, says Nomura in a research note.
"Some of the smaller steel and power companies are now facing significant debt
servicing challenges after the cancellations as their profitability was largely driven by these block allocations. We estimate $10 billion of system lending to these companies," the report said.
According to Nomura, large power and steel companies, which have coal blocks that were cancelled, cumulative have a debt of about Rs4 lakh crore. It said, "Despite the blocks being cancelled, most large power and steel companies will not face significant debt servicing challenges, in our view, though their equity returns are likely to impacted due to cancellations and penalties imposed."
Talking about exposure of banks and non-banking finance companies (NBFCs), Nomura said exposure of Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) is highest to the smaller power companies linked to these cancelled coal blocks.
In state-run lenders, Punjab National Bank, Union Bank of India, IDBI, UCO Bank and United Bank of India has highest exposure to steel and power companies affected by the Supreme Court decision. "PNB and Union Bank of India has the highest exposure to these assets as a percentage of their net worth at 10-15% of FY14 net-worth (NW) compared with 6%-7% of NW for State Bank of India (SBI), Bank of Baroda (BOB) and Bank of India (BOI)," Nomura said.
Private banks like ICICI Bank and Axis Bank do not have exposure to affected steelmakers but these lenders have exposure of around 4-5% of NW to power producers. According to Nomura, exposure of other private banks to these assets is relatively negligible.
"Although the cancellation of coal blocks weakens the business models of some of the names mentioned and will likely lead to some credit or restructuring charges, we think the impact on our top picks Axis Bank and ICICI Bank is manageable," the report added.
The union government is preparing a roadmap for identifying PSUs not capable of revival and for closing them down after giving benefit of VRS to its employees
The Indian government has started the process to revive five out of 11 sick public sector units (PSUs) and would form a joint venture of Maharatna PSUs to help revive the sick units, says Anant Geete, union minister for Heavy Industries and Public Enterprises.
Speaking about terminally ill PSUs, the minister said, "It would be better to make one-time settlement and eliminate even higher recurring expenditure."
Geete said, his ministry is preparing roadmap for identifying PSUs not capable of revival and for closing them down after giving benefit of voluntary retirement scheme (VRS) to its employees. "We are making a proposal for one-time settlement costing around Rs1,000 crore for employees of six PSUs that are not capable of revival," the minister added.
The functioning of the Board for Reconstruction of Public Sector Enterprises (BRPSE) has been reviewed, Geete said, adding that the government want to streamline multiple mechanisms for revival of sick central public sector enterprises (CPSEs) and have identified the action points in this regard.
The minister also said that there is a proposal to establish Ultra Mega Green Solar Power Park with an ultimate capacity of 4000 MW in Rajasthan.