Stocks
Nifty, Sensex overbought, but may move sideways - Monday closing report
We had mentioned in Friday’s closing report that Sensex, Nifty were vulnerable to a short-term decline. The major indices of the Indian stock markets were range-bound on Monday and closed with gains of around 0.50% over Friday’s close. The trends of the major indices in the course of Monday’s trading are given in the table below:
 
 
Positive global cues, along with higher crude oil prices and firm rupee buoyed the Indian equity markets for the sixth consecutive session on Monday. The key indices traded with appreciable gains to reach their new 2016 intra-day high levels, as healthy buying was witnessed in capital goods, oil and gas, and metal stocks. The BSE market breadth was skewed in favour of the bulls -- with 1,724 advances and 1,016 declines.
 
Even though Indian commercial banks' shares have moved higher, ignoring Brexit (Britain exiting European Union), the currency volatility risks have to be understood, said US investment banking firm Jefferies in a report. Banks need to make provisions for their exposures to corporate with unhedged foreign currency exposure (UFC) and additional capital buffer for high risk UFCEs, the report said. Jefferies estimate the risk exposure at 1.7% of gross credit exposure for banking system. Banks have built Rs13 billion in provisions and Rs29 billion in additional capital as of FY16. According to the report, Bank of Baroda (BOB) is the only to report Liquidity Coverage Ratio (LCR) in British pound implying five per cent plus of liability in that currency. “This may result in higher hedge costs going forward -- marginal NIM (net interest margin) negative. This of course depends on the currency composition on the asset side -- unfortunately we don't have sufficient public data to delve deeper," the report said. Bank Nifty closed at 18,097.65, up 0.62%.
 
The price of OPEC's basket of 13 crudes rose to $46.27 a barrel on Thursday, compared to $45.82 on Wednesday, according to the OPEC Secretariat. Healthy oil prices at the international level are still important for the major indices of the Indian stock markets to keep from slipping lower.
 
Healthy monsoon rains, more economic reforms and a firm rupee are expected to support the equity markets' upward trajectory in the coming week. According to market observers, clarity on Britain's exit from the EU (Brexit) and increased chances of stimulus measures expected to be initiated by global central banks will provide the incentive for investors to chase prices. "Domestic markets are expected to continue to behave in line with global sentiments in the near-term. However, we expect the market to remain bullish," D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, told IANS. Last week, the Indian markets gained momentum on the back of resurgent Asian and European markets which recovered after clarity emerged on the modalities of Brexit. Further, global investors were hopeful that international central banks might initiate major stimulus measures to protect growth. 
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

 

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COMMENTS

Ralph Rau

11 months ago

Flat YOY growth

Total Sales up 40% in 5 years. Export Sales up 60% in 5 years.

Ultra Low Employee Cost compared to Total Costs ?

Oil being the major input factor there will be a benefit of low crude prices.

Q1 investment remains muted on fiscal constraints, weak demand
Actual and announced investment slowed significantly in first quarter (Q1) of FY17, pulled lower by the private sector. Investment in projects under implementation across sectors also slowed in Q1-FY17 with the value of stalled projects remaining near an all-time high while there was no significant rise in stalled projects during the quarter. Fiscal constraints, weak demand and a leveraged private sector to keep the investment revival slow over coming quarter, says a research report.
 
In a note, Standard Chartered Bank (StanChart) says, "Despite interest rate cuts in the past 18 months, inflation and currency stability, and a significant improvement in the pace of project approvals, private investment remains muted. This indicates that headwinds such as excess capacity and high leverage continue to weigh on private-sector business confidence. Increased public investment spending in FY16 and FY17 (budgeted) has so far failed to ‘crowd in’ private-sector investment. We think a recovery in private-sector investment will take time, based on our analysis of past cycles, the current challenging environment and fiscal constraints on the government."
 
 
According to the report, during Q1, the value of stalled projects remained high, at Rs11.2 lakh crore as against Rs11.3 lakh crore in FY2016, with the bulk of them or around 75% in the private sector. It says, "Central government remained the biggest driver of investment growth, while private-sector investment fell in Q1-FY17. Lack of regulatory clearance and inadequate input availability explained the delays for 42% of stalled projects, while weak business sentiment including lack of investor interest, lack of funds, and unfavourable market conditions, accounted for 28%. Most of the stalled projects are in the electricity (31%) and steel (25%) sectors."
 
 
About 56% of total stalled projects are in the electricity and metals sectors, StanChart says, adding, "Regulatory clearance bottlenecks and input availability (combined) was the main reason for project delays in the private sector, at 42%. Weak business sentiment explained 28% of project delays, up from 14% in FY12, indicating weak demand and excess capacity. A much lower proportion of projects is now stalled due to land acquisition issues (10%) compared to FY12 (17%)."
 
 
The Centre for Monitoring Indian Economy (CMIE) data shows that the signs of a pick-up in the investment cycle, especially in the private sector, remained elusive in Q1-FY17.
 
StanChart says, "The decline in Q1-FY17 would have been sharper had it not been for the announcement of a large steel plant, contributing about 15% of the total value of announced investments during the quarter, although this was by a company recognised by Indian banks as stressed. The slowdown in new announcements in Q1-FY17 is a concern, as new project announcement and projects under implementation (PUIs) have a positive correlation."
 

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Bajaj Auto's June sales decline
Two- and three-wheeler major Bajaj Auto on Monday reported a 4% decline in its total sales for June.
 
According to the company, its total sales during the month under review stood at 316,969 units from an off-take of 331,317 units during the corresponding month of 2015.
 
However, total domestic sales in June were up 11% to 193,717 units from 175,243 units sold during the like month of last year.
 
The overall exports during the last month declined by 21% to 123,252 units from 156,074 units shipped out during the corresponding month of 2015.
 
The company's total motorcycle sales during the month under review decreased by five per cent to 273,298 units from 287,582 units sold in the like month of last year.
 
The overall commercial vehicle sales slipped by 0.14% to 43,671 units from 43,735 units sold during June 2015.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  

 

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