Companies & Sectors
Oil Ministry seems to be in panic, as OMCs raise prices

A Rs5-6/litre diesel price increase is likely, after Parliament session ends this week, forecasts Nomura in its research note on the oil sector

OMCs (oil marketing companies) are loath to raise prices while Parliament sessions are on. However, last weekend there were price hikes (petrol Rs2.35/litre, diesel 50p/litre), while the Parliament was in session. With rising oil prices and a weak rupee, import bills and under-recoveries have shot up. There seems urgency. The Prime Minister has called to reduce oil import bills by US$25 billion this year. And, the Oil Ministry seems to be in panic with pressure from both the government and the consumers. This is according to a research note on the oil sector by Nomura Financial Advisory and Securities (India) Private Limited.


While politically difficult, Nomura thinks that the government does not have much of an option and will soon take ‘tough’ decisions. It expects a Rs5-6/litre diesel price increase, after Parliament session ends this week. This, Nomura estimates, would not impact y-y (year-on-year) inflation due to base effect (Rs5/litre hike in September 2012). Decisive action, apart from reducing subsidy concerns, would boost overall market sentiment, in Nomura’s view for companies in the oil sector.


The Nomura research note adds on stock market performance of oil companies that it is positive on Reliance Industries and GAIL. Among oil PSUs, Nomura prefers OMCs (vs. upstream oil PSUs) on valuations. In the gas space, Indraprastha Gas and Petronet LNG remain favourites.


The Nomura stock recommendation in the sector is given below:




Mamata Effect gone: Pension Bill passed

The newest addition to the Pension Bill allows subscribers to invest in stock market with a cap of 26% FDI and also provides old age income security for government employees

The Pension Fund Regulatory and Development Authority Bill (PFRDA), 2011 was passed by the Lok Sabha today in the Parliament. It was earlier introduced in Lok Sabha on the 24th March, 2011. The Bill has been in the works for almost a decade and got delayed due to vociferous opposition from various allies of UPA government such as the Left and later Mamata Banerjee of Trinamool Congres.


The newest addition to the bill allows subscribers to invest in stock market with a cap of 26% foreign direct investment. The Pension Bill also provides old age income security for government employees. It calls for a statutory regulatory body the Pension Fund Regulatory and Development Authority (PFRDA) under the provisions of the Bill. The legislation seeks to empower PFRDA to regulate the New Pension System (NPS).



In order to effectively invest and manage huge funds belonging to a large number of subscribers and to ensure the integrity of NPS, creation of a statutory PFRDA with well defined powers, duties and responsibilities is considered absolutely necessary and would benefit all NPS subscribers. Currently the NPS is implemented in 26 states with a subscriber base of 52.83 lakh and a corpus of Rs 34, 965 crore.  The NPS has been mandatory for all central government employees except the armed forces with effect from 1/01/2004. The PFRDA Bill authorizes the PFRDA to establish a Pension Advisory Committee by notification under Clause 44 of the PFRDA Bill, 2011. The object of the Pension Advisory Committee shall be to advise the Authority on matters relating to the making of the regulations under the PFRDA Act.


Sensex, Nifty likely to rally: Wednesday closing report

From here, the Nifty may move in the range of 5,370 and 5,540. A close above 5,460 would be bullish for the short-term

Except for a few minutes of trading in the red, the indices traded in the positive for the entire session on Wednesday. The Sensex opened at 18,315 while the Nifty opened at 5,359.  The Sensex and the Nifty hit an intra-day low almost at the same level as yesterday. The Sensex hit a low of 18,188 while the Nifty hit a low of 5,319. The Sensex hit an intra-day high of 18,613 and closed at 18,568 (up 333 points or 1.83%) while the Nifty hit an intra-day high of 5,460 and closed at 5,448 (up 107 points or 2%). The indices covered up nearly half of yesterday’s fall but the rise was on lower volumes. The National Stock Exchange (NSE) recorded a volume of 58.50 crore shares.


Except for Realty (down 0.34%) and Media (down 0.85%) all the other indices on the NSE closed in the positive. The top five gainers were Metal (2.64%); Pharma (2.54%); Auto (2.51%); Infra (2.38%) and IT (2.36%).


Of the 50 stocks on the Nifty, 47 ended in the green. The top five gainers were Ranbaxy (8.70%); BHEL (6.46%), Jaiprakash Associates (6.13%); Lupin (4.59%) and Tata Motors (4.59%). The losers were DLF (1.02%); ITC (0.23%) and Maruti (0.07%).


RBI, yesterday, said housing loans from banks to individuals should be closely linked to the stages of construction as upfront disbursals of lump sum loans are likely to expose the banks as well as their home loan borrowers to additional risks. This is expected to put the squeeze on builders and lead to a fall in real estate prices. Please read our article Realty prices to crash as RBI curbs innovative borrowing schemes


RBI today issued certain clarifications regarding overseas direct investment notified on 14 August 2013. Among others, it has been clarified that in respect of funding of overseas direct investments by way of external commercial borrowings, instead of limit of 100% of the net worth, the earlier limit of 400% of the net worth will continue to apply. The explanation given by RBI was that it is not the intention of the bank to restrict bona-fide and genuine overseas direct investment transactions by Indian companies.


The economy continues to contract. Indian services activity shrank in August at its quickest pace since the depths of the global financial crisis as new business dried up, a survey showed. The HSBC Services Purchasing Managers' Index (PMI) compiled by Markit, slipped to 47.6 in August, the weakest since April 2009, from 47.9 in July. A number below 50 denotes contraction.


US indices ended in the green on Tuesday. Better-than-forecast economic data overshadowed concern over possible military action against Syria. The Institute for Supply Management's manufacturing index increased to 55.7 in August, the strongest since June 2011, from 55.4 a month earlier. Another report showed construction spending in the US increased in July to the highest level in four years, propelled by gains in residential real estate.


US House of Representatives Speaker John Boehner backed President Barack Obama's call for action against Syria, while Republican and Democratic leaders of the Senate's foreign relations panel agreed on a proposal backing a military strike. The Senate reached an agreement on a resolution authorizing military strikes against Syria. The resolution gives Obama 60 days to strike Syria, and is expected to be put to a vote on Wednesday, 4 September 2013.


Except for Nikkei 225 (up 0.54%), Shanghai Composite (up 0.21%) and NZSE 50 (up 0.08%) all the other Asian indices closed in the negative. The top loser was Jakarta Composite (2.17%).


Growth in China's services sector hit a five-month high in August underpinned by new orders and business optimism, a private survey showed on Wednesday, adding to views that the world's second-largest economy had avoided a sharp slowdown. The Markit/HSBC Services Purchasing Managers' Index (PMI) climbed to 52.8 in August after seasonal adjustments, up from July's 51.3 and the highest since March.


Euro zone businesses had their best month in over two years in August as orders increased for the first time since mid-2011. Markit's Eurozone Composite Purchasing Managers Index (PMI) rose to 51.5 last month from 50.5 in July. The forward-looking new orders index rose to 51.0. This is the first time it is above the 50 mark since July 2011. However, there are still major differences between Europe's two most important economies. The composite PMI for Germany, the euro zone's largest, jumped to a seven-month high of 53.5, but the French PMI dipped to 48.8 from 49.1. The PMI covering the dominant service sector bounced to 50.7 from July's 49.8, the first time it has risen above the break-even point since the start of 2012. Businesses' optimism about the future also rose to a 17-month high.


European indices were trading in the red and US Futures were trading marginally lower.


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