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Strong Start to the Week; Tata Stocks Spurt
Mon, 20 Feb Closing

Stock markets in India continued to trade firm in the afternoon session and finished on a strong note amid positive global markets. At the closing bell, the BSE Sensex stood higher by 193 points, while the NSE Nifty finished up by 58 points. Meanwhile, the S&P BSE Mid Cap finished & the S&P BSE Small Cap finished up by 0.7% and 0.9% respectively. Gains were largely seen in metal stocks, IT stocks and power stocks.

Tata Steel share price finished the trading day on an encouraging note (up 4%) after it was reported that the company looking at possibilities to explore overseas market and building a distribution network and its brands in the business-to-consumer (B2C) markets in Bangladesh and Myanmar. Tata Steel terms consumer products as B2C and has marketed these steel products similar to FMCG strategy.

Meanwhile, Tata Consultancy Services (TCS) share price surged 4.1% ahead of the board meeting to consider a share buyback proposal later in the day. This will be the first time TCS will be buying back its shares if the proposal is approved. The company has cash and equivalents of Rs 388 billion as of December 31, 2016. TCS had consistently been building up cash to meet the business requirements and for any possible acquisition.

Asian stock markets finished broadly higher today with shares in China leading the region. The Shanghai Composite is up 1.18% while Hong Kong's Hang Seng is up 0.47% and Japan's Nikkei 225 is up 0.09%. European markets too are higher today with shares in Germany leading the region. The DAX is up 0.65% while France's CAC 40 is up 0.37% and London's FTSE 100 is up 0.02%.

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The rupee was trading at Rs 66.98 against the US$ in the afternoon session. Oil prices were trading at US$ 54.11 at the time of writing.

Bharat Petroleum Corporation Ltd (BPCL) share price surged 3.1% in today's trade after it was reported that the company plans to set up a petrochemicals unit at its Bina refinery in Madhya Pradesh as part of its Rs 250 billion expansion plan for the refinery. Bharat Oman Refineries Ltd, a joint venture of BPCL and Oman Oil Co., runs the Bina refinery.

According to an article in The Livemint, the petrochemical unit, which will include a 1.5 million tonnes per annum (mtpa) naphtha cracker, is expected to cost Rs 60-70 billion. The investments could be made through a special purpose vehicle or issue of warrants.

Bharat Oman Refineries registered a net profit at Rs 3.66 billion for the first time in 2015-16. That compares with a loss of Rs 7.9 billion in the previous fiscal year.

BPCL plans to spend Rs 1 trillion over the next five years to expand capacity, half of which is likely to go into increasing its refining capacity. By 2022, BPCL plans to raise its crude processing capacity by 62%. The firm is also expanding refining capacity at its Kochi refinery from to 15.5 mtpa from 9.5 mtpa for an investment of Rs 160 billion. It will also build a Rs 50 billion petrochemical plant in Kochi.

Also, Bharat Petroleum's US$600 million bond sale in January drew bids for three times the amount, helping the fuel retailer price the 10-year debt at the tightest spread over US treasuries by any Indian company in a decade.

BPCL share price has surged 74% in Last one year

BPCL share price has surged 74% in Last one year

Sentiments also remained upbeat after the company stated that it will raise Rs 20 billion in debt in the current fiscal ending March 31 to fund its capex requirements.

In other news, according to an article in The MoneyControl, India has become the 12th largest holder of US government securities at the end of 2016, with exposure worth US$ 118.2 billion, as compared to US$116.8 billion for the previous year. This comes at a time when foreign residents decreased their holdings of long-term US securities.

However, in December 2016, the country's exposure stood slightly lower than previous month November 2016. As per the US Treasury Department latest data, Japan remained the largest holder of government securities, with holdings worth US$ 1.09 trillion, followed by China with securities to the tune of US$ 1.06 trillion and Ireland was at the third place with holdings worth US$ 288.2 billion.

Among the BRIC, a group of five nations-Brazil, Russia, India, China and South Africa, India is at the third place after China and Brazil in terms of exposure. The data reflects foreign holdings of US securities collected primarily on the basis of custodial data. Foreign residents decreased their holdings of long-term US securities in December with net sales of US$ 13.9 billion.

Meanwhile, official data revealed that the American economy, also the world's largest, saw its growth slowdown to 1.9% in the fourth quarter of 2016. The deceleration in real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports, a deceleration in personal consumption expenditures, and a downturn in federal government spending.

And here's a note from Profit Hunter:

The metals and mining sector was among the best performing sectors in 2016, gaining more than 100% since the market bottomed in February 2016. The sector is still going strong, beating the benchmark Nifty 50 Index by over 80% from February 2016 lows.

Tata Steel Ltd has been a major contributor to the sector's rally. It rose nearly 125% from the February 2016 lows. Today, the stock made a new 52-week high of Rs 489.

Although the stock is currently showing immense strength, it is also approaching an important resistance level of Rs 500. This marks the 78.6% retracement level of the previous decline from Rs 575 to Rs 200. This level is also a horizontal resistance level (see chart below).

It will be interesting to see if this Rs 500 level will mark the end of Tata Steel's rally or if the stock can overcome resistance and continue its uptrend.

Tata Steel at 52-Week High
Tata Steel at 52-Week High  

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Jan 22, 2018 03:33 PM