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Indian Indices Trade Marginally Higher; Oil & Gas Stocks Witness Buying Interest
Tue, 6 Mar 11:30 am

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a positive note with stocks in the consumer durables sector and oil & gas sector witnessing maximum buying interest.

The BSE Sensex is trading up 98 points (up 0.3%) and the NSE Nifty is trading up 38 points (up 0.4%). The BSE Mid Cap index is trading up by 0.6%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 64.94 to the US dollar.

Gitanjali Gems share price has continued its downtrend and is witnessing selling pressure today. Losses are seen as CBI said that the PNB fraud was going on since 2010.

The CBI yesterday said the violation of norms for issuance of Letters of Undertaking (LoUs) to benefit Nirav Modi and his uncle Mehul Choksi had been going on since 2010.

Note that the stock of Gitanjali Gems has nosedived on several occasions since 2013, eroding market capitalisation by over 80%. Its promoter's role in aiding Nirav Modi carry out one of the biggest frauds in the banking history has damaged the stock's position and credibility. Reportedly, Gitanjali Gems and its two subsidiaries fraudulently acquired letters of undertaking and letters of credit worth Rs 48.9 billion issued through Punjab National Bank.

Gitanjali Gems, the Fall Guy

It has emerged that Gitanjali Gems' receivables position has been outstanding far longer than that allowed by the RBI. Auditors have pointed out the overdue loans/debentures and overdrawn working capital limits by the company in the latest annual report. In fact, the company has said that it does not even have funds to honour debenture redemption liability of as low as Rs 14.8 m.

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We had stuck our necks out, warning investors that Gitanjali Gems' shiny exterior is a sham. Being in a working capital business of importing gold and exporting jewellery, regulatory restrictions on gold imports in FY13 pushed the company in deeper debt. But the company's weak management, integrity, and ethics were completely unacceptable to us. Therefore, despite Gitanjali Gems attracting institutional interest during the gold rally, we had clearly asked investors to steer clear of this value-trap.

Connecting the dots in the aftermath of the fraud undoubtedly confirms that the dubious management is responsible for the company's downfall, something we had seen coming long back. Clearly, management integrity is one aspect that shareholders cannot afford to compromise in their frenzy to ride the bull run.

The December quarter GDP numbers are out. India's GDP grew by 7.2% in Q3 FY18. Manufacturing grew by 8.1% for the quarter compared to 7.9% in the same quarter last year.

Cement, electricity, coal, and steel, the bedrock of the economy, all witnessed robust growth.

India also surpassed China as the world's fastest growing economy.

Rest assured, we'll keep a close eye on this trend.

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