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Indian Markets Continue Their Uptrend
Mon, 21 Mar 11:30 am

After opening the day on a positive note, the Indian Markets have added to their early gains. Sectoral indices are trading on a positive note with stocks from the realty, FMCG and capital goods sectors leading the gains.

The BSE Sensex is trading up 132 points (up 0.5%) and the NSE Nifty is trading up 41 points (up 0.5%). The BSE Mid Cap index is trading up by 0.8% while the BSE Small Cap index is trading up 1%. The rupee is trading at 66.50 to the US$.

Steel stocks are trading mixed with Tayo Rolls and Gujarat Mineral Development leading the gains. As per a leading financial daily, Tata Steel is in discussion with foreign companies for investments up to Rs 200 billion in heavy industries over the next five years at its Special Economic Zone (SEZ) project at Gopalpur in Odisha. The investments will be in defence, metal downstream and electronics as well as chemicals and pharmaceuticals among others.

The management of the company said that all master-planning for the investment has been done, the entire area has been cleared and there is no encumbrance. For the investments, the company is in discussions with 13 to 14 different investors.

One shall note that Tata Steel is the anchor tenant for the multi-product 2,970-acre SEZ at Gopalpur in Odisha. The SEZ will be based on a Singapore model for industrial development which offers land parcels of various sizes for industries. Basic utilities and road infrastructure has already been built in early development of the zone which has Tata Steel's ferrochrome plant.

Moreover, the company is also discussing a possible investment in expansion of Gopalpur port which is about five kms away from the zone.

Tata Steel Group is among the top-ten global steel companies with an annual crude steel capacity of over 29 million tonnes per annum (MTPA). It is now the world's second-most geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries. On standalone basis, Tata Steel looks attractive. This is because, the government has imposed a minimum Import price (MIP) for six months on 173 steel products ranging between US$ 341/tonne and US$ 752/tonne. Imposition of MIP is likely to result in firming up of domestic steel prices. This will improve realisations. However, at the consolidated level, Tata Steel is bleeding. To know more, read our analysis of the third quarter results here (Subscription required).

Presently the stock of Tata Steel is trading up by 0.8%.

Stocks in the PSU banking space are trading on a positive note with IDBI Bank and Punjab National Bank (PNB) witnessing maximum buying interest. State Bank of India (SBI) has raised Rs 30 billion on a private placement basis. The bank has issued 30,000 Basel-III compliant, Tier-II bonds in the nature of debentures. The debentures have a face value of Rs 10 lakh each at par, with a 10-year tenure, bearing 8.45% per annum coupon payable annually and with a call option after 5 years.

The fund raised is part of the bank's Rs 120 billion debt capital. Note that earlier, on March 9, the SBI board had approved raising the remaining Rs 50 billion of the Rs 120-billion fund-raising programme.

The programme for raising Rs 120 billion was announced by the bank earlier in December. The bank has so far raised Rs 40 billion and Rs 30 billion in two tranches through issue of debt instrument as a part of the programme. On February 19th, the bank had informed BSE that it raised Rs 30 billion from Basel-III compliant bonds to fund business growth. Further, the bank on December 24th announced that it raised Rs 40 billion by issuing Tier-II bonds on private placement basis under the Basel-III norms.

One shall note that the Basel-III norms are aimed at bolstering banks' resilience. Further, according to Fitch Ratings Report, Indian banks need US$ 140 billion worth of capital to ensure full compliance with the Basel-III norms by 2018-19. Several PSU banks have in the recent past announced capital raising by way of bond issue. This is because they would need to hold more capital for every new loan they give in order to absorb any losses that may arise if the borrowers default on the loan, according to the Basel III accord. One should also note that earlier in August last year the government had announced fund infusion of Rs 201 billion into 13 PSU banks. SBI cornered a hefty sum of Rs 55 billion in the same.

Presently the stock of SBI is trading up by 2.2%.

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May 23, 2017 12:24 PM

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