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Indian Indices Open Flat
Tue, 12 Apr 09:30 am

Major Asian stock markets have opened the day on a positive note. The stock markets in Hong Kong and Japan are trading higher by 0.2% and 1.2%, respectively. Major indices in Europe ended their session on a positive note. US markets ended their previous session in the red. The rupee is trading at 66.41 per US$.

Indian stock markets have opened the day on a flat note. The BSE Sensex is trading up by 60 points (up 0.2%) and NSE Nifty is trading up by 16 points (up 0.2%). The BSE Mid Cap and the BSE Small Cap indices are trading in the green, both up by 0.6%. Sectoral indices have opened the day on a positive note with stocks from consumer durables, healthcare and oil & gas sector leading the gains.

Stocks in the steel sector have opened the day on a mixed note with Tata Steel and Steel Authority of India Limited (SAIL) leading the losses. As per a leading financial daily, it is confirmed that Tata Steel is selling its Long Products business in Europe to the investment firm Greybull Capital. The deal is finalised at nominal consideration as the struggling company is exiting the UK after a decade long unsuccessful foray.

The sale is in exchange for Greybull Capital taking the whole of the business, including assets and relevant liabilities, and securing funding package of 400 million pounds.

It was noted that the deal financing, provided principally by a combination of banks and Greybull Capital shareholders, will be available to fund working capital and future investments in the Long Products business of the company. The deal includes Scunthorpe steelworks, mills in Teesside and northern France, an engineering workshop in Workington, a design consultancy in York, and associated distribution facilities. The deal is expected to be completed within eight weeks, subject to financing arrangements and cost agreements with key suppliers.

It shall be noted that on 29 March, Tata Steel decided to sell its UK operations, called Tata Steel Europe Ltd. This came as the company failed to turn around the business it bought as part of the takeover of Corus at the height of the commodity boom in 2007 for US$12.1 billion. The business has suffered almost a decade of losses amid poor demand and cheap Chinese imports.

Radhika Pandit, Managing Editor, ValuePro had written an interesting piece on this matter in one of the editions of The 5 Minute WrapUp titled The Perils of Big Acquisitions Spare No One...Not Even the Tatas. You can read the same here.

However, amidst these worries, Tata Steel has got a welcome breather by reporting best ever total sales volume in FY16. The company has reported 9% YoY increase in its total sales volume at 9.54 million tonne (MT). Also, sales volume in fourth quarter jumped 13% YoY to 2.72 MT.

The current business conditions for the global steel industry are extremely challenging with elevated imports across regions and depressed market sentiments. This has affected Tata Steel Group's profitability. However, the above development of record level production by the company will aid the company's performance in the long run. Also, an article in Business Standard suggests that Tata Steel has been one of the top 20 capex spenders between FY12 and FY14, after investing in new capacities in India. This suggests that the company is well placed on capacity utilisation front.

Tanushree Banerjee, Managing Editor, StockSelect pointed out the importance of capacity utilisation levels in a recent edition of The 5 Minute WrapUp titled 70% Upside in Sensex Will Be a Reality Only If... She explains why capacity utilisation is the most important data she will be tracking to check the upside in Sensex in the coming days.

As she writes, 'If we look at the capex spending of India's 200 largest companies from the Equitymaster Stock Market Yearbook, 50% of the incremental capex in the last ten years was incurred in FY13 and FY14. And just nine companies accounted for 50% of that. Since those nine companies are among the largest players in the sector, their capacity utilisation will determine the sector's growth and profitability over next three years. Weak demand for their products could be a drag for not just these players; it could negatively impact volumes and realisations for the entire industry.' You can read the entire article here.

Stock of Tata Steel has opened the day down by 2.6%.

In another news update it was reported that 40 banks and non-banking financial companies (NBFCs) have sanctioned Rs 712 billion to fund renewable energy projects in India. Of this sanctioned amount, Rs 295 billion has already been disbursed by banks between February 2015 and March 2016.

The above development comes as banks committed to provide debt funding for renewable energy projects aggregating to over 78.75 gigawatt (GW) during the span of the next five years at RE-INVEST 2015. RE-INVEST 2015 is an event on renewable energy organized by Ministry of New and Renewable Energy.

This bodes well for the Indian renewable energy sector. The low cost and long term funding can boost the growth of the sector in the coming days.

One shall note that, Piyush Goyal- minister of power, coal and renewable energy had earlier stated that India has a US$250 billion investment opportunity in the renewable energy space. The Indian Government has set a target of 175 GW of renewable energy capacities by 2022 with a capital outlay of US$160 billion including equity of US$40 billion. (1 gigawatt = 1,000 megawatts)

By the way, April 2016 is a very special month for us at Equitymaster. We complete 20 years of service to millions of readers and subscribers.

And that's why we're in a celebratory mood.

Not only are we celebrating the success of The Equitymaster Way but also our success in earning the trust of subscribers who've been with us throughout this two-decade journey. And as the countdown to our anniversary begins, we would like to invite you to share some of your experiences with us over the years. You can do the same by posting your experiences here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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