Sensex Ends Day in Red; Axis Bank Falls 2.5%

Wed, 18 Apr Closing

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After opening the day in green, share markets in India witnessed volatile trading activity throughout the day and ended the day in green. Sectoral indices were mixed, with stocks in the FMCG sector and stocks in the realty sector leading the gains.

At the closing bell, the BSE Sensex stood lower by 63 points (down 0.2%) and the NSE Nifty closed down by 23 points (down 0.2%). The BSE Mid Cap index ended the day down 0.1%, while the BSE Small Cap index ended the day down by 0.4%.

Asian stock markets finished in green. As of the most recent closing prices, the Hang Seng was up by 0.7% and the Shanghai Composite was up by 0.8%. The Nikkei 225 was up by 1.4%. Meanwhile, European markets were trading on a mixed note. The FTSE 100 was up by 0.7%, The DAX, was down by 0.5% while the CAC 40 was up by 0.3%.

The rupee was trading at Rs 65.60 against the US$ in the afternoon session. Oil prices were trading at US$ 67.15 at the time of writing.

In news from stocks in the steel sector. Tata Steel share price ended the day on an encouraging note after the steel major raised over US$1.9 billion.

In one of the largest debt raising exercises this year, Tata Steel raised US$1.9 billion through syndicated loans for its Singapore units Nat Steel Asia and TS Global to refinance existing high-cost debt.

The move is a part of a mega financial reengineering exercise undertaken by the country's largest steel maker to streamline its international balance sheet.

The loan is in two tranches - US$1.29 billion and US$469 million.

Facilities are priced at about 200 bps above Libor and will have about six-year maturities. The fresh debt will likely have a 50-basis-point advantage over existing interest rates. About 20 banks, including JP Morgan, Citigroup, Bank of America-Merrill Lynch, State Bank of India, Axis Bank and ICICI Bank, are part of the lending syndicate.

As of September 30, Tata Steel's gross debt stood at Rs 902 billion.

Is the Steel Sector's Recovery Under Threat?

India's steel industry was just coming out of a rough patch.

Demand was picking up. Steel prices were on the rise. Buyers were lining up to pick up stressed assets. With the expected pick up in the investment cycle, the sector was on the upswing.

India's Steel exports were on a roll.

Then Donald Trump spoiled the party. The US government plans to impose a 25% tariff on steel and a 10% tariff on aluminium.

India produces a lot of both commodities but internationally, we are not a big player. The US imports only 2.4% of steel and 2% aluminium from India.

But it's not so simple.

With the new US tariffs, major exporters like South Korea will look to sell in other countries. This would lead to a glut and as a result, lower prices.

This could threaten the nascent recovery in the industry.

Moving on to news from stocks in the banking space and the telecom sector. Axis Bank share price and Bharti Airtel share price ended the day in red after the Aadhar authority imposed multiple fines on the bank and the telecom major.

The Unique Identification Authority of India (UIDAI) imposed fines (disincentives) worth millions on telecom major Bharti Airtel and Axis Bank for breaching terms and conditions attached to Aadhaar authentication.

While the UIDAI had temporarily barred the telecom firm and Airtel Payments Bank from conducting Aadhaar-based SIM verification of mobile customers using eKYC process, it is unclear whether the disincentives imposed on Airtel was linked to its above decision.

At the centre of the government's push for Digital India is the Aadhaar ID. The unique biometric identification can drastically reduce corruption in welfare schemes and enable digital payments.

As per an article in the Economic Times, Aadhaar enabled payments have jumped more than 3.5 times in the last year!

This is proof of the enormous scope of the UID initiative. More than 300 million unique beneficiaries have availed of the Aadhaar Enabled Payments System (AEPS) in less than five years.

The data reveals that more than 600 million transactions have been done already. But this is just the start.

The nodal agency UIDAI, is building capacity to process 100 million transactions daily. That works out to 3.65 billion transactions in a year. In FY17, the rate was just 1.26 million transactions per day. This puts the chart above in proper perspective.

But this growth brings with it several risks. Foremost are the infrastructure and security issues.

The recent leaks of Aadhaar based information came as a rude shock to many. But it was only to be expected. The government has outsourced the work of building the eco-system around Aadhaar to various private individuals and companies. In the process, it is no longer in control of the security of the data.

The woes surrounding the infrastructure enabling Aadhaar has been well documented. We believe the infra issues will be sorted out over time but the security problems will remain.

The biggest risk for the government in its digital India drive will be losing the trust of the common man when it comes to digital transactions, including welfare payments, due to security issues.

And here's a note from Profit Hunter

The benchmark indices ends their nine-day winning streak today. The Nifty 50 Index opened today's session gap up, but slipped lower later in the day to end the session 23 points down.

Despite the selling in the broader market indices, Godrej properties is currently trading 3% up.

The stock has been trading in a strong uptrend after it made a low of 286 in December 2016. It touched a life-time high of 912 in January 2018. Interim, it corrected to touch a low of 705.

Yesterday, the stock rallied more than 5% with strong volumes. Today, it surged more than 3% with heavy volumes.

Does this mean that the stock is now ready to post a new life-time high soon? Let's keep a track of it...

Godrej Properties Surged 3% for the Day

 

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