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Post Noon Sell Off
Tue, 3 May Closing

Indian equity markets surrendered their early gains as selling activity intensified in the afternoon session and finished below the dotted line for a second consecutive session. At the closing bell, the BSE Sensex closed lower by 207 points, the NSE Nifty finished lower by 59 points. The S&P BSE Midcap & the S&P BSE Small Cap finished down by 0.9% and 0.3% respectively. Losses were largely seen in IT and metal stocks.

Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.85%, while the Hang Seng fell 1.85%. European markets are broadly lower today with shares in Germany off the most. The DAX is down 1.86% while France's CAC 40 is off 1.27% and London's FTSE 100 is lower by 0.80%.

The rupee was trading at 66.27 against the US$ in the afternoon session. Oil prices were trading at US$ 44.53 at the time of writing.

Shares of National Aluminum Company Ltd (Nalco) finished on an encouraging note (up 1.1%) after it was reported that the company is planning to buy back 25% of its shares from the government. The buyback, initiated by the finance ministry earlier this year, is part of the government's efforts to raise much-needed funds, including by selling shares worth up to Rs 565 billion to curb the 2016/17 fiscal deficit.

Reportedly, the company earlier tried to push back against the finance ministry request as it needed money for expansion which includes a planned project to set up a smelter complex worth about $2 billion in Iran and to diversify into sectors such as nuclear energy. If bought back at market prices, the stake would cost US$450 million.

Nalco has the largest integrated alumina-aluminum complex of Asia. Its integrated operations cover the entire aluminum production value chain from mining bauxite, refining alumina, smelting aluminum. The company is still managing to sustain a competition in the market despite a sharp drop in the metal's prices (Subscription Required) and rising imports from China that have hurt many private competitors.

Metal stocks languished the day in red with Coal India and SAIL leading the losses.

After a prolonged weakness in commodity prices, metals stocks have been on fire in the last three months. The BSE Metal index is almost up by 27% since mid-February. The recovery in the prices globally can be attributed to the lower production and capacity curtailment. In Budget 2016-17, the government has increased custom duty marginally on primary aluminum products to 7.5% from 5% and custom duty on other aluminum product increased from 7.5% to 10%.

Moving on to news from engineering sector. According to a leading financial daily, Bharat Heavy Electricals (BHEL) has successfully commissioned a 600 MW coal-based thermal power plant in the state of Madhya Pradesh. The unit has been commissioned at the 1x600 MW Jhabua Thermal Power Project (TPP) located in Seoni district in Madhya Pradesh. The project is being developed by Jhabua Power (JPL), a subsidiary of Avantha Power & Infrastructure (APIL). This is the second project of APIL commissioned by BHEL, having earlier commissioned the 1x600 MW Avantha Bhandar TPP at Raigarh in Chhattisgarh.

So far, the company has contracted 21 sets of 600 MW each, of which 16 have already been commissioned. BHEL is also presently executing two supercritical units of 800 MW for NTPC at Gadarwara in Madhya Pradesh.

The script of BHEL finished the day down by 2.7% on the BSE. The stock price of the company has surged more than 25% in a short span of time since the budget. Meanwhile, many of the other companies from the capital goods space have seen their stock price move up quite sharply.

The engineering industry in India has grown tremendously over the years. But that growth has been marked by extreme volatility. Over the last eight years, the sector has seen numbers ranging from an output growth of 48% YoY in one year, to a contraction of 6% YoY in another. In our recent edition of the The 5 Minute WrapUp Premium, we explain what factors to look for when picking an engineering stock (Subscription Required).

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Nov 23, 2017 (Close)