Sensex Opens Marginally Down; Realty & Metal Stocks Drag

Tue, 22 May 09:30 am

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Asian share markets are subdued today, shrugging off gains seen on Wall Street as recent US-China trade tensions cooled. The Nikkei 225 tracked lower by 0.1% after starting the session with slight gains. The broader Topix slipped 0.2%, with most of its 33 subsectors trading lower as mining and insurers led losses. US stocks rose on Monday and gains in industrials helped propel the Dow to a more than two-month closing high.

Back home, India share markets opened the day marginally lower. The BSE Sensex is trading down by 32 points while the NSE Nifty is trading down by 13 points. The BSE Mid Cap index and BSE Small Cap index opened the day on a flat note.

Sectoral indices have opened the day on a mixed note with consumer durables stocks and capital goods stocks witnessing maximum buying interest. While, realty stocks and metal stocks opened the day in red. The rupee is trading at 68.09 to the US$.

Steel stocks opened the day on a mixed note with Bhushan Steel & Adhunik Metaliks leading the gainers. As per an article in a leading financial daily, the National Company Law Appellate Tribunal (NCLAT) declined to stay Tata Steel's acquisition of debt-laden Bhushan Steel under the corporate insolvency resolution process.

The NCLAT has also issued notices to Bhushan Steel employees, who had also challenged the sale before the National Company Law Tribunal (NCLT).

On 15 May, NCLT had approved the resolution plan of Bhushan Steel, which found Tata Steel as the highest bidder.

Tata Steel had offered to pay Rs 352 billion to the financial creditors and Rs 12 billion to the operational creditors of Bhushan Steel, which owes Rs 560.8 billion to its financial creditors and Rs 13.3 billion to operational creditors, respectively.

Meanwhile, engineering and construction major L&T, which is an operational creditor of Bhushan Steel, has also approached the appellate tribunal against NCLT's order approving sale of the debt-ridden firm to Tata Steel.

L&T, which has a claim of Rs 9 billion, will be heard by NCLAT today.

So, Tata Steel's dream of snatching the title of 'India's largest steel maker' from JSW Steel will have to be put back on ice, indefinitely. And the fraud-ravaged Punjab National Bank, which was the term loan consortium leader for Bhushan Steel and had an exposure of close to Rs 50 billion, will have to wait longer for a respite from its woes.

To know more about the company, you can view Tata Steel's latest quarterly result & Tata steel stock analysis here.

Tata Steel share price opened the day down by 0.6%.

Moving on to the news from the economy. Rating agency ICRA expects GDP growth in January-March 2017-18 at 7.4% on account of good rabi crop harvest and improved corporate earnings, up from 7.2% in the third quarter.

The Central Statistics Office (CSO) is scheduled to come out with GDP estimate for the fourth quarter (Q4) of fiscal 2017-18 and provisional annual estimates for the year 2017-18 on 31 May.

As per Icra, the growth of the Indian gross value added (GVA) at basic prices in year-on-year (YoY) terms is likely to record a considerable recovery to 7.3% in Q4 FY18 from 6.7% in Q3 FY18, thereby rebounding above 7% after a gap of five quarters.

This revival in the fourth quarter, relative to the previous three months, is expected to be broad-based, supported by an uptick in industry (to 7.7% from +6.8%), agriculture, forestry and fishing (to 4.5% from 4.1%), and services (to 7.8% from +7.7%).

The rating agency further said it expects a mild pickup in growth in the services sector, reflecting the improvement in diesel and petrol consumption, service sector exports, passengers carried by domestic airlines, cargo handled at major ports and railway revenue carrying freight.

Notably, 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.

GDP Growth Getting Back on Track

India also surpassed China as the world's fastest growing economy. Rest assured, we'll keep a close eye on this trend.

We, at Equitymaster, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus all our energy on understanding the underlying business strength of companies.

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