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Sensex Finishes Flat; Tata Power Rallies 5.3%
Tue, 20 Jun Closing

Indian share markets continued to trade range bound in the afternoon session. At the closing bell, the BSE Sensex stood lower by 14 points, while the NSE Nifty finished down by 4 points. Meanwhile, the S&P BSE Mid Cap finished up by 0.2% & the S&P BSE Small Cap finished up by 0.1%. Gains were largely seen in IT stocks, consumer durables stocks and energy stocks.

Earnings Yet to Catch Up with Valuations

The markets are touching record highs every day. While valuation has reached dizzy heights, earnings are yet to catch up. Investors are hoping that earnings will eventually catch up with valuations. Even the slowdown on the economy due to the notebandi impact has been ignored.

The GDP numbers reflected the recent slowdown in the economy. GDP grew at 6.1% for the fourth quarter of 2017, a fourth consecutive decline for the quarter.

With money from retail investors coming into the market at a steady pace, the general assumption amongst investors is that growth will eventually come and justify the premium valuations they've given to the markets. Perhaps investors are getting ahead of themselves.

Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.81%, while the Hang Seng & the Shanghai Composite fell 0.31% and 0.14% respectively. European markets are higher today with shares in France leading the region. The CAC 40 is up 0.38% while Germany's DAX is up 0.31% and London's FTSE 100 is up 0.09%.

The rupee was trading at Rs 64.47 against the US$ in the afternoon session. Oil prices were trading at US$ 44.11 at the time of writing.

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Tata group stocks were in focus today as the defence arm of the Tata Group has signed an agreement with American firm Lockheed Martin to produce and export new generation F-16 fighter aircraft, potentially kick-starting a mega 'Make in India' project. Reportedly, he agreement will give the Tata Group firm the ability to integrate Indian sensors and systems into the high-technology Block 70 version of the US fighter jet.

Meanwhile, Tata motors share price finished the trading day up by 3.3% in today's trade after it was reported Tata Motors is considering an initial public offering (IPO) for its Jaguar Land Rover subsidiary. Tata purchased Jaguar Land Rover from Ford Motor Co. for US$2.4 billion in 2008.

However, Tata Motors denied the reports of listing the luxury-car maker the company bought in 2008 for US$ 2.4 billion.

Tata Motors has turned around Jaguar Land Rover since buying the business from Ford Motor Co., helping boost revenue more than sevenfold between 2008 and 2015.

In another development, Tata Power share price surged 5.3% after it was reported that the company is expected to dilute its stake in Indian Energy Exchange through initial public offering.

As per an article In Moneycontrol, existing shareholders including Tata Power Company, private equity arm of Aditya Birla Group, Madison India Capital and Renuka Ramnath-led Multiples Alternate Asset Management will sell 6.06 million shares in the company via IPO.

In news from economic sector, the Indian economy is likely to pick up pace in the next two fiscal years. The Credit rating agency, Fitch Ratings in its latest report 'Global Economic Outlook' has forecasted the Gross Domestic Product (GDP) of the country to grow at 7.4% this year and 7.6% in the next fiscal year buoyed by rising public spending on infrastructure.

The rating agency added that the investment in India is also expected to witness gradual rise owing to transmission of supportive monetary policy along with the government's various structural reforms.

The report further said that the upcoming Goods & Services Tax (GST) regime will facilitate trade within India and reduce transaction costs. However, the rating agency also pointed that the demonetization move did have a material impact on spending and its lagged effect on the economy is quite puzzling and the effects would be expected to be quite rapidly felt - but partly reflects the challenges of measuring spending in an economy with a large informal sector.

Moreover, Fitch Ratings predicted that the consumer price index (CPI) Inflation would rise as the current low food price effect will fade, but expecting to remain firmly within the central bank's target range. It also said that investment dipped into negative territory (-2.1%). This partly reflected poor construction activity, which fell by 3.7%, an unprecedentedly low level in recent years and added that investment has been persistently weak in recent years.

Moving on to news from oil & gas sector. ONGC share price finished the trading day on an encouraging note (up 1.6%) after it was reported that the company's overseas arm - ONGC Videsh (OVL) has been shortlisted alongside global giants like Chevron, Shell and Total to bid in Mexico's latest round of oil and gas field auction.

Mexico is offering 15 shallow-water exploration blocks in the second round of hydrocarbon auction, called round 2.1. These blocks cover a combined area of 8,908 sq km and hold prospective resources of 4 billion barrels of oil and oil equivalent gas.

In 2015, OVL was among the 19 companies and seven groups that was pre-qualified to bid for Mexico's maiden offshore oil blocks auction. It was however unsuccessful in getting any block.

OVL has stake in 38 projects in 17 countries including Azerbaijan, Kazakhstan, Russia, Brazil, Colombia, Venezuela, Iraq, Syria, Libya, South Sudan, Sudan, Mozambique, Bangladesh, Myanmar, Vietnam and New Zealand.

It contributes to 14.5% and 8% of oil and natural gas production of India, respectively. In terms of reserves and production, it is the second largest petroleum company of India, next only to its parent ONGC.

In another development, as per an article in The Economic Times, BPCL is revisiting its old plan plan to build a refinery in Allahabad to cater to the expanding demand for fuel in the country. The company plans to raise refining capacity to 50 million tonnes in five years.

India's fuel demand rose 5% in 2016-17, with consumption of diesel and petrol rising about 2% and 9% respectively. The expansion in fuel demand has spurred refiners to increase capacity, which the government expects to go up by 150 million tonnes in the next 7-8 years from 235 million tonnes today. The increase is expected to include 50-60 million tonnes of brownfield expansion.

BPCL, along with Indian Oil Corporation and HPCL, is working on setting up the world's biggest greenfield refinery in Maharashtra. BPCL holds 25% stake in the mega project in which Saudi Aramco is said to be keen to invest.

BPCL share price finished the day down by 0.5% on the BSE.

And here's a note from Profit Hunter:

Tata Power - up 5% - is the top gainer from the Nifty 50 Index today.

The stock made a low of Rs 55 in September 2015. It recovered a bit, but the bears dragged the price back to Rs 55 in February 2016. The stock found support from there and rallied strongly to form a double bottom pattern.

It broke out of this pattern in April 2016 and gradually traded up to hit a new 52-week high of Rs 91 in March 2017. Since then, the stock has been correcting in a falling channel line.

Today, the stock shot up 5% with heavy volumes to trade near the channel's resistance line. A sustained close above this resistance line would signify strength.

So will the stock break out of this channel to end its correction or will it continue to trade in the channel to correct even further?

Will Tata Power End Its Correction?
Will Tata Power End Its Correction? 

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Nov 24, 2017 (Close)