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Of Increasing Troubles for Solar Power Developers, Federal Reserve Policy and Key Stocks in Action Today
Fri, 3 Aug Pre-Open

Solar Power Developers to be Negatively Impacted by Safeguard Duty on Solar Cells

The Ministry of Finance has notified imposition of a safeguard duty of 25% on solar cells. The safeguard duty of 25% will be valid till 29 July 2019. Post this date, a safeguard duty of 20% will be levied for the next six months and 15% for another six months (till 29 July 2020).

The Chinese were dumping solar cells in India at lower costs, which helped the power developers to quote lower solar tariffs. With the safeguard duty coming in, the solar cells will turn expensive in-turn increasing the expenses for the solar developers.

The increase in expenses could lead to higher solar tariffs going forward. Further, the internal rate of return (IRR) for solar developers could go for a toss, assuming that they had bided for projects without having assumed a possible imposition of safeguard duty by the government.

We had highlighted such concerns in our article two years back stating the flaws in the US$ 100 billion solar sector.

Marico Plunges 4.8% Despite Decent Result

The company's consolidated net profit grew 10.2% YoY and the revenues grew by a healthy 20% YoY. On account of sharp increase in raw material cost, gross margins contracted by 5.5% to 42.3%. The EBIDTA margins too slipped by 1.8% to 17.5%. The fall in EBIDTA margins was contained on account of lower employee cost, advertisement and other expenses.

Growth in rural volumes, coupled with the company's ability to pass on the steep increase in the raw material cost will be the key things to watch out for going forward.

Fed Leave Interest Rates Unchanged

In news from the global economy, following the Reserve Bank of India's decision to hike key interest rates by 25 basis points (bps), the US Federal Reserve held its rates steady while reiterating their plan to gradually lift borrowing costs to keep the economy expanding at a healthy pace.

Tracking the US Fed announcement, the yield on the benchmark 10-year U.S. Treasury note broke above 3% for the first time since June after the government said it intended to increase its borrowing from the bond market in the coming quarter to fund spending and debt obligations. Yields inching upwards is bad news for emerging economies like India. US treasuries are considered as safe investments and increasing yields could possibly lead to foreign outflows from emerging economies. In fact, the market correction we witnessed in February-March this year can be attributed to the rising yield on the 10-year US Treasury bond.

Key Stocks in Action Today

The stocks of Nilkamal, KEC, Nestle India, Indo Count Industries, TCPL Packaging, Titan are expected to be in the news today as they declare their results for the quarter ended June 2018.

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