Sensex Trades in Red; Auto Stocks Witness Selling

Fri, 11 Aug 01:30 pm

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After opening the day lower, share markets in India continued to witness selling pressure and are currently trading in the red. Sectoral indices are trading on a mixed note with stocks in the consumer durables sector and the pharma sector trading in green, while stocks in the auto sector and the metal sector are leading the losses.

The BSE Sensex is trading down by 266 points (down 0.8%), and the NSE Nifty is trading lower by 90 points (down 0.9%). Meanwhile, the BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading flat. The rupee is trading at 64.15 to the US$.

Coming to news from the oil & gas sector. According to an article in The Economic Times, state run Oil and Natural Gas Corp (ONGC) plans to raise funds from the debt market for the first time.

The company may raise over Rs 250 billion through the issue of bonds. ONGC may take on a combined debt of as much as US$4 billion through loans and bond issues to purchase the government's US$5.2 billion stake in Hindustan Petroleum Corp (HPCL) and for expansion projects.

ONGC hasn't borrowed since at least 1993 when it was converted into a corporation. However, its overseas investment unit, ONGC Videsh Ltd (OVL) has tapped the market to fund purchases of oil and gas blocks.

The company's bond issues are expected to attract a lot of buying interest given its credit profile. It has Rs 130 billion (US$2 billion) of cash on its books and a long-term rating that's a notch above the government.

Moody's Investors Service has a Baa2 score on ONGC's debt, making it the nation's highest rated state-run company.

With the current development, ONGC is set to join the ever-growing list of Indian companies opting to raise funds via bond issues.

Increasing Bond Issues by Indian Companies

Indian companies raised a record US$ 46.5 in debt and equity in 2017, the highest amount in the last decade. 64% of these funds are from the financial sector. What is interesting is that the energy and power sector was the second highest in raising funds. Also, amongst the financial sector companies, Power finance corp. Ltd (PFC) which raised US$ 3.5 billion was one of the largest fundraisers.

At the time of writing, ONGC share price was trading down by 1.3%.

Moving on to news from the auto sector. Tata Motors' share price is in focus today, after the automobile major called off its potential partnership with Volkswagen group firm Skoda Auto.

The companies said that they have ceased discussions on a potential alliance but will be open to talks on future collaborations.

The partnership, if it had materialized, would have had the two auto majors sharing vehicle platforms, technology, engines and even manufacturing facilities.

In March this year, the two companies signed a memorandum of understanding at the Geneva Motorshow to explore various options, including a partnership for the development of Tata's new advanced modular platform (AMP), a joint venture or a contract manufacturing agreement, in a bid to achieve economies of scale that would have helped to cut costs.

As of last week, the companies said that they have performed a technical feasibility and commercial evaluation of a potential collaboration and jointly concluded that the envisioned areas of partnership may not yield the desired synergies as originally assessed.

However, both the companies have kept the door open for future collaborations and partnerships.

At the time of writing, Tata Motors share price was trading down by 2%.

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