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Dull End to the Week; Coal India Climbs 2%
Fri, 15 Sep Closing | Karan Janani, TM Team

Indian share markets continued to trade range bound in afternoon session as geopolitical tensions escalated in far east following another missile launch by North Korea that dampened the sentiment.

At the closing bell, the BSE Sensex closed higher by 31 points and the NSE Nifty finished flat. The S&P BSE Mid Cap finished down by 0.3% while S&P BSE Small Cap finished up by 0.4%. Power stocks and capital goods stocks witnessed majority of the selling pressure. Meanwhile, gains were seen in software stocks and energy stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.52% and the Hang Seng rose 0.11%. The Shanghai Composite lost 0.53%. European markets are mixed. The DAX is higher by 0.04%, while London's FTSE 100 is off 0.87%. Shares in France are unchanged.

The rupee was trading at Rs 64.07 against the US$ in the afternoon session. Oil prices were trading at US$ 49.99 at the time of writing.

As per a leading financial daily, a UN report has lowered India's GDP growth forecast for the year 2017 to 6.7% from 7% in 2016. The report has said that the informal sector which still accounts for at least one-third of the country's GDP and more than four-fifths of employment, was badly affected by the government's 'demonetisation' move, and it may be further affected by the rollout of the Goods and Services Tax (GST) regime.

Referring to India and China, UNCTAD's Trade and Development 2017 report noted that at the current levels of growth, the countries are unlikely to serve as growth polls for the global economy in near future.

It pointed out that India's growth performance depends to a large extent on reforms to its banking sector, which is burdened with large volumes of stressed and non-performing assets (NPAs), and there are already signs of a reduction in the pace of credit creation. It added that banking sector in India is saddled with NPAs of over Rs 8 trillion.

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It also said that the gradual slowdown of China is expected to continue as it moves ahead with rebalancing its economy, towards domestic markets. Thus, it noted that the dependence on debt makes the boom in China and India difficult to sustain and raises the possibility that when the downturn occurs in these countries, deleveraging will accelerate the fall and make recovery difficult.

In news from mining sector, Vedanta share price slipped 0.2% in today's trade after the Odisha State Pollution Control Board (OSPCB) directed the company for partial closure of its power plants over ash pond breach at Katikela in Jharsuguda district where the company's aluminium smelter as well as power generation facilities are located.

Vedanta has been directed to shut down five units of its captive as well as independent power plants (IPP) for at least seven days.

The company expects to be able to sustain the smelter capacity without affecting its production volume. The company is working towards the lifting of the SPCB closure orders at the earliest, to ensure that aluminium production is not affected.

In another development, Coal India share price finished up by 2% on the back of the news that the company is likely to diversify its core business of coal extraction.

The company is planning to become a full-fledged mining company in a bid to mitigate the growing pressure from renewable energy. Betting on the core competence in mining, the company is planning to foray into mining of iron ore, bauxite, copper and nickel.

Previously, CIL was given a target of scaling up coal production to 1 billion tonne by 2020, but in an unprecedented move, the Union government cut its production target for the current year from 660 million tonnes to 600 million tonnes in view of tepid demand. The company expects renewable energy pressure to increase and there may not be growth in demand for coal in the future.

In news from automobile sector, Maruti Suzuki share price finished on an encouraging note (up 0.4%) after the company said that its joint venture partnership with Toshiba Corp. and Denso Corp. will start making lithium ion batteries for India and international markets from 2020.

As per an article in The Livemint, the lithium battery plant of Suzuki in Gujarat would see an investment of Rs 11.51 billion (US$180 million). The company will invest an additional US$600 million for setting up its third car manufacturing unit in Gujarat's Hansalpur area, taking its overall investment in the factory to US$2.1 billion. With the third unit in place, the company's overall production capacity in the Gujarat would go up to 750,000 vehicles.

S&P BSE Auto index is the best performing sectoral index since the global financial crisis. Auto index has surged by a mammoth 823% since November 2008. This is way ahead as compared to the benchmark index returns of 230% during the same period.

BSE Auto Index Witnessed the Highest Gains Since Financial Crisis

Within the auto index, Tata Motor's share price has appreciated the most since November 2008. The stock has posted a gain of 1180% since November 2008. Other stocks too such as Maruti Suzuki, Bajaj Auto, Mahindra and Mahindra have gained more than 1000% since then.

The main reason leading to this surge is the booming consumption story. Driving aspirations of the rising middle class have pushed up car sales in the world's second most populous country. Further, benign interest rates and lower oil prices too have supported this consumption boom.

And here's a note from Profit Hunter:

The Nifty 50 Index traded on a positive note during the week. The index set the week with 37 point gap up and continued to trade up until mid-week almost hitting a new life high. The index traded sideways for the next two sessions. On Friday, the index dropped a bit as North Korea fired another ballistic missile over Japan. But it couldn't sustain the dip for long and recovered immediately. It finally ended the weekly session with 1.48% gains.

We mentioned last week, the index is finding support from the channel's support line. The index bounced strongly from this support and traded higher. But it couldn't overhaul its previous life high of 10,138 which is acting as a resistance. If the index closes above this level, it might open up further upside. On the flip side, if it finds selling from this resistance, it might as well slip back to the channel's support line.

Nifty 50 Index Traded on a Strong Note
Nifty 50 Index Traded on a Strong Note 

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Feb 26, 2021 03:36 PM