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Indian markets fall
Wed, 21 Oct 01:30 pm

After trading on a firm note in the early hours of the day, the Indian share markets lost their momentum and slipped into the red in the post-noon trading session. Sectoral indices are trading mixed with banking, capital goods and pharma sectors bearing the maximum burnt.

BSE-Sensex is down 44 points (0.2%) and NSE-Nifty is trading 25 points down (0.3%). S&P BSE Midcap and S&P BSE Smallcap index are both trading on a negative note, down by 0.3% and 0.6% respectively. Gold prices, per 10 grams, are trading at Rs 27,155 levels. Silver price, per kilogram, is trading at Rs 36,916 levels. Crude oil is trading at Rs 2,994 per barrel. The rupee is trading at 65.16 to the US$.

Stocks in the energy space are trading on a mixed note with Castrol India and Gujarat Gas Ltd leading the gains. As per a leading economic daily, the former investment arm of India's top oil explorer Oil & Natural Gas Corporation (ONGC) is targeting oil and gas asset purchases of US$ 10-US$ 12 billion over the next three years.

The move was initiated as ONGC Videsh Ltd (OVL) wanted to capitalize on cheaper assets after a slump in oil prices and Prime Minister Narendra Modi's diplomatic efforts to boost the global presence of Indian firms. The company stated that it is presently giving more good consideration to M&A (mergers & acquisitions). It further added that the concerned asset purchase plan will include more corporate acquisitions.

OVL, which produces about 1,75,000-1,80,000 barrels per day from its overseas assets, wants to double output by 2018 and increase it six-fold by 2030. Presently the scrip of ONGC is trading up by 0.6%.

Automobile stocks are also trading mixed with Bajaj Auto and Maharashtra Scooters leading the gains. As per an article in Economic Times, Maruti Suzuki's royalty payments to its Japanese parent Suzuki has increased over six times per car sold over the past 15 years. However, average sales realization per car increased only 1.6x. According to proxy advisory firm IiAS, royalty payments have aggregated 5.7% of net sales and 36% of profits before royalty in 2014-15.

The company defends the higher royalty payments on the premise that the global brands and the product research & technology have been developed outside India. But the report concluded that the royalty payments were extortive and Suzuki's R&D efforts do not appear to aid Maruti's margins or expansion.

One of our articles in 'The 5 Minute WrapUp' has detailed the structure of royalty payments and some of its peculiarities. You can read it here.

Stock of Maruti Suzuki is presently trading down by 0.8% on the BSE.

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Jan 24, 2018 01:41 PM