Firm Start to the Week; Coal India Rises 2%

Mon, 11 Dec Closing

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Indian share markets continued to witness buying momentum in the afternoon session and finished on a firm note amid strong global markets. At the closing bell, the BSE Sensex closed higher by 205 points and the NSE Nifty finished higher by 57 points. The S&P BSE Mid Cap finished up by 0.4% while S&P BSE Small Cap finished up by 0.2%. Gains were largely seen in software sector, pharma sector and automobiles sector.

Asian stock markets finished broadly higher today with shares in Hong Kong leading the region. The Hang Seng is up 1.14% while China's Shanghai Composite is up 0.98% and Japan's Nikkei 225 is up 0.56%. European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.59% while France's CAC 40 is up 0.10% and Germany's DAX is up 0.07%.

Rupee was trading at Rs 64.36 against the US$ in the afternoon session. Oil prices were trading at US$ 57.02 at the time of writing.

In news from mining sector, Coal India share price finished the day on an encouraging note (up 2%) after it was reported in The Economic Times that the company is planning to leverage the expertise for diversification.

Coal India is contemplating foraying into mining of new minerals and metals like iron ore, nickel, bauxite and copper to harness its expertise. Moreover, the PSU coal miner is working on various areas including solar power.

Last month, Coal India had said that the modalities for diversification into new mineral mining were expected to be ready in the next few months. Coal India, which accounts for over 80% of the domestic coal production, is eyeing 1 billion tonnes output by 2019-20.

In another development, coal imports surged by 40% to 19.18 million tonnes (MT) in November against 13.70 MT in November 2016 and 19.77 MT in October 2017.

This was mainly due to pick up in demand for winter restocking and low coal stock position in power plants. Also, the uptrend in coking coal prices coupled with supply concerns saw the buyers taking fresh positions in that market.

In news from the economy, the Confederation of Indian Industry's (CII's) Business Confidence Index has climbed to 59.7 during October-December 2017, against 58.3 in the previous quarter, showing improvement in perception regarding overall economic conditions. This comes amidst indications of a normalisation in business situation after the recent interruptions like Goods and Services Tax (GST).

As per the CII's quarterly Business Outlook Survey, Indian companies are optimistic that the country's economic growth will gain traction during the third quarter of fiscal year 2017-18 and the government's interference is having a ground impact.

As per the quarterly Business Outlook Survey, business conditions are expected to improve as over 63% of the firms anticipated an increase in sales in October-December 2017, compared with only 44% who experienced the same in the previous quarter.

The report said a majority of the firms expected no change in their investment plans, with around 50% expecting to maintain status quo in their domestic investment plans. On the international front, too, 59% firms expected to keep their investment plans unchanged. Besides on the concerns, the firms rated low domestic demand, followed by high commodity prices as the major threats.

In news from telecom sector, Bharti Airtel share price finished on a positive note (up 1.4%) after it was reported that the company is planning to set up 2,000 mobile towers across villages and national highways in the North East with the help of government funding.

In this regard, the company has signed an agreement with the department of telecommunications (DoT) and the Universal Service Obligation Fund (USOF) to provide mobile services in 2,100 villages across Assam, Manipur, Mizoram, Nagaland, Sikkim, Tripura and Arunachal Pradesh over the next 18 months.

The government charges a small fee from telecom companies which go into the USOF which, in turn, is used to provide connectivity in rural areas of the country. Moreover, the company will receive Rs 16.1 billion from the USOF for executing the project.

With it's cup of debt burden woes already brimming, the telecom industry continues to battle the intense competition from new-entrant Reliance Jio. Recently, the TRAI reduced the interconnect usage charge (IUC) from 14 paise per minute to six paise per minute. IUC are charges paid by operator companies for voice calls terminating from a different operator's network.

The 57% reduction in IUC is the steepest drop till date. TRAI has proposed phasing it out the IUC by 2020. This is another blow for industry players, as India has one of the lowest IUC rates in the world. Globally, the IUC rates continue to be gradually phased out.

India has the Lowest Interconnect Usage Charge

Coming back to the domestic telecom industry, the IUC rate cut is expected to adversely impact established players like Bharti Airtel and Idea Cellular. What this means is that these companies would no longer be able to enjoy additional revenues from having a large subscriber base thereby impacting their profitability and debt servicing capability. At the same time this development would entail significant cost savings for entrant Reliance Jio.

Moving on to news from power sector. Power Grid Corporation of India has reportedly entered into a loan agreement with Asian Infrastructure Investment Bank (AIIB) for US$100 million for funding of high voltage direct current (HVDC) bipole link between Western Region (Raigarh, Chhattisgarh) and Southern Region (Pugalur, Tamil Nadu)- North Trichur Kerala Scheme 2: AC System Strengthening at Pugalur end.

Power Grid share price finished the day up by 0.5% on the BSE.

In news from engineering sector, IL&FS engineering share price hit upper circuit in today's trade and finished up by 5% on the BSE after the company won a Rs 2.16 billion order from GAIL for constructing a pipeline.

The company has received Fax of Acceptance from Gas Authority of India Ltd (GAIL) for 157.8 km long 30' diameter pipeline laying works for Dobhi-Durgapur-Haldia Pipeline Section (Part B) along with 13.28 km long 12' diameter spurline under Jagdishpur Haldia/Bokaro-Dhamra Natural Gas pipeline project in Jharkhand/West Bengal.

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