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Major Asian stock markets have opened the day on a negative note with the stock markets in Indonesia and China are trading lower by 1.5% and 0.6% respectively. Benchmark indices in Europe and the US ended their previous session in red with benchmarks indices in US ending the day lower by 1.4%. The rupee is trading at 66.93 per US$.
Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading marginally higher by 50 points (up 0.2%) and the NSE Nifty is trading marginally higher by 4 points (up 0.1%). Both, BSE Mid Cap and BSE Small Cap are trading higher by 0.6% and 0.4% respectively.
As per an article in Livemint, Tata Steel reported its results for the quarter ended June 2016. The company reported a significant improvement from its business in India, South-East Asia as well as Europe.
Indian business witnessed a healthy net profit growth of 35.3% during the quarter. Further, the Earnings Before Interest Tax, Depreciation and Amortization (EBITDA) Margins from the Indian business too widened to 22% from 19.5% in the preceding quarter.
Further, Tata Steel's European business too have yielded a positive EBITDA of Rs 3,384/tonne as compared to a loss of Rs 1,996/tonne in the preceding quarter. Not only this, the UK geography too posted a profit at the EBITDA level.
Additionally, its restructuring efforts in the European geography too yielded positive results by reducing costs and in-turn aided profits. The primary reason behind an improved performance was the spurt in global steel prices in the June quarter. Overall, the revenues declined by 4% QoQ to Rs 264 billion. While, its EBITDA grew by 65% QoQ during the quarter.
However, this trend has reversed again and the prices have been falling lately. Not only this, the worse part is that the prices of the raw material such as coking coal are increasing. This is a cause of concern as the raw material cost is increasing, but steel prices are trending lower.
The company reported a net loss of Rs 31.8 billion as compared to Rs 3.1 billion a year ago. The losses grew tenfold mainly on account of a one-off. The company accounted for the divestment of its Long Steel UK Ltd factory which led to a spurt in the losses. Excluding this, the net profits from continuing operations was Rs 1.7 billion as compared to Rs 0.22 billion a year ago.
Going forward, a pick-up in the infrastructure and real estate sector will be the key things to watch out for to assess a simultaneous pick-up in the steel demand. The stock of Tata Steel is trading down by 0.8%.
In another news update, the inflation numbers coupled with the Index of Industrial Production (IIP) data was published on Monday.
The inflation number reduced significantly in the month of August. Retail inflation stood at 5.05% in August as compared to 6.07% in the month of July. The inflation decelerated mainly on account of the correction in the vegetable prices.
A normal monsoon has led to an increase in the sowing area. Till date, kharif crops as well as pulses have seen an increase of 4.16% and 30% respectively in the sowing area as compared to a year ago.
Talking about IIP, the factory output contracted by 2.4% in the month of July. The sharp correction in IIP was on the back of a sharp fall of 3.4% in the manufacturing output.
The fall in the manufacturing output was driven by items such as rubber insulated cables, marble tiles and sealed compressers which declined by 91%, 62.3% and 33.3% respectively. Mining and electricity also showed tepid growth at 0.8% and 1.6%, respectively.
The lower factory output coupled with falling inflation on the back of normal monsoon may put pressure on the Reserve Bank of India (RBI) to lower interest rates in the upcoming monetary policy on 4 October 2016.
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