Markets Finish on a Positive Note
Closing

Indian equity markets started the day on a positive note and continued this trend throughout the day on the back of buying activity in Realty, Power and Oil & Gas sector. While the BSE-Sensex closed higher by 83 points, the NSE-Nifty closed higher by 33 points. S&P BSE Midcap and S&P BSE Smallcap also closed on a strong note with both the indices up by 1.3%.

Asian markets closed mixed in the first trading week of 2016, after a wild ride that saw the Chinese market shut down prematurely twice to curtail rapid selloffs. Oil prices also fell to 12-year lows.

At the closing bell, the Shanghai Composite gained 1.97% and the Hang Seng rose 0.59%. The Nikkei 225 lost 0.39%. European markets are trading higher today with shares in Germany leading the region. The DAX is up 0.74%, while London's FTSE 100 is up 0.73% and France's CAC 40 is up 0.58%. The rupee was trading at 66.67 against the US$ at the time of writing.

According to a leading financial daily, Tata Steel's Kalinganagar steel plant will start commercial production from April 2016. Some units of the plant like coke oven plant, sinter plant have already started production on a trial basis. The blast furnace and steel melting shop will be on trial in the current quarter (Jan-Mar). With the 3-MT Kalinganagar steel plant's first phase, Tata Steel India's total capacity will rise to 13 MT.

Further, the company also reportedly claimed that its Sukinda Chromite Mine (SCM) in Odisha's Jajpur district has become the first mine in India to roll out a pilot project on Sustainable Development Framework (SDF). SDF aims at integrating social, environmental and economic value in decisions and operations of mining companies.

In 2QFY16, Tata Steel Europe level reported loss at the EBITDA (Subscription Required) for the first time since 3QFY13. This was due to drastic change in the business environment led by demand weakness primarily in China (Subscription required), which resulted in dumping of steel across the world. Consequently, this had effect on the Indian operations which resulted in decline in operating profits. A recent data released by the Joint Plant Committee shows that steel production in November 2015 fell by 8.5% to 7.1 million tonnes.

Moving on to news from the information technology sector, Tech Mahindra has reportedly entered into a strategic alliance with MetricStream, Inc. to deliver governance, risk and compliance (GRC) solutions across the globe. MetricStream's leading enterprise and cloud apps for GRC allow clients to strengthen risk management, regulatory compliance and vendor governance.

Further, Tech Mahindra has established a dedicated MetricStream Center of Excellence (CoE) in Bangalore, India, which will be supported by expert consulting services worldwide in various geographical markets. The GRC offering will target verticals such as BFSI, Retail, Manufacturing, Healthcare, Telecom and Infrastructure.

Also in other news, Mahindra & Mahindra (M&M), along with Tech Mahindra, also recently announced its intention to acquire Italian car designer Pininfarina SpA (Subscription Required). Accordingly, both M&M and Tech Mahindra, through a special purpose vehicle (SPV), will buy a 76.06% stake in the Italian car designer for around 25.3 million euros.

Equitymaster Conference 2016 is going to be one of our most important conferences ever!

Ajit Dayal (Founder, Equitymaster) and Bill Bonner (Founder, Agora Inc.) will aim to address all your questions about the current investment environment and help you plan for the next year.

Plus, at the Conference, you will rub shoulders with not only our speakers but also like-minded investors from across India (last year, we welcomed guests from 33 cities and three countries). So if you are serious about your investments, you cannot afford to miss the Equitymaster Conference 2016. More details about the Conference and our speaker line up are available here.

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Power Stocks Lead the Gains
01:30 pm

After opening firm, the Indian indices continued to trade in the green during the post noon trading session. Sectoral indices are trading on a positive note with stocks from the energy, IT and power sectors leading the gains.

The BSE Sensex is trading up 153 points (up 0.6%) and the NSE Nifty is trading up 48 points (up 0.6%). The BSE Mid Cap index is trading up 1.2% while the BSE Small Cap index is trading up by 1.3%. Gold prices, per 10 grams, are trading at Rs 25,872 levels. Silver price, per kilogram is trading at Rs 33,844 levels. Crude oil is trading at Rs 2,278 per barrel. The rupee is trading at 66.67 to the US$.

Energy stocks are trading on an encouraging note with Gujarat State Petronet and Gujarat Gas leading the gainers. As per an article in Economic Times, power and fertilizer companies will benefit from the deal between Qatar's RasGas and Petronet LNG. The deal is likely to help these companies in buying more gas at cheaper rates from the state-run company and boost their margins.

The major impact is likely to be on the fertilizer industry. The decrease in RasGas LNG prices would lead to decrease in subsidy receivables (subscription required) and working capital requirements of these companies. Further, it will lead to a decrease in interest cost due to lower working capital needs in case of delays in subsidy payments. This can in turn is expected to aid their profitability. The benefit is also likely to be passed on to gas transmission and marketing companies.

To note, Petronet LNG renegotiated a major deal with its Qatar-based supplier Rasgas in December. The deal was regarding lowering in the costs of gas shipments and avoidance of a US$ 1.5 billion penalty fee for lifting less gas then agreed. On December 30, the contract was reworked which lowered the price of the imported fuel by 50%. With this, the price of gas is now expected to decline to US$ 6-7 per million British thermal units (Btu) from US$ 12 per million Btu earlier.

Presently the stock of Petronet LNG is trading up by 0.9%.

Stocks in the automobile space are also trading firm with Tata Motors and Escorts witnessing maximum buying interest. As per a leading financial daily, Mahindra & Mahindra (M&M) is planning to roll out two more passenger cars/utility vehicles this financial year. With this, the company will complete its planned launch of 10 vehicles during 2015-16.

The first launch will be KUV 100 which will be rolled out on January 15. The second launch is said to be of new Quanto. While the KUV 100 will come packed with a petrol engine option, the Quanto will be upgraded.

Recently, the company launched a premium pickup Imperio that sports SUV looks with car like comforts and gives better performance. The same was launched with four variants of two single cabin options and two double cabin options.

While many companies in the automobile space have made new launches recently, the ban on registration of diesel vehicles came as a shock for these players. One of our charts shows how automakers are affected by these regulatory changes. Read it here.

Scrip of M&M is trading up by 0.7% on the BSE.


Markets Trade in the Green
11:30 am

The Indian Indices have recovered yesterday's losses and have managed to trade in the green today. Sectoral indices are trading on a positive note with stocks from the IT, FMCG and energy sectors leading the gains. In yesterday's The 5 Minute WrapUp, we shared our views about the crash in China and also how investors in India can stay safe from this volatility. You can read it here.

The BSE Sensex is trading up 105 points (up 0.4%) and the NSE Nifty is trading up 30 points (up 0.4%). The BSE Mid Cap index is trading up by 0.8% while the BSE Small Cap index is trading up 0.9%. The rupee is trading at 66.66 to the US$.

Majority of the automobile stocks are trading on a firm note with Escorts and Tata Motors witnessing maximum buying interest. As per a leading financial daily, Maruti Suzuki has launched auto gearshift (AGS) technology in the top-end diesel version DZire sedan. The same is tagged at Rs 8.39 lakh (ex-showroom). With this launch, the DZire becomes the first diesel car, and the fourth model in the company's portfolio, to be offered with AGS technology.

Maruti Suzuki had introduced the AGS technology in India with the Celerio. Presently, the company is offering the technology in Alto K 10 and WagonR as well.

Maruti Suzuki has sold over 1.2 million units of DZire until date. This makes it the only sedan in India to cross a million units sales mark. Going forward, the company aims to reach sales volume target of 2 million units over the next five years and in this regard plans to launch 20 new models in the same period.

Stocks in the mining space are trading on a mixed note with Ashapura Minechem and Gujarat NRE Coke leading the gains. As per an economic daily, Coal India's arm Mahanadi Coalfields (MCL) announced that it has crossed 100 million tonne (MT) production milestone. This comes in line with the company's effort to achieve the target of 150 MT output for the current fiscal.

The company achieved this production level (100 MT) in a record 281 days during current financial year 2015-16. Furthermore, the company on December 28, 2015 sated that it has also achieved 100 million tonne dispatch of coal to its various consumers, primarily power producers.

Coal India accounts for over 80% of domestic coal production. The government has set a production target of 550 MT for the company for the current fiscal and one billion tonne production goal by 2020. Presently the stock of the company is trading down by 2.5%.


Respite For Markets After Crash
09:30 am

After yesterday's mayhem wherein trading in China was halted after the index tanked more than 7%, major Asian stock markets have opened the day on a positive note. Stock markets in China and Hong Kong are trading higher by 2.2% and 1.2% respectively. However, stock indices in Europe and US ended their previous session on a negative note with benchmark indices in US falling as much as 2.3%. The rupee is trading at 66.91 per US$.

Indian stock markets too have opened the day on firm note. The BSE Sensex is trading higher by 203 points (up 0.9%) and NSE Nifty is trading higher by 100 points (up 1.3%). Both BSE Mid Cap and BSE Small Cap are trading higher by 1.2% and 1.5% respectively. Sectoral indices have opened the day on a positive note with stocks from pharmaceutical and automobile sector witnessing maximum buying interest.

As per an article in leading financial daily, government is planning to pare its stake in IDBI Bank. Consequently, bank has hired investment bankers to help them to raise funds through the Qualified Institutional Placement (QIP) route. Reportedly, at current market capitalization the QIP placement will result in a dilution of around 15-20% of the governments shareholding in the bank. Currently, government directly holds 76.5% stake in IDBI Bank. Additionally, government holds 13.88% through public sector entities like Life Insurance Corporation (LIC).

Recently, Mr Sinha, minister of state finance, had stated that government is planning to transform IDBI Bank on the lines of Axis Bank. Currently, government holds around 29.54% stake in Axis Bank through Specified Undertaking of Unit Trust of India (SUUI) and LIC. However, bank operates as a private owned entity. Government plans to do the same in the case of IDBI Bank. IDBI Bank is trading up by 2.5%.

As per an article in leading financial daily, Titan Company Ltd is expected to take a hit of Rs 5 billion in revenues in FY16. The hit will be triggered largely on account of governments move to lower the transaction threshold of quoting Permanent Account Number (PAN). Government has lowered the purchase limit for quoting PAN to Rs 2 lakh per transaction from Rs 5 lakh earlier. Further, the company stated that it expected cash sales of jewellery items between Rs. 2 lakh and Rs. 5 lakh to be impacted to some extent after the government's move. Titan is trading down by 0.5%.

Equitymaster Conference 2016 is going to be one of our most important conferences ever!

Ajit Dayal (Founder, Equitymaster) and Bill Bonner (Founder, Agora Inc.) will aim to address all your questions about the current investment environment and help you in plan for the next year.

Plus, at the Conference, you will rub shoulders with not only our speakers but also like-minded investors from across India (last year, we welcomed guests from 33 cities and three countries). So if you are serious about your investments, you cannot afford to miss the Equitymaster Conference 2016 . More details about the Conference and our speaker line up are available here.

Reserve your seat under our 'Early Bird' opportunity!


Greedy When Everyone Is Fearful
Pre-Open

Markets are crashing. But it seems mutual fund investors are making the most of the 'greedy when everyone is fearful' mantra.

The mutual fund industry made many headlines recently. This was as the industry saw its assets hit a record at the end of 2015. Assets swelled 1.8% in the three months ended December. And this was recorded as the ninth straight quarter of gains.

To note some numbers, the industry's average assets under management (AUM) stood at a whopping Rs 13.4 trillion in the three month period ending December 2015. Equity assets under management crossed a record Rs 4 trillion in November. Overall, the industry had a surprisingly good 2015, capping a 27.5% growth.

So far so good. However, are these mutual funds (MFs) placed well in the minds of Indian investors? Going by statistics, the answer can be no.

As an article in Livemint states, mutual funds are still some time away from being the savings instrument of choice.

If one has to evaluate, bank deposits have favored far well than mutual funds. According to the Central bank data as of December 11, 2015, commercial banks had an aggregate deposit of Rs 91.3 trillion. If compared, this was about seven times the AUM of mutual funds.

Going further, it may be far before the mutual fund industry will overtake bank deposits in India. Even if one assumes that the growth trend seen in 2015 continues for both asset classes, MFs will outdo bank deposits only by 2029.

Incremental financial savings in India still seems to be oriented towards bank deposits. Data shows that assets held through mutual funds, shares and debentures accounted for 4.6% of the change in overall financial assets in 2014-15. On the other hand, the same for bank deposits stood at 46.9%.

What Can One Expect Further?

All of the above facts state that while the mutual fund industry performed well, it hasn't been able to persuade a vast majority of Indian savers. The year gone by was impressive for MFs as gold and realty didn't do well. However, it may be a very short period to call it a trend. As things go, 2016 will be a test for the sector.

As for investors, with the looming uncertainties in the domestic as well as global economy, one can increase the odds in his favor by following proper asset allocation principles.