Sensex Finishes Flat as RBI Maintains Status Quo
Closing

Share markets in India plunged in red as Reserve Bank of India did not deliver the expected 25 basis points cut in repo rate before recovering to finish flat.

At the closing bell, the BSE Sensex stood lower by 45 points, while the NSE Nifty finished flat. Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap finished up by 0.5% and 0.2% respectively. Gains were largely seen in consumer durables and realty sector. Meanwhile, bank stocks and FMCG stocks lead the losses.

Bharat Heavy Electricals Ltd share price surged 2.8% in today's trade after the company posted net profit of Rs 935.4 billion for the quarter ended December 31, 2016 as compared to net loss of Rs 10.84 billion for the same quarter in the previous year. Total income of the company increased by 17.52% at Rs 64.61 billion for the quarter under review as compared Rs 54.98 billion for the corresponding quarter previous year.

Asian markets finished higher today with shares in Hong Kong leading the region. The Hang Seng gained 0.66% while Japan's Nikkei 225 was up 0.51% and China's Shanghai Composite rose 0.44%. European markets are mixed today. The CAC 40 is up 0.46% while the DAX gains 0.12%. The FTSE 100 is off 0.09%.

The rupee was trading at Rs 67.29 against the US$ in the afternoon session. Oil prices were trading at US$ 51.60 at the time of writing.

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Steel Authority of India (SAIL) share price finished the trading day on an encouraging note (up 0.6%) after it was reported that the company is planning to spend up to Rs 40 billion on the modernization and expansion of its plants in the coming fiscal.

The company would fund the capital expenditure through debt. In 2015-16, the public sector undertaking (PSU) had spent Rs 44.83 billion as capital expenditure. Crude steel production of SAIL, which was at 14.3 million tonnes (MT) in FY16, would increase to 21.4 MTPA post expansion in FY17.

Steel Demand has Outpaced Supply Over the Last 5 Years in the Country
Steel Demand has Outpaced Supply Over the Last 5 Years in the Country

In another development, a strong performance from the Indian operations helped Tata Steel beat market estimates during the December quarter with an Rs 2.32 billion consolidated net profit compared with a loss of Rs 27.47 billion a year ago.

Tata Steel reportedly overcame strong demand related issues in its European business and skirted the effect of demonetisation of high-end currencies in November in India by rationalizing its operating cost and focusing on value added products in the UK.

Total deliveries during the quarter were higher by 5.2% on year at 6.11 m tonnes. Indian deliveries grew 27% on year and 14% sequentially far outperforming the domestic markets which grew by 2% on year and 3% sequentially.

The company is also confident of resolving the pension issue with the UK union which has recommended its members to support the ballot process that is currently on to close the BSPS to future accruals.

Tata Steel share price finished the trading day down 0.5% on the BSE.

Moving on to news from pharma sector. According to an article in The Economic Times, Indian pharma exports in the current financial year may see a near double-digit growth and might end up on the lines with that of last year.

Indian Pharma exports stood at US$16.9 billion in the last financial year, growing at 9.4% with US$5.7 billion to USA and US$3.3 billion to Africa, as per the statistics supplied by Pharmexcil. The exports stood at $15.4 billion in 2014-15.

As per the reports, there may not be much impact of Brexit on pharma exports in either Britain or Europe as the situation has stabilized with regard to exports to those geographies.

Meanwhile, Indian pharma industry leaders have reiterated their concerns over constant reduction in the healthcare budget of the Central government and an increasing pressure on price reduction which is resulting in squeezed margins.

India spends about 1% of its gross domestic product (GDP) on public health, compared to 3% in China and 8.3% in the United States. Despite this low budget allotment, the contribution has been decreasing or kept stagnant in India since several years.

Pharma stocks finished the day on a negative note with Panacea Biotech and Wockhardt Ltd leading the losses.

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The Bank Nifty index traded erratically as Reserve Bank of India (RBI) announced its monetary policy.

Until the policy was announced, the index was trading in a very narrow range - less than 100 points. But as RBI rolled out its policy, the index experienced sharp volatility as seen in the one-minute chart below. It dropped 230 points in just a few minutes...made an equally dramatic V-shape recovery later on...and ended the session with a loss of 82 points at 20,245.

Currently, the index is trading just below its all-time high of 20,575. This resistance can prove to be a make-or-break level for the index. A sustained close above this level would indicate fresh strength in the index. If not, Bank Nifty might experience some selling pressure.

Bank Nifty Traded Volatile Post RBI policy
Bank Nifty Traded Volatile Post RBI policy 


Sensex Trades Flat; Consumer Durables Stocks Gain
01:30 pm

After opening the day on a flat note, the Indian share markets have continued to trade on a weak note and are currently trading marginally below the dotted line. Sectoral indices are trading on a mixed note, with stocks in the consumer durables sector and the metal sector witnessing maximum buying interest. Stocks in the banking sector and the pharma sector are trading in the red.

The BSE Sensex is trading down 52 points (down 0.2%) and the NSE Nifty is trading down 8 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 67.31 to the US$.

According to a leading financial daily, state-owned refiner Hindustan Petroleum Corporation Ltd (HPCL) has received environment clearance for expansion of its refinery in Mumbai.

HPCL had recently proposed to expand capacity in its Mumbai refinery at an estimated investment of Rs 38.5 billion.

The proposal is to expand the refining capacity of Mumbai refinery located in Chembur district from 7.5 million tonnes per annum (MTPA) up to 9.5 MTPA including Propylene Recovery Unit (PRU) and revamp of existing Captive Power Plant (CPP).

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With the proposed expansion, the Mumbai refinery will be able to produce gasoline and diesel meeting Euro IV quality specifications, besides other petroleum products like LPG, Naphtha, Kerosene, ATF, Fuel oil and Sulphur to help meet the current market demands.

The Environment Ministry has given environment clearance to HPCL's expansion project subject to compliance of some conditions. Among conditions specified, HPCL will have to impart training to all employees on safety and health aspects of chemicals handling.

It has also been told to set up a separate environmental management cell equipped with full-fledged lab facilities for carrying out environmental management and monitoring.

Through Mumbai Refinery Expansion Project, production of MS meeting Euro V/VI norms will be made possible.

The proposed project will improve refinery margin and contribute to overall development of the region. The proposed PRU project will facilitate production of chemical grade propylene and revamping of existing CPP will ensure self-sustainability in power.

The proposed expansion comes at a time when the government is mulling consolidating all of the major oil players into an integrated public sector 'oil major'. Our energy sector analyst Richa Agarwal, had written about her view of this development in one of the recent editions of the 5 Minute WrapUp Premium. Give it a read to form a better understanding of the development.

At the time of writing HPCL share price was trading up by 1.7%.

Moving on to news from stocks in the telecom sector. India's third largest telecom player is in the news again today as it announced plans to raise Rs 10 billion through the issuance of non-convertible debentures.

The Idea bonds will offer 8.12% with a tenure of seven-year proposed to be listed on the National Stock Exchange. The bonds will be allotted on a private placement basis and shall be deemed allotted on 8 February 2017.

The proceeds would be used for capital expenditure as the telecom company is looking to expand in its 4G network. In January 2017 alone, the number three telco has raised Rs 40 billion by issuing corporate bonds.

The added push towards capital expenditure comes at a time when the major telecom companies are under pressure by the disruptive pricing of the cash rich Reliance Jio.

Jio's Data Pricing Disrupts the Telecom Apple Cart

Jio's Data Pricing Disrupts the Telecom Apple Cart

Reliance Jio's disruptive pricing, seemingly hasn't left other market players with much of a choice but to accelerate investments in infrastructure to remain profitable in the long run.

A potential merger between Vodafone India with Idea Cellular too is on the cards as the telecom majors look for consolidation in order to remain competitive.

A merger of this scale has potential to change the industry order. The combined entity would have 43% revenue share in the market by FY19 against 33% of Bharti Airtel and 13% for Reliance Jio.

At the time of writing Idea share price was trading up by 1.4%.


Indian Indices Trade on a Volatile Note Ahead of MPC Rate Decision
11:30 am

After opening the day on a flat note, the Indian share markets witnessed choppy trades and are presently trading near the dotted line. Sectoral indices are trading on a mixed note with stocks in the banking sector witnessing maximum selling pressure. Stocks in the consumer durables sector are trading in the green.

The BSE Sensex is trading down 3 points (down 0.01%) and the NSE Nifty is trading up 7 points (up 0.1%). The BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.2%. The rupee is trading at 67.31 to the US$.

Indian share markets are trading on a volatile note ahead of the RBI monetary policy. RBI governor Urjit Patel is scheduled to announce the last monetary policy of the fiscal year at 2:30 pm today. This will be the second monetary policy after November's notebandi and the first since the Union Budget 2017-18.

The policy comes at a time when banks are flushed with funds post demonetisation. Owing to this, many expect the RBI to keep its key interest rates unchanged.

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There are also arguments made on the other side. With services sector contracting for the third straight month in January, hopes are that the RBI can slash the policy rate. Also, with the government pegging fiscal deficit target for FY18 at 3.2% of GDP, there's a room for RBI to be accommodative.

Fiscal Deficit Over the Years

Fiscal Deficit Over the Years

Apart from the above, there are a host of global as well as domestic factors to consider this time around. And what decision the Monetary Policy Committee (MPC) may take is hard to predict.

But as usual, we recommend that you, the intelligent investor, avert your eyes from this drama and keep them focused on the value and comfort of the safest stocks. Because, as you know, neither rate hikes, nor cuts, impact our long-term view on stocks.

After all, rate cut alone will not speed up the economic slowdown caused by demonetization-led cash shortage, and consumption reduction. To set the paralyzed demand into motion, way more action needs to be taken.

Along with keeping an eye on valuations, it's also important that you have a process in place. Many of you have already tasted the fruits of one of Rahul Shah's processes with his Microcap Millionaires service.

At the Equitymaster Conference 2017, Rahul asked attendees to mark 10 February, 2017, on their calendars. Why? Because he announced that he will send out his first Profit Velocity report to subscribers.

Profit Velocity is a system-based strategy.

With Profit Velocity, Rahul has created a system to help subscribers potentially fetch gains several times those of the benchmark index. Our Founder Member opportunity, which closes at midnight of 10th February, offers a whopping 60% discount on the usual membership fees for Profit Velocity.

So don't miss out. Act now to get your own system in place.


Sensex Opens Flat Ahead of RBI Monetary Policy Review
09:30 am

Asian markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.19%, while the Hang Seng is down 0.15%. The Shanghai Composite is trading down by 0.45%. Stock markets in the US ended their previous session on a positive note.

Meanwhile, share markets in India opened the trading day on a flattish note with caution ahead of the monetary policy review today. The BSE Sensex is trading lower by 7 points while the NSE Nifty is trading higher by 4 points. The BSE Mid Cap index and BSE Small Cap index have opened the day up by 0.5% & 0.3% respectively.

The rupee is trading at 67.37 to the US$. Sectoral indices have opened the day on a mixed note with information technology and FMCG stocks leading the decliners. While, consumer durables and metal stocks are among the top gainers on the BSE.

The central bank governor Urjit Patel is scheduled to take the stage at the Reserve Bank of India (RBI) headquarters in Mumbai at 2:30 pm today to announce the last monetary policy of the fiscal. This will be the second monetary policy after the government decided to demonetize high-denomination notes and the first since the Budget 2017.

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Economists predict that Urjit Patel will deliver a final interest rate cut today to buoy growth. Falling inflation and the government's fiscal prudence in Budget might propel the RBI to cut the key repo or lending rate today.

In its October policy review, Urjit Patel's first as governor had sprung a surprise by cutting interest rates by 0.25%. In December, just a month after Rs 500 and Rs 1000 currency notes were banned, it kept the repo rate unchanged at 6.25%. So, what could the RBI do this time around?

As the chart below shows, the repo rate has fluctuated in a range over the last six years. It is back to where it was in November 2010. The last change was a cut to 6.25% last October. So, where to from here? It is entirely possible the RBI could reduce the rate a bit more.

Repo Rate is Trending Down

Repo Rate is Trending Down

Reportedly, the six-member Monetary Policy Committee's (MPC) decision on a possible rate cut will depend on the funds situation at Indian banks post-demonetisation and a firming up of global oil prices. Meanwhile, with a key macroeconomic data showing services sector contracting for the third straight month in January, also provoked expectations of a rate cut by the RBI.

Other factors which will guide the RBI towards lowering the rates include Finance Minister Arun Jaitley cutting the fiscal deficit to 3.2% for next year and the dovish stance adopted by the US Fed, the reports noted.

Moving on to the news from stocks in energy sector. As per an article in a leading financial daily, As the government plans to merge state-run oil companies to create a behemoth to take on competition from overseas integrated players, GAIL (India) which comes under the ambit of the proposal may remain a separate vertical even in a merged entity.

Finance Minister Arun Jaitley in his Budget last week announced the government's plan to merge state-run oil & gas entities to create an integrated company. According to him, the merged entity will provide the capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders.

The plan comes at a time when private players like Essar, RIL and BP and Royal Dutch Shell are planning it big in the retail space, but if the proposal works out these players may not be able to compete with a single large state-controlled behemoth.

As GAIL has distinct businesses such as gas contracts, petrochemicals, city gas distribution and pipelines, which are not purely oil industry play, it shall probably remain a separate vertical, the reports noted.

The ambition is really big. The question is whether the government will be able to bring about an effective merger of all these companies. Then there is the big challenge of efficiently running such an organization. A lot of thought will have to go into all these issues before the government decides to put this ambitious plan into action.

To know more about the company's financial performance, subscribers can access to GAIL's latest result analysis and GAIL stock analysis on our website. GAIL share price began trading up by 0.7%.


To Cut or Not to Cut? RBI's Interest Rate Dilemma
Pre-Open

Today's the day. All eyes in the Indian stock markets are trained on the Reserve Bank of India's (RBI) bi-monthly monetary policy review.

Because banks are flush with post-demonetisation funds, and rising crude oil prices are set to fuel inflation, many believe the RBI will keep its key interest rates unchanged.

But with the services sector contracting for the third straight month in January, some still hope that the RBI will slash the policy rate. And with the government pegging the fiscal deficit target for FY18 at 3.2% of GDP, there's room for the RBI to accommodate this.

With these and a whole host of other global and domestic factors to consider...it's hard to predict what the RBI will do.

But as usual, we recommend that you, the intelligent investor, avert your eyes from this drama and keep them focused on the value and comfort of the safest stocks. Because, as you know, neither rate hikes, nor cuts, impact our long-term view on stocks.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

After all, rate cut alone will not speed up the economic slowdown caused by demonetization-led cash shortage, and consumption reduction. To set the paralyzed demand into motion, way more action needs to be taken.

Along with keeping an eye on valuations, it's also important that you have a process in place. Many of you have already tasted the fruits of one of Rahul Shah's processes with his Microcap Millionaires service.

At the Equitymaster Conference 2017, Rahul asked attendees to mark 10 February, 2017, on their calendars. Why? Because he announced that he will send out his first Profit Velocity report to subscribers.

Profit Velocity is a system-based strategy.

With Profit Velocity, Rahul has created a system to help subscribers potentially fetch gains several times those of the benchmark index. Our Founder Member opportunity, which closes at midnight of 10th February, offers a whopping 60% discount on the usual membership fees for Profit Velocity.

So don't miss out. Act now to get your own system in place.