A Flat End to the Day

At the closing bell, the BSE Sensex closed marginally higher by 10 points, while the NSE Nifty finished higher by 7 points. However, S&P BSE Midcap and S&P BSE Small Cap inched upwards and ended the day higher by 0.6% and 0.9% respectively.

Major Asian markets finished on a mixed note as of the most recent closing prices with stock markets in Japan and Singapore ending the day higher by 0.9% and 0.5% respectively. Whereas, stock markets in China ended the day lower by 0.3%. Oil prices were trading at US$ 51.96 a barrel at the time of writing. The rupee was trading at 66.73 against the US$.

Sectoral indices finished the day on a positive note with stocks from power and capital goods sectors witnessing maximum buying interest.

As per an article in Livemint, the Board of National Mineral Development Corporation (NMDC) and Manganese Ore India Ltd (MOIL) have approved a buyback of shares. A little over 20% of the paid up capital would be bought back in each of these companies.

NMDC and MOIL will buy back the shares at a premium of 5.26% and 2.01% respectively from their previous close.

Further, the government currently holds 80% stake in each of these companies. The buyback from both the companies will help the government to raise Rs 84 billion. Further, this will also help the government to move closer towards its disinvestment target. The government has set a disinvestment target of Rs 565 billion for 2016-17.

Moreover, the buyback will help to keep the fiscal deficit in check. As the macro factors like crude prices have started moving against our favour, the government will have to find sources of revenues to keep the fiscal deficit at the desired levels.

Talking about fiscal deficit, Radhika Pandit, Managing Editor of ValuePro, has written an excellent article stating how the rising crude prices could become the ruling government's worst enemy. You cannot miss this interesting piece. Click here to access it.

In another news update, Indian Meteorological Department (IMD) stated that the southwest monsoon has hit the southern state of Kerala and declared the onset of the rainy season. IMD expects it to rapidly advance over the rest of the country.

The agency in April had stated that the monsoon rainfall will be 106% of the long period average and there is a 94% probability that monsoon will be normal to excess. Reportedly, the monsoon is considered normal when the rainfall is 96 to 104% of the Long Period Average (LPA) and is considered above normal when it is 105% to 110% of LPA.

A normal monsoon will lead to higher disposable income in the hands of farmers, which in turn will boost rural consumption. To add to this, a normal monsoon will also help to keep the inflation at low levels. The possibility of a good monsoon would also increase the chances of the country's central bank retaining its easy money policy. However, there have been many instances in the past wherein the forecasts have gone wrong. Provided, they are accurate it will help revive rural sentiments.

Indian Indices Remain Flat
01:30 pm

After opening the day on a flattish note, the Indian indices have continued to trade in the similar fashion. Major sectoral indices are trading in the green with stocks from the capital goods and power sectors leading the gains.

The BSE Sensex is trading higher by 47 points (up 0.2%) and the NSE Nifty is trading higher by 10 points (up 0.1%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is up by 0.9%. Gold prices, per 10 grams, are trading at Rs 29,560 levels. Silver price, per kilogram, is trading at Rs 39,600 levels. Crude oil is trading at Rs 3,367 per barrel. The rupee is trading at 66.83 to the US$.

As per an article in Livemint, over 239 projects involving investments worth Rs 5,000 billion have been given environmental clearance in the last two years. Projects in important sectors such as roads, railway network, pipelines, irrigation canal have remained stuck for approval for many years.

According to the data put out by the Union environment ministry, projects worth Rs 5,037 billion were cleared across all states which together have a potential of creating 164,239 jobs. Also, the Environment Minister Prakash Javadekar said that average waiting period for approval of projects has been brought down to 190 days from 600 days earlier. He further added that Modi's government will bring a kind of revolution in this space ahead and the development will unlock the potential of creating millions of jobs which in turn will drive India's economic growth.

As per the data released, Maharashtra was leading among the states with 35 projects approved followed by Andhra Pradesh and Gujarat with 11 and 19 projects respectively. Projects of upto 40 hectares and linear projects will be taken up at 10 offices instead of one ministry. Also, the forest cover in India has been increased by 3,500 sq km in the last two years.

Stocks in the banking space are trading on a positive note with SBI and Bank of Baroda leading the gains. Kotak Mahindra Bank (KMB) has notified that its customers will continue to enjoy 6% and 5% interest per annum on savings account for balance above Rs 1 lakh and up to 1 lakh, respectively.

Notwithstanding fall in interest rates, KMB decided to continue with their 6% proposition.

KMB is among the first banks to revise its interest rates upwards to 6% while most banks still continue to offer 4% p.a.

The bank has further said, it has nothing to do with competition but it is just giving a fair deal to customers.

Scrip of Kotak Mahindra Bank is currently trading down by 1.6%.

Telecom Stocks Lead the Gains
11:30 am

After opening the day on a flattish note, the Indian stock markets have continued to trade near the dotted line. Sectoral indices are trading on a mixed note with stocks from the capital goods, telecom and power sectors leading the gains. IT stocks are trading in the red.

The BSE Sensex is trading up by 30 points (up 0.1%) and the NSE Nifty is trading up by 2 points (up 0.02%). The BSE Mid Cap index and the BSE Small Cap indices are trading in the green, up by 0.3% and 0.6% respectively. The rupee is trading at 66.74 to the US$.

Crude oil is witnessing buying interest this week. The commodity hit its 2016 highs yesterday and US crude settled above US$ 50 a barrel. This was due to reports that showed a higher-than-expected crude draw in the US inventories during the last week. Also, worries about global supply shortfalls on the back of attacks on Nigeria's oil industry aided the rally.

These gains are followed by losses witnessed during last week after the much-awaited OPEC meet went off with no decision on the freeze of crude supplies.

The Organization of the Petroleum Exporting Countries (OPEC) members failed to change the oil output policy at the meeting scheduled in Vienna last week. This came as Iran insisted on steeply raising its production. This was seen as yet another failure by oil producers after they failed to agree on a production cap during the summit in Doha earlier in April.However, some respite was found as Saudi Arabia promised not to flood the market and sought to mend fences within OPEC. Also, Saudi Arabia's oil minister stated that oil prices have recovered and this recovery will continue.

All eyes are now on official inventory numbers by the US Energy Information Administration (EIA) that are going to be released today.

At the time of writing, crude oil was trading at Rs 3,374 per barrel, up by around 0.9%. Do read what Richa Agarwal, research analyst at Equitymaster, has to say on the future prospects of crude oil prices. Also, an entry in Vivek Kaul's Diary offers some insights on why oil prices will touch US$100 per barrel again.

To keep a regular tab on the movements in crude oil prices, you can read weekly market commentary from the Daily Profit Hunter team. Their weekly commentary tracks the developments in the global economy as well as equity, currency and commodity markets.

As per a leading financial daily, the Telecom Commission (TC) has lowered the annual spectrum usage fee for telecom operators to 3% of adjusted gross revenue for all bands in the upcoming auction that is going to be held in July. The commission has also kept the charge for using broadband wireless access (BWA), or 4G spectrum, bought in the 2010 auctions, at 1% of revenue.

As per the new formula, weighted average will be calculated between broadband wireless access (BWA) spectrum, the current spectrum usage charge (SUC) rate and the spectrum that will be acquired in future by the company.

Also, to prevent the revenue loss for the government, if new SUC computation leads to a lower payout, telecom operators will pay a minimum amount they are paying as per 2015-16 rates. The annual SUC collection as per present levels is at around Rs 70 billion.

Department of Telecommunications (DoT) is going to move the Cabinet note on spectrum auction in a week for inter-ministerial consultations.

If all the spectrum on offer is sold at base prices, it will fetch around Rs 5,440 billion for the government.

Indian Indices Open Flat
09:30 am

Major Asian stock markets have opened the day on a mixed note. The stock markets in Hong Kong are trading down by 0.33%, while markets in Japan are trading up by 0.55%. Major indices in Europe ended their session on a positive note. US markets, however, closed their previous session in the red. The rupee is trading at 66.75 per US$.

Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading up by 51 points (up 0.08%), while the NSE Nifty is trading flat. The BSE Mid Cap and the BSE Small Cap indices are trading in the green, both up by 0.3%. Sectoral indices have opened the day on a mixed note with stocks from telecom and capital goods sectors leading the gains.

Stocks in the PSU banking space have opened the day on a mixed note with Indian Bank and Central Bank leading the gains. As per a leading financial daily, State Bank of India (SBI) chairperson Arundhati Bhattacharya said that the merger of SBI with its five subsidiaries will strengthen them and boost market share as the move will help in reducing several repetitive costs. She also stated that talks with bank unions will take place and their concerns related to the proposed merger will be addressed once the government gives its in-principle approval.

The bank is going to merge its five associate banks, along with Bharatiya Mahila Bank, with itself. The five associate banks are State Bank of Travancore, State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, and State Bank of Patiala.

Recently, Finance Minister Arun Jaitley announced that the government as of now was looking at SBI merging its subsidiaries and a decision on this will be taken soon.

The above development comes as some state-run banks have evinced their interest to take on smaller entities. Finance Minister Arun Jaitley had said in March that the bankers' themselves have supported the proposal of consolidation of banks in order to have strong banks rather than having numerically large number of banks.

However, does it really make sense to merge public sector banks? Why are these PSUs willing to consolidate their operations? Will this be a successful move knowing that public sector banks are facing huge bad loan problems? Vivek Kaul answers all of these questions in one of the articles from the Vivek Kaul's Diary. He is of the opinion that the merger of two public sector banks will give us a bigger inefficient bank.

Moving on to the news from energy space. As per an economic daily, the Ministry of New and Renewable Energy (MNRE) is planning a second phase of setting up solar parks across the country. For this, the ministry is aiming to identify land capable of accommodating 40,000 megawatt (MW) in 25 states.

Notably, this phase is planned twice as ambitious as the first and will set aside a portion where solar power producer will also have to set up facility to store the energy in batteries.

One shall note that the India Government has set a target of 175 gigawatt (GW) of renewable energy capacities by 2022 with a capital outlay of US$160 billion including equity of US$40 billion. (1 GW = 1,000 megawatts) Speaking of renewables, we had written an article stating the major flaw in the US$ 100 billion solar sector.

Is a Boom in Real Estate Visible?

Since a while now, the real-estate sector has shown no signs of improvement. The situation is much worse in the metros as compared to the smaller towns. Unsold inventors, in the top eight cities have risen by around 22% YoY in FY16. However, in-spite of the rise in the inventory levels, the developers have not brought down the prices. This indeed has played a part in the slowdown in this sector.

Having said that, there was a gradual pick-up in the housing demand in the first quarter of this calendar year. Experts believe that the improvement in demand is because of the improving economic scenario, lower interest rates and the newly introduced Real Estate Act (REA), 2016.

Talking a bit about the new act. If implemented effectively, REA will have a lot of positives for the buyers. Let us take you through some of the positives.

  • The state level authorities will regulate both residential and commercial transactions. It will ensure the timely completion of projects.
  • Complaints will have to be disposed of within 60 days. Developers and agents can now be imprisoned for up to 3 years and one year respectively, if they break the rules. There are many other aspects of the bill that we like.
  • Pricing will have to be done on the basis of carpet are only. And the term 'carpet area' will be clearly defined.
  • All projects will have to be registered with the regulator. No pre-launch will be allowed without all approvals being granted. Developers will have to disclose all important project details so that buyers can make an informed decision.
  • Perhaps the biggest issue that the bill has covered is the money developers have to deposit in an escrow account to cover cost of construction and land. This has been fixed at a minimum of 70% of funds collected from buyers. This will bring in much needed transparency to the sector.

While the positives from the real estate bill might have revived the confidence of buyers, a take on the revival of this sector will only depend on a sustainable growth in the housing demand. Further, lower interest rates too will play its part in assessing the demand scenario in this sector.

Moreover, a boom in the real estate sector seems to be a far visibility as of today. However, it will be interesting to see how things pan out in this space over a period of two years. As for an investors perspective on whether to buy real estate or equities, Rahul Shah, has written an excellent article stating how equities could crush real estate over the next three-five years. You cannot miss to read this interesting piece. Click here to access it.