Markets Pare Early Gains
Closing

Indian equity markets started the day's proceedings on a strong note and continued this trend in the morning session. However, indices witnessed selling pressure in the afternoon trading to finish just below the dotted line. At the closing bell, the BSE Sensex closed lower by 49 points, the NSE Nifty finished lower by 2 points. Meanwhile, the S&P BSE Midcap & the S&P BSE Small Cap finished up by 0.3% and 0.1% respectively. Losses were largely seen in capital goods and banking stocks.

Asian markets finished mixed as of the most recent closing prices. The Hang Seng gained 1.09% and the Nikkei 225 rose 0.4%. The Shanghai Composite lost 0.87%. European markets are also trading mixed today. The DAX is up 0.53%. while the FTSE 100 has gained 0.1%. The CAC 40 is off 0.09%.

The rupee was trading at 66.74 against the US$ in the afternoon session. Oil prices were trading at US$ 41.17 at the time of writing.

PSU banks languished in the red today with Dena Bank and Canara Bank leading the losses. According to a leading financial daily, Punjab National Bank (PNB) plans to sell its real estate assets in central Delhi in order to monetize its real estate portfolio. The bank's units, which are currently part of the headquarters, are spread across various locations. PNB will relocate its headquarters to its new building in Dwarka. The bank would also auction some realty assets in Kanpur and Gorakhpur in Uttar Pradesh and some properties in Kerala. PNB is also planning to recover Rs 30 billion from among its bad loans by selling these to asset reconstruction companies (ARCs).

The bank has reported a fall of 57.49% in its net profit at Rs 3.06 billion for the quarter ended June 30, 2016 as compared to Rs 7.20 billion for the same quarter in the previous year. However, total income of the bank increased by 3.71% to Rs 139.3 billion for the quarter under review, from Rs 134.32 billion for the corresponding quarter of the previous year.

The bank's gross NPA for the April-June quarter of the current fiscal increased to 13.75%, as compared to 6.47% in the same quarter of the previous year. Besides, bank's net NPA stood at 9.16% in 1QFY17. The stock price of PNB finished the day down by 0.7% on the BSE.

Automobile stocks finished in the green with Tata Motors DVR and Maruti Suzuki leading the charts. Maruti Suzuki reported a rise of 12.7% in its total car sales (Domestic + Export) for the month of July 2016 at 137,116 units, as against 121,712 units in July 2015. The company's domestic sales rose by 13.9% in July 2016 at 125,778 units, as against 110,405 units in corresponding month last year.

Of the total, the company has sold 93,634 units of its passenger cars during last month, up by 2.2% as against 91,602 units in July 2015. The company's sales of vans have increased by 24.1% to 14,748 units in July 2016 as against 11,887 units in July 2015. Further, the company's sales of utility vehicles rose by 151.3% to 17,382 units from 6,916 units in July 2015.

In June, sales of passenger vehicles were subdued due to disruption in production at Maruti Suzuki due to an incident of fire at vendor Subros. July was the highest ever monthly sales for the company, which accounts for almost one of every two vehicles sold in the country. The company reported a 12% YoY and 23% YoY growth in sales and net profits (Subscription Required) respectively for the first quarter ended June 2016 recently. Maruti Suzuki finished the day up by 2.4% on the BSE.

Meanwhile, shares of Ashok Leyland tanked 4.2% in today's trade after the company reported a fall of 5% in July 2016 sales to 10,492 units, as against 11,054 units sold in the same period of last year. The company's medium and heavy commercial vehicle (M&HCV) sales declined (Subscription Required) by 7% to 8,182 units, as against 8,835 units sold in corresponding month previous year. However, as far as Llght commercial vehicles (LCV) are concerned, the company registered a sales growth of 4% to 2,310 units as compared to 2,219 units sold in July 2015.


Capital Goods & Banking Stocks Trade Weak
01:30 pm

After opening the day firm, Indian indices slipped into the negative territory during the post-noon trading session. Sectoral indices are trading on a mixed note with stocks from the IT and auto sectors leading the gains. capital goods and banking stocks are however trading in the red.

The BSE Sensex is trading lower by 59 points (down 0.2%) and the NSE Nifty is trading lower 11 points (down 0.1%). The BSE Mid Cap index is trading up 0.1% while the BSE Small Cap index is trading flat. Gold prices, per 10 grams, are trading at Rs 31,420 levels. Silver price, per kilogram is trading at Rs 47,930 levels. Crude oil is trading at Rs 2,786 per barrel. The rupee is trading at 66.75 to the US$.

As per an article in The Economic Times, Tata Power's South African joint venture Cennergi Ltd has accomplished commercial operations for its 134-MW Amakhala Emoyeni wind farm project.

Cennergi Ltd is a Tata Power's 50:50 joint venture with Exxaro Resources in South Africa.

Reportedly, the Amakhala Emoyeni plant is Cennergi's first operational asset. The company expects to complete its second wind farm shortly. Both facilities were awarded contracts under the second window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Further, Cennergi will focus on the examination of feasibility and management of electricity generation projects in South Africa, reports stated.

Notably, Tata Power now comprises of 30-40% of non-fossil based generation portfolio of its total generating capacity.

Considering power sector's several headwinds, Bhavita Nagrani, our research analyst, has discussed the challenges faced by Tata Power (Subscription Required) in one of our premium editions of The 5 Minute Wrap Up.

Speaking about Tata Power's financials, Radhika Pandit, Managing Editor of ValuePro has shared a few insights on Tata Power's Performance. Click Here to know more.

Tata Power was trading was trading down by 0.4% at the time of writing.

Moving on to the news from energy sector. According to an article in a leading financial daily, Bharat Petroleum Corp. Ltd (BPCL) announced that it has signed definitive agreements to acquire a 21% stake in FINO PayTech Ltd for Rs 2.5 billion in cash.

FINO is a financial inclusion software solutions and services company.

Reportedly, this strategic business and investment partnership would enable the customers of BPCL to transact through FINO's payment solutions. BPCL said the deal will help them provide customized offerings to different segments of customers and drive its fuel and non-fuel business.

It must be noted that, FINO had received the Reserve Bank of India's in-principle approval to start a payments bank last year.

Going forward, payment banks increasing these partnerships will be a key to improve their distribution reach to ensure a quick break-even, the reports stated. BPCL was trading was trading flat while writing.


Indian Indices Continue Uptrend
11:30 am

After opening the day on a positive note, the Indian stock markets have continued to trade in the green. Sectoral indices are trading on a positive note with stocks from the IT, auto and metal sectors leading the gains.

The BSE Sensex is trading up 175 points (up 0.6%) and the NSE Nifty is trading up 57 points (up 0.7%). The BSE Mid Cap index is trading up by 1.1%, while the BSE Small Cap index is trading up 0.9%. The rupee is trading at 66.73 to the US$.

As per a leading financial daily, the government has realised Rs 9 billion through the fourth tranche of its Sovereign Gold Bond scheme. This is recorded as the highest sum realised so far. The previous highest was recorded at Rs 7.5 billion, which was realised in the second tranche, when the issue price stood at Rs 2,600/gram of gold.

The latest subscription mobilized amounts through over 1.95 lakh applications and represented around 2.95 tonnes of gold. The issue price for this was fixed at Rs 3,119/gram of gold.

It is said that these numbers are likely to go up as receiving offices are keying in data for huge number of applications on the last day. The top five receiving offices were the State Bank of India (SBI), NSE, Bank of India (BOI), ICICI Bank, and HDFC Bank. The total subscriptions in the first three tranches was Rs 13 billion corresponding to 4.9 tonnes of gold.

The SGB scheme was introduce in the Union Budget 2015-16 as an alternative to keeping physical gold. The aim of this scheme was to reduce demand for physical gold and in process reduce India's current account deficit (CAD). To improve attractiveness of the scheme, new features were introduced in the latest instalment, where the minimum subscription limit was brought down to 1 gram from 2 grams earlier.

As far as our views are concerned, the SGB scheme is a worthwhile proposition while taking exposure to gold. However, what one must also keep in mind is that there is no point having an over exposure to such schemes. One shall look at gold as a portfolio diversifier and a monetary asset (rather than a mere commodity), which can help in reducing risks to the overall portfolio with its trait of being a store of value in times of uncertainties. One of our editions of The 5 Minute WrapUp has shared some insights on the government's various gold schemes.

Also, while we are on the topic of gold, Asad Dossani, editor, Profit Hunter, has penned an article that illustrates how one can make money trading gold.

Moving on to global news, data released during the end of last week showed economy growth for the eurozone halved in the second quarter of 2016. GDP rose 0.3% between April and June. This was in line with expectations but below 0.6% growth witnessed in the first quarter.

Eurozone inflation rose 0.2% in July from 0.1% in June on the back of higher food, alcohol, and tobacco prices. The 19-nation single currency, however, moved away from deflation. France, the eurozone's second-largest economy, saw no growth after expanding 0.7% in the first quarter. Bill Bonner, writing recently from France, explains why that country is a mess.

The above figures are the first to be released since Brexit. The data pointed out that Brexit indeed had a far worse impact on the entire economy. If there is still room for further pain remains to be seen. In its latest update, the International Monetary Fund (IMF) slashed the UK's growth forecasts and stated that Brexit has damaged the British economy's short-term prospects and thrown a spanner in the works of the global recovery.


Positive Start to the Day
09:30 am

Barring China, major Asian stock markets have opened the day on a positive note. Stock markets in Indonesia and Hong Kong are trading higher by 2.1% and 1.3% respectively. Benchmark indices in Europe ended their previous session in green with the stock market in Germany ending the day higher by 0.6%. The rupee is trading at 67.03 per US$.

Indian stock markets have opened the day on a firm note. The BSE Sensex is trading higher by 161 points (up 0.6%) and the NSE Nifty is trading higher by 50 points (up 0.6%). While both, BSE Mid Cap and BSE Small Cap have moved upwards and are trading higher by 0.9% and 0.8% respectively.

Major sectoral indices have opened the day ion green with stocks from automobile and oil & gas sector are witnessing maximum buying interest.

As per an article in Livemint, ICICI Bank declared its results for the quarter ended June 2016. The net profits declined by 25% YoY to Rs 22.3 billion during the quarter. The net profits declined on the back of higher provisioning on account of bad loans. Provisions grew by 163% YoY to Rs 25.1 billion during the quarter.

Concerns pertaining to bad loans rose as gross non-performing assets (NPAs) grew by 3.7% QoQ to Rs 271.9 billion during the quarter. Further, gross NPAs as a share of total advances stood at 5.87% compared with 5.82% in the preceding quarter.

Net Interest Income, considered as the core income of the bank grew marginally by 0.85% YoY to Rs 51.5 billion during the quarter. Whereas, the net interest margins declined by 0.21% to 3.16%.

Asset quality will be the key thing to watch out for going forward. The stock is trading down by 1.7%.

In another news update, Nestle too reported its results for the quarter ended June 2016. The company reported a net profit of Rs 2.3 billion as compared to a net loss of Rs 0.6 billion a year ago. The company had incurred a loss in the preceding quarter last year, mainly on account of the Maggi controversy. The loss was linked to the one-time charge of Rs 4.5 billion related to the removal of Maggi noodles from the domestic market.

The company's net sales grew by 16.7% YoY to Rs 22.5 billion during the quarter. Sales from domestic and export market grew by 17.5% YoY and 7% YoY respectively during the quarter. Maggi noodles is yet to re-gain its lost market share, which stood at 80.2% in the quarter to March 2015. Currently, the market share stands at 57%.

Further, the company is increasingly launching new products to reduce its reliance on the Maggi noodles. Reportedly, the company has launched more than 25 new products across categories.

Traction from new products coupled with the re-gain of market share from Maggi noodles will be the key things to watch out for going forward. The stock is trading up by 0.3%.


Will the Rally in Commodity Markets Sustain?
Pre-Open

There is a lot of speculation about where the commodity prices are headed next. Crude oil prices have been on a roller-coaster ride recently after being in the doldrums during the early months of the year. Precious metals have turned the safe-haven bets amid global volatility. Major global developments - such as Brexit and weak US economic data - helped these metals garner plenty of gains. And guess what? The good times for these commodities are going to continue ahead - at least as per the projections made by the World Bank.

An article from the Business Standard states some key details from the Commodity Markets outlook for July that has been published by the World Bank. Let us jot down some of these points briefly and answer what lies ahead for the commodity markets.

As per the outlook, the World Bank opines that there is much optimism left for commodity prices in the second half of 2016. This is confirmed with its upward revision for many commodity prices during the abovementioned period. It has also noted that while some commodities might end the year with a lower average price than in 2015 but on the whole, prices have already seen a bottom.

Limiting our focus to individual commodities, the positive trend is said to be witnessed for energy, non-energy, crude oil, silver and gold.

As regards precious metals - the tag crowned by gold and silver - prices are expected to rise 8% during the second half 2016. This, as per the outlook, will be seen on the back of stronger investment demand. However, the outlook also spells a conservative cast. It states that these metals could see a decline with the tightening of US monetary policy and a strengthening dollar ahead. Being on the topic of precious metals, Asad Dossani, editor, Profit Hunter, has penned an article that illustrates how one can make money trading gold.

Moving on to energy prices. Crude oil surged around 30% in the second quarter of 2016. The outlook states that this uptrend will also be stretched in the second half of 2016. Crude oil forecast for 2016 is being raised to US$ 43 a barrel. This marks an upward revision from the April assessment, where the growth outlook was set at US$ 41 per barrel. Moreover, in 2017, the price is expected to be US$ 53 a barrel. This marks an upward revision of 23.7% as compared to the April projection of US$ 50.

Last on the list are agri-commodities. Agricultural prices have been revised upwards by two percentage points. However, they are still projected to average marginally lower in 2016 than in 2015.

For the other side, the outlook for fertilizer and metal & minerals is still negative.

So far, so good. The above data seems to be a welcome breather for most of the commodities in the coming days for this year. This, if turned true, will definitely bear an impact on various businesses that operate in or are intricately linked to the abovementioned commodities. But will the rally sustain?

We think that it would be too early to conclude that. This is because there are still many headwinds that remain ahead for the global economy.

The projections may provide some room for the uptrend in commodities space. However, eventually the prices should converge to their intrinsic value.

What one shall understand is that commodity prices are influenced by many global factors. The prices of many commodities may be stable right now. But historically they have been volatile. So one shall not assume that today's price and next year's price will follow a similar trend.

Also, we have never believed in betting on such macro forecasts. One should instead follow a bottom-up approach to stock picking that focuses on the analysis of individual companies rather than the economy as a whole. Picking stocks solely on the price outlook of a commodity, on the other hand, can always be risky.

One can be better off by focusing on fundamentally strong companies, that have exposure to the above commodities, whenever available at beaten down valuations.