Firm End to the Week

Indian equity markets gathered steam in the post noon trading session as buying activity intensified in stocks from the banking, capital goods and IT spaces. The BSE-Sensex today closed higher by around 170 points while the NSE-Nifty saw an increase of around 59 points. BSE Mid Cap and BSE Small Cap indices also closed well in green gaining 0.5% and 0.3% respectively.

Asian markets finished broadly lower today with shares in China leading the region. The Shanghai Composite is down 5.48% while Hong Kong's Hang Seng is off 1.87% and Japan's Nikkei 225 is lower by 0.30%. European markets are mixed. The DAX is higher by 0.03%, while the CAC 40 and FTSE 100 are down by 0.30% and 0.30% respectively. The rupee was trading at 66.55 against the US$ in the afternoon session.

According to a leading economic daily, National Aluminum Company (NALCO) Ltd has received US$8.05 million or around Rs 540 million in an out-of-court settlement with a US firm. This ends a long-drawn litigation with Peak Chemical Corporation Inc. of the US in a case related to 1994 supply contract for a specific variety of caustic soda used in the alumina refinery.

Furthermore, the company recently lined up a plan to invest US$2.8 billion to build a smelter and a captive power unit in either Iran or Oman, depending on where it will get the fuel cheaper. Nalco reportedly reckons that the proposed smelter abroad could make it competitive against even Chinese aluminum producers known for their lower costs, enabled by captive power units. Nalco is a Navratna CPSE under Ministry of Mines, Government of India where the government holds a stake of 80.93%.

Nalco's move comes at a time when the global aluminum stocks and margins are under severe pressure due to concerns over the Chinese aluminum exports and global meltdown in commodity prices. Moreover, domestic aluminum companies are also struggling with higher fuel costs. The aluminum companies were forced to source coal from the open markets in the wake of cancellation of the captive coal blocks allotted to them by the Supreme Court last year. And price hikes taken to pass on the cost has further dented their competitiveness in the global markets. This has all been reflected in the weakening financial performance during the first half of FY16. (Subscription required)

NALCO closed the trading day up by 1.5% on the BSE.

Oil and Gas sector closed on a mixed note with Castrol India and Gujarat State Petronet leading the gains. However, Indraprastha Gas and BPCL witnessed majority of the selling activity. According to a leading financial daily, GAIL India in collaboration with National Remote Sensing Centre (NRSC), a unit of Indian Space Research Organization (ISRO), has launched an innovative surveillance geo-portal called 'Bhuvan-GAIL portal' utilizing space technology for its pipeline application. Despite all challenges, GAIL has proved that the space technology can be efficiently used for monitoring the pipeline Right of Use.

GAIL will reportedly start live satellite monitoring of the pipeline Right of Use by January 2016 and is also looking for alternative methods like advance Unmanned Ariel Vehicle (UAV) which can also be integrated with this system. The company has over 13000 Km of Pipeline network wherein monthly monitoring of pipeline ROU at present is being carried out through Helicopter surveys.

The government has proposed a revenue sharing model for oil and gas exploration. Until now, the companies have been winning bids based on the contractor's commitment to carry out a minimum work program, as specified in various exploration phases. The new model has no concept of cost recovery first. The companies will need to indicate the amount of revenues they would be sharing with the government at each stage of production and in different price scenarios. In our recent edition of '5 Minute Wrap up', we outline how the new changes would be a boon for oil and gas companies.

Banking Stocks Lead the Gains
01:30 pm

After opening the day in the green, the Indian Indices have continued to trade on a positive note during the post-noon trading session. Sectoral indices are trading on a mixed note with stocks from the banking and metal sectors leading the gains. Consumer durables stocks are however trading in the red.

The BSE-Sensex is trading up 98 points (up 0.4%) and the NSE-Nifty is trading up 30 points (up 0.4%). The S&P BSE Midcap index is trading up 0.2% while the S&P BSE Smallcap index is trading up by 0.1%. Gold prices, per 10 grams, are trading at Rs 25,231 levels. Silver price, per kilogram is trading at Rs 33,875 levels. The rupee is trading at 66.71 to the US$.

Cement stocks are trading on a mixed note with Prism Cement and Heidelberg Cement leading the gains. ACC Ltd is planning to open a series of cement brick-making units in partnership with dealers and social organizations. The move is a bid to retain the company's retail rural market share and enhance focus on value-added products.

Under the partnership, ACC Ltd will provide the expertise and technical support while the joint venture partner would own and operate the units. As planned, each plant for this project calls for an investment of Rs 20-26 million. Furthermore, the brick units will compulsorily source cement from ACC, which has opened 19 brick units largely in the northern and eastern part of India.

The company is also planning to set up other 26 brick units in seven months. The company stated that the brick units have opened the doors to new sales channel in few places with each unit consuming about 100 tonnes of cement in a month.

ACC Ltd is India's foremost manufacturer of cement and ready mixed concrete with a countrywide network of factories and sales offices. The company has announced its financial results for the third quarter of the calendar year 2015. During the quarter ended September 2015, while the company's standalone sales reported flat growth, the net profit plummeted 42.9% YoY respectively. Read our detailed analysis of the results here.

Stock in the banking space are trading on a positive note with Oriental Bank of Commerce and IDBI Bank witnessing maximum buying interest. As per a leading financial daily, State Bank of India (SBI) is finalizing plans to set up a subsidiary for managing its large portfolio of real estate properties and those taken on lease or rent. Once formed, the subsidiary will take over all these properties.

The subsidiary will be formed in the next financial year. One of the huge properties of the bank includes Samriddhi Bhavan in Kolkata, which also houses the Local Head Office (LHO) of the Bengal circle. Other prominent ones included the Bengal circle's CGM bungalow and corporate office in Mumbai. Currently, the bank is collecting data for listing these properties.

State Bank of India is the largest state-owned banking and financial services company in India. It recently declared its results for the second quarter of the financial year 2015-16 (2QFY16). Madhu Gupta, Managing editor of ResearchPro, has recently released a detailed analysis on the same. In the note Madhu explains factors driving the performance of the company in this period and what to expect going forward. If you are interested in the stock, then this is a necessary read.

Indian Markets Inch Upwards
11:30 am

After opening the day on a positive note, the Indian stock markets gained momentum. Sectoral indices are trading on a positive note with stocks from the metal, capital goods and banking sectors leading the gains.

The BSE-Sensex is trading up 162 points (up 0.6%) and the NSE-Nifty is trading up 51 points (up 0.6%). The S&P BSE Midcap index is trading up by 0.6% while the S&P BSE Smallcap index is trading up 0.7%. The rupee is trading at 66.75 to the US$.

As per an article in leading financial daily, Ashok Leyland has received an order worth US$ 200 m from the West African country Cote D'lvoire. The order is pertaining to supply of 3,600 trucks and buses.

The order is the largest contract the company has ever bagged. Further, it is also the largest contract that the West African country has signed with any firm in India. The company is exploring opportunities to expand its market in West Africa. This humongous order will set a base for the company to expand its presence in the region. The delivery of the vehicles will take place in the next twelve months.

Ashok Leyland is trading up by 2.50%.

As reported in a leading financial daily, earlier this week Idea Cellular had purchased the right to use spectrum in the 1800 MHz band from Videocon Telecommunication. The spectrum was purchased at a price of Rs 33.1 bn. The spectrum was relating to the regions in Gujarat and Uttar Pradesh West, wherein the company has a strong footing.

The value at which spectrum was purchased, came as a surprise to the entire industry as it paid three times the price that Videocon paid in November 2012. However, recently Idea clarified that the deal should be viewed as a one-off event because the company is not planning to strike similar deals in the near future.

Further the management stated that as they have a leadership position in Gujarat and Uttar Pradesh West, it was critical for the company to enhance its leadership in these markets. This was the prime reason behind paying such high valuations for purchasing the spectrum. However, company will wait for auctions to happen for the rest of the circles.

Rahul Shah, Managing editor of Microcap Millionaires, recently released a detailed analysis of the company's results (subscription required). In the note Rahul explains factors driving the performance of the company in this period and what to expect going forward. If you are interested in the stock, then this is a must read!

Indian markets open in green
09:30 am

The major Asian stock markets have opened the day in red with stock markets in China (down 1.6%) and Hong Kong (down 1.3%) being the top losers. Major stock indices in Europe and US ended their previous session in green. The rupee is trading at 66.55 per US dollar.

Indian stock markets too have opened the day on a positive note. BSE-Sensex is trading higher by 76 points (up 0.3%) and NSE-Nifty is trading higher by 28 points (up 0.4%). Both BSE Mid Cap and BSE Small Cap have moved upwards and are trading higher by 0.4%. Barring FMCG major sectoral indices have opened the day in green. Stocks from banking and automobile are witnessing maximum buying interest.

As per an article in Livemint, the Reserve Bank of India (RBI) has allowed foreign portfolio investors (FPIs) to acquire bonds that are either partly or fully in default. The move will be permitting existing investors an exit option and will also boost the fledging distress bond market in the country.

FPIs wanting to acquire such bonds shall disclose to the debenture trustees the terms of their offer to debenture holders or beneficial owners from whom they are going to acquire. Furthermore, the RBI stated that issuers of such bonds will have to restructure repayment tenures. While doing so, they should bear in mind existing norms for foreign investors that mandate them to buy bonds only of a maturity of three years or more.

Many policymakers have been pushing firms to trim their debts and clean up balance sheets after a slowdown in economic growth weighed on the profits and in some cases dragged them below debt-servicing levels. This in turn led to an increased stress for banks as firms began to default on loan and bond repayments. And the defaults in bond repayments are rising ever since.

As per a leading financial daily, a total of 2,311.88 MW (mega watt) of grid-connected power generation capacity has been added during the current fiscal so far in India. This in the form of renewable energy sources like solar and wind energy.

This has taken the cumulative solar electricity generation capacity to 4,579.24 MW. Similarly, 1,234.11 MW wind power generation capacity was added during the period, taking cumulative wind electricity generation capacity to 24,677.72 MW. The country's total grid-connected power generation capacity from all the above mentioned renewable sources was 3,8096.49 MW at the end of October.

Going by that, the government has aimed to add 1,400 MW and 2,400 MW of solar power generation capacity and wind power generation capacity respectively in 2015-16.

A Further Push for Indian Start-Ups...

Start-ups have acquired a fair share of Indian business in a short time. They have entered most sectors and are leaving no stone unturned to get ahead of their competitors. As this has become more evident, the government has now set its eyes on them. It is aiming to plug the gaps for start-ups. One such major push can come from PM Narendra Modi's 'Start-up India, Stand-up India' campaign. Yes, the government is working to come up with a new start-up policy. Going one step at a time, emphasis for now is placed on manufacturing and innovation in this space.

As an article in Livemint reports, the government is moving towards a new start-up policy that will focus on manufacturing, seek to promote innovation and offer tax incentives to small unlisted start-ups.

The core motive behind the initiative is to build a solid ecosystem for Indian start-ups. As is seen, the Indian start-up ecosystem has come into its own. It is driven by PE funding, consolidations and a budding domestic market. So, rather than merely offering incentives, the government has planned this move to take the Indian start-ups to the next level.

The policy will also throw light on compliance and exits and ease of doing business. The first in the process of this policy is the definition of a start-up. An inter-ministerial meeting is will be held on Thursday for the same. The definition will define the scope of who will come under the ambit of the policy.

At present, there are many concerns for start-ups. Some of them are stuck due to the absence of a proper regulation and a clear code of conduct. On the back of such issues, many domestic start-ups were seen inclined to choose places like Singapore and the US. Tracking this, the department of industrial policy and production (DIPP) has held several rounds of discussion to draw up a 40-point action plan that will be addressing the key concerns of start-up firms. It has furthermore spoken to several people from the emerging start-up ecosystem on what they wish to see in the policy.

In our view, a start-up policy may be a great aid in creating a favorable system for Indian start-ups. Such emphasis will hopefully make the entire process simpler and transparent. What it actually delivers, however, remains to be seen.