Sensex Finishes on a Flat Note; Tata Power Surges
Closing

Indian share markets finished the trading session on a flat note ahead of RBI monetary policy review on Wednesday. At the closing bell, the BSE Sensex stood higher by 44 points, while the NSE Nifty finished up by 14 points. Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap finished up by 0.5% and 0.4% respectively. Gains were largely seen in realty and energy stocks.

Asian markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.75% and the Nikkei 225 rose 0.47%. The Shanghai Composite lost 0.16%. European markets too are mixed today. The CAC 40 is up 0.20% while the DAX gains 0.12%. The FTSE 100 is off 0.02%.

The rupee was trading at 68.03 against the US$ in the afternoon session. Oil prices were trading at US$ 51.55 at the time of writing.

Tata Power's share price finished the trading day on an optimistic note (up 2.7%) after it was reported that the company's Strategic Engineering Division (Tata Power SED) has bagged an order from Ministry of Defence, Government of India for the supply of one regiment of Command Post and Launcher of Pinaka Multi Rocket Launcher System (MRLS) to Indian Army.

The order worth Rs 2 billion includes supply of 20 launchers and 8 command posts. Tata Power SED had delivered one regiment of Pinaka Launcher and Command Post in the period of 2006-2010, which was then inducted in the Army.

Pinaka Weapon System is one of the first 'Create in India' product designed and developed by Indian private industry in association with Armament Research and Development Establishment of the DRDO.

Meanwhile, it was recently reported that the company plans to sell 30% stake in Indonesia-based coal company PT Arutmin for a sharply lower consideration of US$ 246.64 million after entering into revised pacts that take into account certain prior liabilities.

In another development, Torrent power's share price surged and finished up by 4.5% on the BSE after the company entered into Renewal and Amendment Agreement to the Distribution Franchise Agreement (DFA) with the Maharashtra State Electricity Distribution Company (MSEDCL) for distribution of power in Bhiwandi Circle for a further period of 10 years with effect from January 26, 2017.

Earlier, on December 20, 2006 the Company had signed the DFA with the MSEDCL for distribution of power in Bhiwandi Circle for a period of 10 years.

Moving on to news from stocks in telecom sector. According to an article in The Livemint, Bharti Airtel Ltd has registered significant increase in revenue market share in the top six circles in the country since the September quarter of 2012-13.

Bharti Airtel's has posted crucial growth of 155 basis points (bps), while Idea and Vodafone gained 40 bps and 30 bps, respectively. Even in circles where revenue growth was the lowest for operators, Bharti Airtel's market share gains were the highest.

Sharp gains have also been seen in Bharti's incremental revenues since 2013-14-from 32% at the end of March 2014 to 66% in the second half 2016-17. The market share gain will serve to ring-fence the existing market leader against the onslaught of Mukesh Amabani promoted Reliance Jio Infocomm Ltd.

As per the reports, Bharti Airtel retained market leadership in 13 out of the country's 22 telecom circles while Idea lost market share in as many as 20 circles. Vodafone India, in turn, reported a weaker show in key markets like Gujarat, Maharashtra and UP-East, though it gained in Mumbai, Kerala and Andhra Pradesh in the second fiscal quarter.

Nevertheless, the entrance of RJio is expected to put pressure on the operating performance of telecom companies in December 2016 and March 2017 quarters. Also, continued network spends and increase in sales and administration costs may put pressure on margins of incumbents going ahead.

Bharti Airtel's share price finished the day up by 0.2% on the BSE. The stock price of the company has dropped 6% in the last six months.

Bharti Airtel's Performance over the last 6 months

Telecom stocks finished the day on a mixed note with Bharti Infratel and ADC India Communications leading the losses.


Sensex & Nifty Hold Gains; FMCG Stocks Buck the Trend
01:30 pm

The Indian share markets continue to maintain the upbeat trend during the noon trading session amid positive global markets. Barring FMCG, consumer durables and auto stocks, all sectoral indices are trading on a positive note with realty, oil & gas stocks leading the pack of gainers.

The BSE Sensex is trading higher by 104 points while the NSE Nifty is trading higher by 32 points. The BSE Mid Cap index and BSE Small Cap index both are trading up by 0.7%. Gold prices, per 10 grams, are trading at Rs 27,975 levels. Silver price, per kilogram is trading at Rs 41,195 levels. Crude oil is trading at Rs 3,496 per barrel. The rupee is trading at 68.17 to the US$.

According to an article in The Economic Times, demonetization has had an impact on FMCG business with primary sales declining significantly. However, Dabur India is of the opinion that the demonetization of high value currency notes would have beneficial impact on organized players in the long run. On account of scarcity of cash available with customers and trade, Dabur is foreseeing near term pressures on the its business.

Dabur India said that the impact varies across channels and geographies. Moreover, the stress is highest for wholesalers and small town grocery shops, who are facing a severe liquidity crisis and are destocking. The impact is likely to be positive on modern trade outlets and plastic money enabled retailers who are likely to benefit from this change.

In the meanwhile, the company is focusing more on modern retail, e-commerce and institutional sales. It is also encouraging general trade retailers to adopt cashless payment systems. This will help in mitigating the overall impact of demonetisation and pave the way for normalization in the next few months.

However, to mitigate the issues of credit risk and defaults from the trade partners, Dabur is giving credit extensions in a calibrated manner. One the liquidity front, Dabur said that it is already seeing signs of liquidity improving in the Southern region compared to North and the East region.

Speaking about Modi's push towards a cashless, digital economy, we have compared the quantum of cashless transactions in some of the major economies of the world. The chart shows how far India has to go to become a cashless economy. Just about 2% of the volume of economic transactions in India are cashless.

Is India Ready to Go Digital?


Poor penetration of banks in villages and lack of access to financial services might be left behind. According to the World Bank, there are only 18 ATMs per 100,000 citizens in India compared to 129 in Brazil. Additionally, just 22% of Indians use the Internet "at least occasionally" and only 17% have a smartphone.

Therefore, unless the whole financial system is made more secure and fool proof, the shift towards a cashless economy can prove to be a financial nightmare for the common man.

Dabur's share price was trading down by 1% while writing.

Moving on to the news from stocks in auto sector. As per an article in Livemint, Mahindra Agri Solutions Ltd (MASL), a wholly-owned subsidiary of Mahindra & Mahindra, has inked a definitive agreement to acquire up to 60% of the equity share capital of OFD Holding BV. OFD Holding BV is Netherlands-based fruit distribution company.

Reportedly, the acquisition is made for a consideration not exceeding 5 million euro (about Rs 360 million) subject to customary adjustments on closing.

Moreover, OFD Holding owns Origin Fruit Direct, Origin Direct Asia and Origin Fruit Services South America, which are based out of the Netherlands, China and Chile, respectively. This deal will give Mahindra an opportunity to tap new markets in Europe and China and strengthen its existing customer base. Besides this, the pact also takes M&M closer to becoming a significant global player in grapes. The move is also in line with Mahindra's long term vision of Delivering FarmTech prosperity.

Meanwhile, M&M's board has recently approved the demerger of Mahindra Two Wheelers Ltd.'s two-wheeler undertaking, which manufactures and sells two wheelers.

Reportedly, M&M approved a scheme of arrangement which envisages demerger of the two wheeler undertaking of its step down subsidiary Mahindra Two Wheelers (MTWL) and transfer and vesting thereof as a going concern into the company. All assets and liabilities of Mahindra Two Wheelers Ltd (MTWL) pertaining to the two wheeler undertaking would be transferred to M&M. The proposed demerger is in line with M&M's strategy of focusing on niche premium two-wheeler segment.

Mahindra & Mahindra's share price was trading down by 0.3% while writing.


Sensex Gains Momentum; Realty Stocks Surge
11:30 am

After opening the day on a positive note, the Indian share markets continued their momentum and are presently trading in the green. Sectoral indices are trading on a positive note with stocks in the realty sector and oil & gas sector witnessing maximum buying interest.

The BSE Sensex is trading up 118 points (up 0.5%) and the NSE Nifty is trading up 37 points (up 0.5%). The BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 0.8%. The rupee is trading at 68.03 to the US$.

Soon, it will be a month since we heard the term demonetization after a gap of thirty-eight years. The intent was to target black money. And to check terrorist funding. This is all known.

But one indirect objective of checking black money is to bridge the income disparity in the economy. As black money loses its power, we assume there will be a shift of funds from illegal activities to more honest and deserving hands.

However, let us go through some recent facts to answer whether the demonetisation drive will reduce the disparity between the rich and the poor.

Income disparity in India has been widening over the recent past. According to the latest data on global wealth from the Credit Suisse Group, the richest 1% of Indians now own 58.4% of the country's wealth. This share of the top 1% is up from 53% last year, and 49% in 2014.

The income patterns are ensuring that this disparity keeps getting wider instead of being bridged. As one of the recent editions of The 5 Minute WrapUp states...

  • As per latest NSSO data, published by Mint, India's richest 20% have 45% of aggregate household disposable income. The poorest 20% earn barely 7% of the aggregate income pie. In fact, the monthly household disposable income of the poor (Rs 7,739) is about one fourth of the rich households (Rs 29,775).

This huge disparity between the rich and the poor is clearly visible in the chart below:

The Huge Disparity Between the Rich and the Poor


As per the survey, lack of education and employment opportunities for the poor are the primary factors that cause income inequality.

As per us, India's growth story is unlikely to take off unless the issue of inequality is tackled by the government. In fact, India's most valuable asset, its youth, could become one of its biggest liabilities if the gap keeps growing. With neither the problem of education nor job creation getting addressed, gaping income inequality remains a huge social risk.

We recently came across a truly shocking number that highlights this risk. A number that concerns every Indian, including you and me. And there is a possibility that the demonetisation drive will make this number worse.

Here's everything that you need to know about this number.

On the news from global markets, the Italy referendum has attracted most of the headlines. Italians voted to reject constitutional reforms. That further led Matteo Renzi to resign as the country's Prime Minister.

All of this is happening in the Eurozone. And it's a mess. First came the Grexit saga. Then there was Brexit. Now there is a fear of Italexit.

While the referendum wasn't about the Eurozone, could Italy be next in line after Britain to exit the Eurozone? A look at ground realities suggests that dark days could be in store for the Eurozone. As Rahul Shah writes in one of the recent editions of The 5 Minute WrapUp Premium...

  • Youth unemployment has soared over 40% since 2013. GDP growth has been mostly negative since 2008. Even worse, per capita GDP has stagnated since the 1990s. Government debt stands at 133% of GDP (only Greece and Japan are higher). Private debt stands at 117% of GDP.

    Then there are the Italian banks. They are struggling with non-performing loans, the highest in the Eurozone. Contrary to what many believe, Deutsche Bank is not the weakest bank in Europe. It is Italy's third-largest bank, Monte dei Paschi di Siena. It needs five billion euros of new capital and has warned it may have to go out of business if it does not get it.

    Seven other regional banks are also in serious trouble. Apparently, only one bank, Unicredit, is believed to be strong enough to weather this storm.

In short, there is a big crisis brewing within the Eurozone. And this is going to have major consequences for the global financial markets, including the Indian stock markets.

The latest issue of Vivek Kaul's Inner Circle presents an intriguing insight on Italexit from our global team of experts in London and other corners of the world. We strongly recommend you to read it.


Sensex Opens on Positive Note Tracking Global Cues
09:30 am

Asian markets are higher today. Japanese shares are higher today as the Nikkei 225 gains 0.44%. The stock markets in Hong Kong are up by 0.84% and Shanghai Composite is up by 0.08%. Stock markets in the US closed their previous session in the green.

Meanwhile, Indian share markets have opened the day on a positive note. The BSE Sensex is trading higher by 97 points while the NSE Nifty is trading higher by 39 points. The BSE Mid Cap index opened up by 0.7% and BSE Small Cap index too opened up by 0.7%. The rupee is trading at 68.17 to the US$.

Barring consumer durables and FMCG stocks, all sectoral indices have opened the day on a positive note with realty, oil & gas stocks witnessing maximum buying interest.

As per an article in The Economic Times, Cipla's idea of delivering insulin via inhaler, rather than by injection has failed to get permission to conduct trials on Indian patients by an expert committee. In November, the Subject Expert Committee, comprising experts in diverse fields of endocrinology and metabolism noted that Cipla's study data on bioavailability/bioequivalence is not acceptable and not scientifically justified with respect to inhaled insulin.

Cipla had based its application to the panel on the bioequivalence studies with Exubera, an inhalation drug and device combination. One must note that this type of combination was marked by Pfizer in the past. However, the marketplace proved surprisingly resistant. Pfizer dropped Exubera shortly after its launch. Recently Sanofi followed suit after its Afrezza saw disappointing sales ended its deal with US-based Mannkind.

Reportedly, carrying out large-scale studies and improving on the product design would enable Cipla to prove that it has bettered the safety and technology profile of the product. Although drug makers have explored technological disruptions to deliver insulin in forms other than needles and bring inconvenience to the patients, those have met with little success.

However, the hope is not entirely lost for inhalable insulin. That said, any drug company entering this space will need to keep a close eye on market conditions, ensuring their product makes it to the patients who need it most.

Meanwhile, it was reported that with Donald Trump in the White House, the pharmaceutical sector could be set for a new era of mega-mergers. A potential influx of foreign cash and improved stock valuations under the Trump administration would likely boost deal-making in the industry.

Moreover, foreign pharmaceutical companies are aggressively targeting opportunities to acquire both businesses and new products, including medicines at different stages in the developmental pipeline.

Top global pharma deals in recent times


As the M&A activity has been heating up globally, the M&A activity in the Indian pharma space has been on the rise in recent times. At the end of the day, whether the company is able to derive value from the acquisitions and augment the overall performance will be the key thing to watch out for going forward.

Cipla's share price was trading up by 0.3%

Moving on to the news from stocks in energy sector. As per an article in a leading financial daily, Vedanta group is planning to invest Rs 300 billion to ramp up the capacity of Cairn India in the next three years. In order to produce an additional 100,000 barrels per day of oil and oil equivalent gas, Vedanta has lined up this investment.

Meanwhile, Cairn India is in the process of being merged with Vedanta, for which the shareholders of both the entities have already given their nod. With this investment, the production capacity of Cairn India would go up to 350,000 barrels of oil equivalent per day. Oil prices will be around US$50 a barrel after the Organization of Petroleum Exporting Countries (OPEC) reached a deal to reduce output targets.

Notably, the average production of Cairn India, which has its producing assets located in Rajasthan, (Subscription Required) Cambay and Ravva, was 211,671 boepd in Financial Year 2015.

It is also looking to increase gas production to 40-45 million standard cubic feet per day (mscfd) by 2017 and 100 mscfd by 2018-19.

Cairn India's share price opened the day down by 0.1%.


Can Demonetisation Bridge the Income Disparity in India?
Pre-Open

The demonetisation saga rolls on...

The main idea behind the decision was to attack the black money hoarded by many Indians. Doing so is supposed to put an end to the parallel economy. The move is also meant to weed out terror funding and corruption. This is all known.

But one indirect objective of checking black money is to bridge the income disparity in the economy. As black money loses its power, we assume there will be a shift of funds from illegal activities to more honest and deserving hands.

Well, that's the story we hear. But will the demonetisation drive really reduce the disparity between the rich and the poor?

As far as facts are concerned, it seems very unlikely that is going to happen anytime soon.

In fact, income disparity in India has been widening over the recent past. According to the latest data on global wealth from the Credit Suisse Group, the richest 1% of Indians now own 58.4% of the country's wealth. This share of the top 1% is up from 53% last year, and 49% in 2014.

That's not all. The richest 10% of the Indians own 80.7% of the wealth. This trend is also going in the upward direction every year, which means that in India the old cliche, the rich get richer and the poor poorer, rings true.

The above report concludes that India is the second-most unequal country in the world.

The lack of education and employment opportunities for the poor are the primary factors that cause income inequality.

Other factors include the capture of subsidies by the rich, skewed distribution of wealth, and the rural-urban income gap.

This deepening income divide can hurt the growth of the Indian economy. According to Satyajit Das, an economic commentator, 'Empirical research suggests that an increase in income inequality by 1 Gini point decreases the annual growth in GDP per capita by around 0.2 percent.'

Inequality has social costs as well. It can create resentment in large numbers of people. It imposes other direct costs such as poorer health, higher crime rates, lower life expectancy, etc.

India's growth story is unlikely to take off unless the issue of inequality is tackled by the government. In fact, India's most valuable asset, its youth, could become one of its biggest liabilities if the gap keeps growing. With neither the problem of education nor job creation getting addressed, gaping income inequality remains a huge social risk.

We recently came across a truly shocking number that highlights this risk. A number that concerns every Indian, including you and me. And there is a possibility that the demonetisation drive will make this number worse.

Here's everything that you need to know about this number.