Metals stocks in demand today

After starting the day on a firm note, Indian share markets pared some of their gains but still traded above the dotted line in the post-noon trading session. The BSE-Sensex closed higher by 74 points, while the NSE-Nifty closed higher by 30 points. BSE Mid Cap closed marginally higher by 0.08% and BSE Small Cap index was up by 0.48%. Barring IT stocks, most of the sectoral indices closed in the green with metal stocks being the most favored.

European stocks were up as Greece's latest budget proposals raised hopes it would stave off a debt default and reach a deal with lenders. Asian markets finished broadly higher today with shares in China leading the region. The Shanghai Composite is up 2.19%, while Japan's Nikkei 225 is up 1.87% and Hong Kong's Hang Seng is up 0.93%. The rupee was trading weak by 12 paise at 63.64 against the US$.

According to a leading financial daily, Bharat Heavy Electricals Ltd. (BHEL) has commissioned a 250-MW coal-based thermal unit at the upcoming Bongaigaon Thermal Power Station in Assam. BHEL is executing the Main Plant package contract for setting up three coal-fired units of 250 MW each at the plant. Significantly, on completion, this will become the highest rating coal-based power plant in North East India. Reportedly, in 2014-15, BHEL had surpassed the capacity addition target set by the Government for utility projects by 19%. The trend is continuing in the current year also with eight sets having already been commissioned by the company in FY 2015-16.

Stocks in the auto sector ended the trading day on a firm note. Stocks of Ashok Leyland surged and ended the trading day on an encouraging note (up 1.56%) after it was reported that the company has received orders worth US$ 82.06 m from Senegal towards building their comprehensive and integrated transportation system. DAKAR DEM DIKK, a public transport organization under the aegis of the Ministry of Transport, Senegal, has commissioned a comprehensive logistics program with Ashok Leyland. This comprises supply of 475 buses, genuine spares, assistance in development of workshops, training and consultancy on fleet management, and structuring of vehicle tracking and monitoring systems. Ashok Leyland is the flagship company of the Hinduja Group.

Indian markets trade in green
01:30 pm

After opening the day on a marginal note, the Indian Indices are trading positively in the post noon trading session. Sectoral indices are trading mixed with stocks from the mining and pharma sectors leading the gainers.

The BSE-Sensex is trading up 89 points (up 0.3%) and the NSE-Nifty is trading up 31 points (up 0.4%). The BSE Mid Cap index is trading up 0.2% and the BSE Small Cap index is trading up 0.4%. Gold prices, per 10 grams, are trading at Rs 26,767 levels. Silver price, per kilogram is trading at Rs 36,602 levels. Crude oil is trading in green at Rs 3,848 per barrel. The rupee is trading at 63.53 to the US dollar.

Stocks in the pharma space are trading on a mixed note with Orchid Chemicals and Panacea Biotech witnessing maximum buying interest. India based pharmaceutical company; Lupin Ltd today declared that its Board of Directors has given in-principle approval for raising funds of up to Rs 75 bn. This raising of funds will be by way of issue of securities i.e. equity shares, ADRs, GDRs, convertible bonds, equity linked instruments etc. For the purpose, enabling approval of the shareholders will be sought at the AGM to be held on July 23. Meanwhile, w.e.f. 22 June, 2015 stock of Lupin Ltd has become a part of the BSE's 30-share benchmark Sensex. Currently the stock of Lupin Ltd is trading down by 1.8%.

Most of the stocks in banking sector are trading on a positive note with Union Bank and Punjab National Bank witnessing maximum buying interest. As per a leading financial daily, shares of Public Sector Undertaking (PSU) Banks are trading higher by around 5%. This was after the Finance Minister Arun Jaitely said that the government will infuse capital in public sector banks in the next three to six months. As the PTI report suggests, Arun Jaitely has earmarked Rs 79.4 bn in the Budget for recapitalization of public sector banks (PSBs) during the current financial year. Subsequent to the announcement, stocks of Union Bank of India, Punjab National Bank, Bank of Baroda, Syndicate Bank and Oriental Bank of Commerce have surged between 3-5% on the National Stock Exchange (NSE).

Indian markets trade flat
11:30 am

After opening the day on a positive note the Indian stock market indices have remained above the dotted line in the morning session. Buying interest is highest in capital goods stocks.

The BSE-Sensex is trading up by 29 points (0.10%) and the NSE-Nifty is trading up by 9 points (0.11%). The BSE Mid Cap index is trading up by 6 points (0.1%), while the BSE Small Cap index is trading up by 25 points (0.2%). The rupee is trading at 63.62 to the US dollar. Gold and Silver are trading at Rs 26,774 per 10 grams & Rs 36,662 per kilogram respectively.

Stocks in Automobile are trading on a positive note with Mahindra and Mahindra (M&M) trading and Tata Motors leading the gainers. M&M plans to launch six new tractors in the next three years each under its Mahindra and Swaraj brands. The company's tractor sales dropped to 19.56% in May at 19257 units as against 23940 units in the same month last year. The company witnessed de-growth in the tractor segment in the last fiscal year. However they expect a good monsoon this year and are optimistic that the overall tractor sales will grow about 5%.

Stocks in Cement sector are trading on a mixed note with ACC Ltd leading the gainers and India Cements leading the losers ACC has resumed mining limestone in Chaibasa Odisha after the same were closed pursuant to a notice served on them on October 10, 2014. Limestone is the key raw material in manufacturing of cement. This resumption will help the company to reduce the cost by Rs 50 per tonne.

Indian Markets open marginally higher
09:30 am

Barring stock market in China (down 2.4%), the major Asian stock markets have opened the day on a firm note with markets in Japan (up 1.6%) and Hong Kong (up 0.35%) leading the gainers US and European stock markets closed their session on a positive note yesterday.

Indian markets have opened marginally up. BSE-Sensex is trading higher by 28 points (up 0.1%) and NSE-Nifty is trading higher by 18 points (up 0.2%). S&P BSE Midcap and S&P BSE Smallcap index indices are trading up by 0.6% and 0.7% respectively. Among the sectoral indices, software and energy are the leading losers while mining and telecom stocks are leading the gains. The rupee is trading at 63.63 per US dollar.

Stocks in the banking space have opened the day on a mixed note. As per a leading financial daily, ICICI Bank has entered into partnership with The partnership is aimed for the launch of the Trade Facilitation Centre. This will provide a single window facility for easier trade finance to the small and medium enterprises in India. Also this will give quick access to the Indian Entrepreneurs who are members of to get quick access to services from ICICI Bank. These services will include business loans, cash management solutions, foreign exchange transactions, bank guarantees and cross-border remittances.

According to financial times, City Union Bank Ltd is planning to raise around Rs 5 bn through Qualified Institutional Placement (QIP) as a part of its business plan. The company's Board of Directors at its meeting held on June 22 has resolved to seek shareholders' approval for an enabling resolution to raise equity capital. The company has informed BSE that this equity capital will be including premium up to Rs 5 bn through QIP as and when necessary subject to the applicable laws and regulations. Stock of City Union Bank has opened the day in green.

Do mergers benefit shareholders?

A merger or an acquisition results in creation of a larger entity. But that cannot be the raison d'etre for shareholders to be gung-ho about the deal. The success of a merger depends upon whether the deal will be able to generate additional returns for shareholders in the long run. Therefore, shareholders need to look out for the following factors in order to avoid getting trapped in corporate mergers and acquisitions.
  • Excessive valuations: Sometimes a promoter company may place high valuation on merger with listed or unlisted subsidiary in order to pocket in higher gains from its stakes in the target company. This can erode wealth for existing shareholders. In such a case, shareholders can choose to vote against the deal.

  • Lack of transparency: In the absence of adequate disclosures on the exact nature of the structure of the deal, assessing the potential of the deal can be difficult and subject to risks.

  • Leveraged buyout: When an acquisition is funded through debt, shareholders need to ensure that it does not stretch the company's balance sheet too much. Otherwise there is a possibility of company's profitability and cash flows getting impacted in the long run.

  • Business synergies: Companies use the merger and acquisition route for inorganic expansion and growth. It may be either for the purpose of backward integration such as a power or cement company acquiring mining assets or vertical integration for gaining access to a new technology, products or markets. Such deals are expected to be value accretive through better synergies. But when a merger between two companies with unrelated business takes place, then it should be analyzed more critically to ensure against destruction of shareholder's wealth in the long term.

  • Past track record: Many a times, distressed companies are acquired at discounted valuations. In such cases it is imperative to look at the past track record of the acquirer company in turning around the fortunes of the target company before arriving at an investment decision.
A company undertaking a merger or acquisition shows a possibility of better growth prospects. But whether it translates in higher returns is something that shareholders need to be certain while arriving at an investment decision.