Sensex Finishes Flat; Idea Zooms 26% on Merger Talks

Mon, 30 Jan Closing

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Share markets in India finished the trading day on a flat note after four straight sessions of gains due to caution ahead of the budget.

At the closing bell, the BSE Sensex closed lower by 33 points, whereas the NSE Nifty finished lower by 9 points. The S&P BSE Midcap finished up by 0.3%, while the S&P BSE Small Cap finished down by 0.3%. Losses were largely seen in auto and bank stocks.

Idea Cellular share price surged 26% in the afternoon session after Vodafone India confirmed that the company was in discussion with the Aditya Birla Group for an all-share merger of Vodafone India and Idea Cellular.

Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.31%, while the Nikkei 225 & the Hang Seng fell 0.51% and 0.06% respectively. European markets are lower today with shares in France off the most. The CAC 40 is down 0.95% while London's FTSE 100 is off 0.74% and Germany's DAX is lower by 0.61%.

The rupee was trading at Rs 68.04 against the US$ in the afternoon session. Oil prices were trading at US$ 53.07 at the time of writing.

According to a leading financial daily, Rural Electrification Corporation (REC) has signed three Memorandum of Understandings (MoUs) for extending financial assistance to the tune of Rs 600 billion for next 5 years.

The company has signed the MoUs with Andhra Pradesh Power Generation Corporation (APGENCO) for financial assistance upto Rs 400 billion; Transmission Corporation of Andhra Pradesh (APTRANSCO) for financial assistance upto Rs 100 billion; and AP DISCOMs for financial assistance up to Rs 100 billion.

Apart from financial assistance, power utilities have agreed for availing Consultancy and Management Services from wholly owned subsidiaries of REC i.e REC Power Distribution Company (RECPDCL) and REC Transmission Projects Company (RECTPCL), for their various activities/projects for next 5 years.

REC share price finished the trading day down by 1.5% on the BSE.

In another development, Housing Development Finance Corporation (HDFC) reported a 12.8% increase in consolidated net profit at Rs 27.28 billion for the third quarter ended December. Profit for October-December in the previous fiscal stood at Rs 24.19 billion.

Its total income has gone up to Rs 149.81 billion for the quarter ended December from Rs 122.53 billion for the quarter ended December 2015.

The company's gross non-performing loans stood at Rs 23.41 billion at the end of December quarter, which was 0.81% of its loan portfolio. Non-performing loans of the individual portfolio stood at 0.65%, while the non-individual portfolio stood at 1.16%.

HDFC share price finished down by 0.4% on the BSE after the company

Moving on to news from economic sector. According to a leading financial daily, Union Finance Minister Arun Jaitley has expressed his confidence that the implementation of the Goods and Services Tax (GST), along with demonetisation will bring more revenues as far as states and the central government are concerned and enlarge the size as far as the formal economy is concerned.

Talking about the impact of demonetisation, Jaitley has said that the move shook the system for some time but is now gradually increasing the process of integrating India's shadow economy with the formal economy. He also said that the size of the formal economy is growing, so are the transactions in the banking system and through the digital mode.

On the GST front, Jaitley said that most of the contentious issues have been sorted out between the Centre and states. He also said that national indirect levy-Goods and Services Tax (GST)-is all set to become a reality by July 1 and further noted that GST will make India one single market, eliminate multiple assessments, check evasion and bring more revenues into the system.

Meanwhile, India's Debt to GDP ratio has been at elevated levels for the last decade or so. The final number for FY16 is expected to be around 66%. The Indian government spends about 30% of its revenue on interest payments. This doesn't leave any room for the government to spend on productive purposes.

High Debt is a Constraint to Growth

Unless this structural issue is addressed, the debt will be a big overhang on growth and India's credit rating won't improve.

And here's a note from Profit Hunter:

Idea Cellular is in news today as the company's stock price surged a whopping 25% on merger talks with Vodafone India.

But we are least concerned with that. For us 'Price is everything. In our earlier commentary, we had mentioned Rs 70 acting as a rock solid support for the stock. The bears tried to push the price below this level thrice but failed on every attempt. In the most recent attempt the prices closed below this 70 level but immediately recovered with healthy volumes.

The 70 levels proved to be a turning point for Idea cellular.

In today's session, Idea cellular broke above its resistances in one go. And now, it is trading near its next resistance zone of Rs 100. The RSI indicator is also at its 4-year high.

It will be interesting to see if the bulls can push through this centurion mark, or will the bears take the control this time around. Only time will tell...so stay tuned.

Idea Cellular Stock Price Pushed Through the Roof

 

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