Global Markets Weigh on Indian Indices, Telecom Stocks Continue to Slide

Wed, 22 Mar Closing

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Indian share markets continued to trade weak in the afternoon session and finished in red for third consecutive session. At the closing bell, the BSE Sensex closed lower by 318 points, while the NSE Nifty closed down by 91 points. Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap closed down by 1% and 0.9% respectively. Losses were largely seen in auto stocks, FMCG stocks and consumer durable stocks.

BSE Small Cap Index 2007-17

The BSE Smallcap Index recently hit a 9 year high. One look at this data might lead one to believe that small caps are the area to look at while searching for multi baggers.

But when one takes a holistic view of the Smallcap index over a period of 10 years, the point to point returns have been negligible. To put it plainly, if someone had invested Rs. 100 in the small cap Index on Dec-07 and kept it till Mar 2017, he would have made absolutely no gain whatsoever.

This is in sharp contrast to the returns generated by the Hidden Treasure team which has beaten the Sensex and small cap returns handsomely over the same period.

Bharti Airtel share price was among the top losers on both the NSE and BSE indices, slipping 3.2%. It is reported that the company is planning to hike capex to Rs 300 billion in FY18 to take on the Idea-Vodafone merger.

Asian stock markets fell following overnight declines in U.S. financial markets as investors re-evaluated their "Trump trade" optimism. The Nikkei 225 is down 2.13% while Hong Kong's Hang Seng is off 1.11% and China's Shanghai Composite is lower by 0.50%. European markets too are lower today with shares in France off the most. The CAC 40 is down 0.88% while London's FTSE 100 is off 0.85% and Germany's DAX is lower by 0.68%.

The rupee was trading at Rs 65.45 against the US$ in the afternoon session. Oil prices were trading at US$ 47.50 at the time of writing.

According to an article in The Economic Times, Coal India is considering producing petroleum oil at its Chatra coal mine in Jharkhand. The Chatra mine comes under its subsidiary Central Coalfields. Petroleum oil from coal is part of the company's diversification plan.

Oil from coal can be used in automobiles. With crude prices on the rise, it would seem like a viable option for the company. Coal India now plans to diversify into related fields to keep its bottom-line healthy.

As per the reports, a few years ago, Coal India had initiated talks with South Africa's Sasol, a leader in coal-to-liquid (CTL) technology to produce hydrocarbons from coal with modern refineries. The project envisaged a minimum investment of Rs 100 billion. However, the proposal was not pursued.

Meanwhile, the coal-based power generation increased by 6% to 674.4 billion units (BU) during the April-December period of the ongoing fiscal. However, the dispatch of coal by Coal India to power sector in October last year was at 31.91 million tonnes (MT) as against 34.50 MT during the same month in 2015.

This could be attributed primarily to regulations lifted by power companies which preferred to consume from their stocks apart from heavy rains in coalfields in August, 2016 and September, 2016. Coal India which supplies majority of its coal to the power sector is eyeing 598.6 MT of production in the ongoing fiscal.

Coal India share price finished the trading day down by 0.2% on the BSE.

Moving on to news from realty sector. According to a leading financial daily, India is expected to witness nearly US$ 4.2 billion new capital in the realty sector in 2017 with India emerging as a preferred investment destination.

As per the reports, new capital available for global real estate investment in 2017 is estimated at US$ 435 billion, out of which India is expected to get nearly US$ 4.2 billion.

The report further states that the total global wall of money in 2017 has fallen by 2% compared to 2016's peak of US$ 443 billion, but is the second highest figure recorded since 2009. India's attractiveness as a global investment destination has strengthened on account of the country's political will to attract and protect investment growth.

Indian realty owes its concrete foundations to private equity. Investment capital from uber-rich individuals and institutions - or private equity (PE) financing now makes up 75% of the funds propping up India's property market, compared with just about a fourth in 2010.

Total funding in the real-estate sector increased 40% to US$ 5.4 billion in 2016 from US$ 3.8 billion in 2011. This includes fund flows from private equities, non-banking financial companies and capital markets.

Banks used to account for anywhere between 50%-57% of the sector's institutional funding requirement until 2014. In the past two years, bank credit to the realty sector has slumped to about 26%.

Vivek Kaul, Editor of Vivek Kaul's Diary, recently wrote an article as to why Indian property prices haven't crashed after Notebandi. You can know all about it here.

And here's a note from Profit Hunter:

The Nifty 50 Index is down 1% after taking cues from global markets. The stock markets are finally witnessed selling pressure.

Tata Motors Ltd - down 3% - is among the top losers for the day.

In an earlier note, we mentioned Rs 423 -431 as a strong support zone for the stock, which had bounced 11% after taking support from that zone.

But now it seems the stock has resumed its downtrend. Today, it opened gap down and tanked 3%. It might re-test the support zone. If it does, it will provide clues for its next move. Keep the stock on your radar; it will be interesting to see how it behaves when it approaches the 423-431 support zone this time.

Tata Motors down 3%

 

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