Sensex Opens Over 200 Points Lower; Reliance Industries & Vedanta Top Losers

Wed, 8 May 09:30 am

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Asian share markets are lower today as escalating trade tensions between the United States and China triggered global growth fears and drove investors away from riskier assets. The Nikkei 225 is down 1.7% while the Hang Seng is down 0.7%. The Shanghai Composite is trading down by 0.2%.

Back home, India share markets have opened the day on a negative note. The BSE Sensex is trading down by 220 points while the NSE Nifty is trading down by 60 points. The BSE Mid Cap index and BSE Small Cap index both opened the day down by 0.2%.

All sectoral indices have opened the day on a negative note with consumer durable stocks and energy stocks witnessing maximum selling pressure.

The rupee is trading at Rs 69.60 against the US$.

Market participants are tracking JK Paper share price, JSW Holdings share price, and Alembic Pharma share price as these companies are set to announce their Q4FY19 results later today.

In the latest developments from the results corner, Vedanta share price is in focus today as the Anil Agarwal-led company reported a consolidated net profit of Rs 26.2 billion for March quarter, down 34% from same period last year on the back of lower revenues which declined as copper factory at Tuticorin remained shut.

Reportedly, the company's top line was higher than expected at Rs 230.9 billion, down 15% from same period last year partly due to lower commodity prices and shutdown of the copper factory which normally contributes about 20% to the company's total revenue.

Exceptional gain was recorded at Rs 3.2 billion. The gains were mainly due to reversal of previously recorded impairment of Rs 2.6 billion in the KG ONN block of the oil and gas business.

The drop in revenues impacted the company's earnings before interest tax depreciation and amortization (EBITDA) for the March quarter as it stood at Rs 63.3 billion, down 19% from corresponding period last year.

As on March 31, 2019, the company's net debt stood at Rs 269.6 billion, up by Rs 50 billion from last year, primarily due acquisition of Electrosteel Steel. Last year, Vedanta occupied into steel business via acquisition of stressed Electrosteel Steel.

Meanwhile, the company achieved the production goal of 1.5 million tonne of steel. The company also aims to take the capacity to 3 million tonne hot metal production which will improve cost structure and strengthen EBITDA margins.

Speaking of interesting development in the steel sector, did you know In the last 6 years, India has been the world's fastest growing steel producer, among the top 10.

Have a look at the chart below which shows India's steel production growing at the fastest rate:

India's Steel Production Growing at the Fastest Rate

The above data validates Tanushree's optimism about India's future.

Here's what we wrote in one of the recent edition of The 5 Minute WrapUp...

• Over the last 6-year period, India's steel production grew at a CAGR of 6%. Countries such as Germany and Japan registered negative growth. Growth has been flat in USA, South Korea, Russia, and Brazil.
  
  China, the world leading steel producer, which saw double-digit growth over 2001-2010, grew marginally by 4% CAGR in the last six years.
  
  Importantly, India's production growth is due to strong domestic demand. Particularly, on the back of strong infrastructure development and housing demand, especially affordable housing.

No wonder India has surged past Japan and USA to become the second largest steel producer in the world.

Moving on to the news from the aviation space, Naresh Goyal has offered to infuse Rs 2.5 billion of his own funds into Jet Airways in a new attempt to revive the Mumbai-based carrier.

As per an article in a leading financial daily, Goyal, who stepped down from the board and chairmanship of the debt laden airline in April, said he would invest the funds from Jet air Pvt. Ltd, a company that he controls.

Goyal's latest attempt comes after the banks rejected a potential bid by him in April to retain control of the carrier citing non-eligibility conditions for an ongoing bidding process.

In March, Goyal was forced to cede control of the airline he had founded more than two decades ago, after the cash strapped airline defaulted on payments to banks and aircraft lessors. Jet Airways eventually suspended operations on 17 April.

The groundings forced the Indian government to take steps to address the shortage in flights and minimize disruptions in the domestic civil aviation market. The government has since allotted slots of Jet Airways at domestic airports to other airlines for a period of three months to start new flights.

Meanwhile, the consortium of banks has opened a bidding contest to find a new investor that is expected to be completed in the June quarter.

According to the bidding eligibility conditions, strategic bidders looking to invest in Jet Airways should have a minimum net worth of Rs 10 billion or at least three years of experience in the aviation sector.

Jet Airways share price has opened the down up by 0.4%.

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