Sensex Opens Firm; Tata Steel up 1.6% Ahead of Q4 Results

Tue, 16 May 09:30 am

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Asian stock markets are lower in morning trade as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.03%, while the Hang Seng is down 0.23%. The Shanghai Composite is down 0.42%. Meanwhile, US markets closed at record highs following the bounce in oil prices after the energy ministers of Russia and Saudi Arabia announced output cuts should be extended till March 2018. Stock markets in Europe too finished the previous session in green.

Meanwhile, Indian share markets have opened the day on a firm note. The BSE Sensex is trading higher by 138 points and the NSE Nifty is trading higher by 29 points. Meanwhile, S&P BSE Mid Cap and S&P BSE Small Cap are trading up by 0.2% and 0.5% respectively. Gains are largely seen in IT stocks, consumer durables' stocks and metal stocks.

Indian Markets Still Dwarfed on a Global Level

Despite all the rising markets and lofty valuations in the Indian market, here's some data that vividly shows how small the Indian markets still are on a global scale. The above chart pegs the values of some large and well known US companies relative to the combined market capitalization of all listed companies in India.

As you can see, just the market cap of Apple alone comes to 40% of all of India's listed companies put together. And if you throw in these five companies together, their value is one and a half times that of all Indian companies' total value. Just goes to show how much room Indian markets still have to grow and mature over the long term.

The rupee is trading at 64.11 against the US$.

In news from the economic sector, the Confederation of Indian Industry (CII) has demanded a lower interest rate for private sector investments to pick up, which can help the government to achieve the full benefit of demonetisation.

CII President Shobana Kamineni said that the recent ordinance to resolve bad loans will give banks that have been hesitant for the past two years the confidence to lend. However, she also said that the industry would need to lower interest rates for picking up demand. With the ordinance, she pointed out that right steps have been taken on the supply side, but the demand side is waiting for a trigger or a signal of lower interest rate.

She said that the industry is reasonably prepared for rolling out the country's biggest reform by way of Goods and Services Tax (GST) from July 1. She also suggested fixing of a sunset period for cess to be levied on luxury cars, tobacco and aerated beverages.

Talking about the anti-profiteering clause in the GST Bill, Kamineni has recommended that it should not be used in a discretionary manner. She also said that it leaves scope for ambiguity of declaring something as profiteering and since most products have MRPs, the scope for profiteering does not arise.

Earlier this month, the government through an ordinance amended a law to give powers to the Reserve Bank of India (RBI) to order banks to initiate insolvency proceedings against defaulters and to create committees to advise them on recovering non- performing loans. The increased powers given to the RBI to clean up asset quality, and to intervene at an early stage when risks build, represents an important positive step toward ensuring a healthy banking system in the future.

Moving on to news from FMCG sector. FMCG stocks began the day on a positive note with ITC share price and Kokuyo Camlin Ltd share price leading the gains.

As per a leading financial daily, Colgate-Palmolive will ramp up its herbal portfolio in the next few quarters.

It reported a 3% decline in volume growth for the March quarter. While in line with Street estimates and lower than the 12% decline in volume growth reported for the December 2016 quarter, this does not bode well for the company.

As per an article in the Business Standard, Patanjali has been growing its share in oral care, where it said it had achieved a market share of 14-15% share in toothpaste. Dabur has seen a share gain of 1% for the March quarter, indicating there is traction for its products, which are based on Ayurveda. Colgate, on the other hand, saw market share fall sequentially from 55.6% in the December quarter to 55.1% in the March one.

Colgate blamed the decline on the collapse of the wholesale channel post-demonetisation. This channel caters to small stores in urban areas, rural markets, and deals solely in cash. This business model cracked after the note ban and fear of scrutiny from the taxman has kept it shut since.

Colgate reported a marginal decline in net profit at Rs 1.42 billion for the fourth quarter ended March 31, 2017. The company had posted a net profit of Rs 1.43 billion during the same period last year.

Colgate share price began the day down by 2.2% on the BSE.

Meanwhile, Tata Steel share price opened the trading day up by 1.6% as the company will report its full year and March quarter earnings later in the day. Analysts expect Tata Steel to post net profit of Rs. 9.61 billion against loss of Rs. 32.13 billion during the same quarter last year. Its sales are expected to come in at Rs. 316.2 billion compared with Rs. 291.64 billion in the same period last year.

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