Sensex Slips in the Red; Realty & Metal Stocks Lead the Losses

Wed, 24 May 01:30 pm

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After trading in green during the morning session, Indian share markets came under pressure in the noon session and are trading marginally lower. Barring software stocks, all the sectoral indices are trading in red. Realty stocks and metal stocks witnessed majority of the selling pressure.

The BSE Sensex is trading lower by 62 points and the NSE Nifty is trading lower by 27 points. Meanwhile, the BSE Mid Cap index & the BSE Small Cap index are down by 1.5% & 1.4% respectively. The rupee is trading at 64.78 to the US$.

Time to Be Fearful?

The markets are touching new highs. Markets are awash with funds. Experts are justifying high valuations. The reasons are far-fetched - from GST to Make in India to a cashless economy. And retail investors seem to be falling for it.

One must note that currently, in most of the cases, it is liquidity driving the valuations, and not fundamentals. And this is exactly the time when one must allow fear to substitute greed. Also, this is precisely the time when it is most difficult to overpower greed and stay disciplined.

In news from international markets, as per an article in The Financial Express, Moody's Investors Services downgraded China's long-term local and foreign currency issuer ratings citing expectations that the financial strength of the world's second biggest economy would erode in the coming years.

The ratings agency also changed its outlook for China to stable from negative. The downgrade one notch to an A1 rating from AA3 comes at a time when the Chinese government is grappling with the challenges of slowing economic growth and soaring debt.

The report also noted that while ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.

Meanwhile, China's potential GDP growth is likely to slow towards 5% in the coming years, but the fall is likely to be gradual due to expected fiscal stimulus, it said.

Moody's said it expects the government's direct debt burden to rise gradually towards 40% of GDP by 2018 and closer to 45% by the end of the decade.

In news from oil & gas sector, GAIL India has drawn up investment plans of Rs 300 billion for expansion out of which Rs 80 billion in the coal gasification, 15 billion in city gas and Rs 10 billion in breakwater water project.

GAIL is also currently executing gas pipelines worth Rs 200 billion and another Rs 100 billion worth of lines are under various stages of evaluation.

The pipelines under execution include Jagdishpur-Haldia line that will take the environment friendly fuel to the east. Current projects will be completed by 2019-20, taking GAIL's pipeline network to 15,000 km from the current 11,000 km.

The company has already spent capex of Rs 21.8 billion in FY17 and plans to spend Rs 42.61 billion in FY18 and Rs 77.04 billion in FY19 towards setting up of pipelines, petrochemical and process plants.

Among the other ambitious project, the company along with HPCL is setting up 1.7 million tonnes petrochemical plant in Andhra Pradesh.

The company posted a 69% fall in fourth-quarter profit. The company reported a Rs 2.6-billion net profit for the fourth quarter of the financial year 2016-2017 lower than the Rs 8.32 billion-net profit in the same quarter of 2015-2016 on account of impairment of investment in Ratnagiri Power plant.

The company provided for an impairment loss of Rs 7.83 billion out of carrying value of investment of Rs 9.74 billion in the joint venture entity of Ratnagiri Power plant. The power plant has been running lower than its 2,000 MW generation capacity. This is due to the high cost of power produced from gas-based generation facilities. The lower off take and generation were some reasons for the investment impairment, the reports noted.

GAIL share price is presently trading up by 1.3% on the BSE.

Meanwhile, Max Financial Services share price fell 12% after it was reported that the attorney general Mukul Rohatgi has returned the HDFC-Max Life merger proposal back to the Insurance Regulatory and Development Authority of India (IRDAI) without giving any opinion. The insurance regulator had sought the AG's opinion for legal validity of the proposal.

According to the three-stage deal, Max Life was to merge with Max Financial Services, which would, in turn, merge with HDFC Life. The deal would enable HDFC Life to get listed automatically on the stock exchanges since Max Financial Services is already a listed company.

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