Sensex Opens Marginally Up; Metal and Energy Stocks Gain

Tue, 28 May 09:30 am

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Asian share markets are higher today as relief over EU election results eased concerns about political difficulties in the bloc and merger news supported auto shares, although persistent concerns about trade capped regional sentiment. The Shanghai Composite is up 0.8% while the Hang Seng is up 0.5%. The Nikkei 225 is trading up by 0.4%.

Back home, India share markets opened marginally higher. The BSE Sensex is trading up by 82 points while the NSE Nifty is trading up by 19 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.2% and 0.5% respectively.

Barring telecom and FMCG stocks, all sectoral indices have opened the day in green with metal and energy stocks leading the pack of gainers.

The rupee is currently trading at 69.67 against the US$.

In the news from the airlines sector. InterGlobe Aviation's quarterly profit surged five-fold as yields rose and the airline carried more passengers amid the collapse of rival Jet Airways following funding woes.

Net profit rose to Rs 5.9 billion in the quarter ended 31 March from Rs 1.2 billion a year earlier. Its full-year profit, however, fell 93%, the steepest since the company started trading publicly in 2015.

Indian airlines, including IndiGo and SpiceJet, have been vying for lucrative airport slots left vacant by the grounding of Jet Airways in March. Local airlines are aggressively expanding their fleet and adding new routes to benefit from the shutdown of India's second largest airline.

IndiGo, the country's largest airline by market share, flew 15.7 million domestic passengers during the March quarter compared to 13.4 million in the year earlier.

IndiGo's March quarter revenue grew 35.5% to Rs 82.6 billion from Rs 61 billion a year ago. Fuel cost during the quarter rose 19% to Rs 27.8 billion.

Indigo said its total debt at the end of the March quarter stood at Rs 24.3 billion.

For the year ended 31 March, the airline reported a profit of Rs 1.6 billion compared with Rs 22.4 billion in the previous year. Revenue rose 24% to Rs 298.2 billion.

At the end of the March quarter, the airline's fleet size stood at 217 aircraft, which included 130 Airbus A320ceos, 71 A320neos, one A321neo and 15 ATRs, a net increase of nine aircraft in the March quarter.

IndiGo share price opened the day up by 2.8%.

Speaking of aviation industry, looking at the current demand-supply scenario, air passenger traffic is slowing down.

Air Passenger Growth is Tapering off

A slowdown in passenger growth is due to several factors. These include frequent flight cancellations due to grounding of fund-starved Jet Airways' aircraft, pilot shortages faced by IndiGo, NOTAMs (notice to airmen) at various airports, and a rise in airfare etc.

In the last 5 years, we saw a surge of middle-class travelling by plane. But when the ticket price goes up, many of them prefer an alternate mode of transportation.

This can impact revenue and margin of airports at a time when many of them are undertaking large capex. The decline in passenger traffic follows the increase in airfares due to lower number of flights.

Moving on to the news from the economy. Apex industry chamber Ficci Monday made a strong case for fiscal stimulus to pump-prime the slowing economy amid global headwinds and weakening domestic demand in the next budget as the Narendra Modi government is all set to begin its second innings.

India's GDP growth slowed to five-quarter low of 6.6% during October-December 2018-19.

The Central Statistics Office (CSO) will be releasing the quarterly GDP estimate for the quarter January-March (Q4FY19), 2019 and provisional annual estimates for 2018-19 on May 31.

In its pre-budget memorandum to the finance ministry, Ficci said the Indian economy which was amongst the fastest growing economies in the world over the last few years, now faces the risk of slow growth amidst a weakening global economic environment and slowdown in domestic demand.

India was able to wade through the global headwinds in earlier years as the growth was supported by growing domestic demand.

Low inflation due to subdued food and oil prices had also contributed towards higher consumption growth.

Amid the rising uncertainties and economic challenges on both domestic and global front, there is an urgent need to re-energise the engines of growth and pump-prime the economy, FICCI said.

The government had presented an Interim Budget for 2019-20 in February. A full Budget is likely to be presented in July.

To spur growth, Ficci has sought reduction in corporate tax and abolition of Minimum Alternate Tax (MAT).

In the 2015-16 budget, the government had announced that the corporate tax rate would be gradually lowered to 25% from 30% over the next four years and exemptions available to companies would be phased out.

In the subsequent years, the tax rate was reduced to 25% for companies with a turnover of up to Rs 2.5 billion.

The RBI Governor-headed Monetary Policy Committee (MPC) is scheduled to announce its next set of bi-monthly monetary policy on June 6.

Ficci has also recommended that the Foreign Trade Policy 2015-20 and Customs Law need to be amended for allowing the utilisation of MEIS and SEIS scrips towards the payment of GST on imports.

Now how this pans out going forward remains to be seen.

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