Share Markets in Turmoil over Trump's Victory

Wed, 9 Nov 01:30 pm

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The Indian share markets continue to trade deep in the red during the noon trading session as Donald Trump is elected the new President of The United States. All sectoral indices are witnessing major selling activity with realty & consumer durable stocks leading the losses.

Meanwhile, realty stocks plunged 14% following the government's ban on the use of Rs 500 and Rs 1000 currency notes. Share prices of DLF Ltd & Housing Development Infrastructure Ltd were hit the most and were down by 20% at the time of writing.

The BSE Sensex is trading lower by 521 points (down 1.9%) while the NSE Nifty is trading lower by 172 points (down 2%). The BSE Mid Cap index is trading down by 3.3% and BSE Small Cap index is trading down by 4.2%. Gold prices, per 10 grams, are trading at Rs 30,887 levels. Silver price, per kilogram is trading at Rs 44,282 levels. Crude oil is trading at Rs 2,958 per barrel. The rupee is trading at 66.74 to the US$.

As per an article in The Economic Times, scrapping the high-valued notes of Rs 500 and Rs 1000 in a government's announcement yesterday night will likely cause chaos in the travel and tourism industry and inconvenience inbound tourists.

Nearly 40% of India's economy is driven by small-and medium-sized enterprises that largely run on cash transactions. Economists said the move could impact these businesses, and in turn have a knock-on effect on economic growth.

Reportedly, the move is likely to cause a huge amount of uncertainty and will disrupt transactions, especially for smaller hotels, restaurants and food & beverage operations, which accept cash payments. Further, the move forcing the circulation of black money and counterfeit notes out of the system could inconvenience some people who don't know what to do with their cash, such as foreign tourists who don't have bank accounts in the country or non-resident Indians (NRIs) re-entering the country with their old bank notes.

Moreover, the move is likely to cause chaos in the unorganized hotel space too. The standalone hotels and banquet businesses, which accept a lot of cash payments will be hit. Besides this, Luxury brands may also face additional problems initially because cash transactions are common in some regions.

Tanushree Banerjee, Co-head of Research is of the view that scrapping the currency notes is a war on real estate prices as well. Will this mean more pain for realty companies and some banks in the near term?

Conversely, the digital payments industry which has been forever engaged in a tough fight with cash in their efforts to promote digital transactions, sees this as a big boost to their business opportunities. However, the overall impact will be of a short duration but in the long-term it's a positive move to fight black money that will reward businesses the right way, the reports noted.

Moving on the news from stocks in engineering sector. As per an article in a leading financial daily, Larsen & Toubro (L&T) has signed a long-term technical license agreement with Chiyoda Corporation of Japan for pollution control technology. The pact was signed for its Chiyoda Thoroughbred 121TM (CT-121TM) Flue Gas Desulphurization (FGD) Technology.

The CT-121TM FGD process is a unique technology in which sulphur dioxide is absorbed from flue gas generated by coal-fired, oil-fired and other types of boilers and removed as gypsum. This technology will enable low-cost removal of flue gas SO2. Moreover, it ensures that the plant remains compact and easy to maintain, the reports noted.

One must note that, the new emission norms for coal-based thermal power plants in India had recently introduced new limits on Sulphur dioxide emissions. The move which makes Indian emission norms among the most stringent in the world, has called for mandatory installation of FGD systems in upcoming power plants.

Moreover, L&T and Chiyoda's JV has come to be an internationally reputed design and engineering consultancy organization catering to the Hydrocarbon sector. Through the signing of this agreement, the two companies have extended their association into the power sector as well.

Meanwhile, Larsen and Turbo-MHPS Boilers Private Limited (LMB), a joint venture of L&T and Mitsubishi Hitachi Power Systems Limited (MHPS) Japan has signed a Technology License Agreement for Selective Catalytic Reduction systems (SCRS) with MHPS.

Reportedly, the agreement is for design, engineering, manufacture, installation, commissioning and sale of new boilers and for existing and under construction boilers on exclusive basis in India.

Diversification continues to help L&T (Subscription Required) negotiate and get better terms and margins for projects. Apparently, this is because it is less desperate to win orders as compared to a company which are present in only a couple of sectors. Its reputation, extensive technical prowess, and large skilled workforce have enabled L&T to command a certain premium from customers and vendors alike. Whether, further addition to these new projects provides a cushion to its profitability will be an interesting thing to watch out for going forward.

L&T's Share Price was at Rs 1362.2, down by 2.4% at the time of writing.

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