by admin | May 25, 2021 | Economy, Markets, News
Mumbai : Weak global cues coupled with profit booking and caution ahead of the April derivatives expiry pulled the key Indian equity indices lower on Wednesday.
According to market observers, a weak rupee, along with recent surge in crude oil prices and heavy selling in banking, consumer durables and capital goods stocks weighed heavy on the key indices.
Index-wise, the wider Nifty50 on the National Stock Exchange closed at 10,570.55 points, down 43.80 points or 0.41 per cent from the previous close.
Similarly, the barometer 30-scrip Sensitive Index (Sensex) of the BSE closed in the red. It opened at 34,593.17 points, closed at 34,501.27 points, down 115.37 points or 0.33 per cent.
The Sensex touched a high of 34,631.27 points and a low of 34,400.56 points during the day. The BSE market breadth was bearish with 1,794 declines and 867 advances. Market breadth on the NSE too was bearish on Wednesday.
In the broader market segment, the S&P BSE mid-cap index closed lower by 0.52 per cent and the small-cap index by 0.72 per cent.
“Markets ended lower on Wednesday as selling was seen through the day. The recent rise in crude oil prices and cautiousness ahead of April derivatives expiry due on Thursday, 26 April, 2018 seemed to have affected investors,” Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS.
Abhijeet Dey, Senior Fund Manager, Equities, BNP Paribas Mutual Fund said: “Recent firmness in crude prices, rising bond yields in the US and the expiry of derivatives contracts this week, all contributed to the volatility in the markets.”
“Asian stocks tumbled across the board while US stocks witnessed selling pressure after the 10-year US Treasury yield briefly touched the psychologically important three per cent level for the first time in four years,” he said.
Dhruv Desai, Director and Chief Operating Officer of Tradebulls said: “Markets traded lower as global markets were in negative territory and investors booked profits amid weakened global sentiment.”
Sector specific trade, saw IT stocks’ rise due to a weak rupee which fell by 53 paise to 66.91 against the US dollar on Wednesday from its previous close at 66.38.
In terms of investments, provisional data with the exchanges showed that FIIs sold scrip worth Rs 304.79 crore, while the domestic institutional investors purchased stocks worth Rs 435.98 crore.
Sector-wise, the S&P BSE IT index rose by 163.05 points, followed by Teck (technology, media and entertainment) index by 71.36 points and telecom stocks which inched up by 9.26 points.
On the other hand, the S&P BSE banking index declined by 301.59 points, cosumer durables index by 270.76 points and capital goods index by 231.99 points.
The major gainers on Sensex were: Bharti Airtel, up 3.37 per cent at Rs 419.80; Tata Consultancy Services (TCS), up 2.43 per cent at Rs 3,467.90; Mahindra & Mahindra (M&M), up 1.88 per cent at Rs 854.25; Infosys, up 0.61 per cent at Rs 1,160.90; and Power Grid, up 0.58 per cent at Rs 207.20 per share.
The top losers were: Tata Steel, down 2.01 per cent at Rs 586.20; ICICI Bank, down 1.86 per cent at Rs 278.90; ONGC, down 1.67 per cent at Rs 179.55; Tata Motors (DVR), down 1.65 per cent at Rs 185.15; and Dr. Reddy’s Lab, down 1.46 per cent at Rs 2,124.75 per share.
—IANS
by admin | May 25, 2021 | Investing, Opinions
Representational image (Credit: ET)
By Taponeel Mukherjee,
Author H. Jackson Brown Jr once remarked: “Opportunity dances with those already on the dance floor.” For global investors and businesses, India in the 21st century is that very dance floor — but we must hasten to add that the investment opportunities here come with a unique set of challenges.
Creating a business out of an opportunity that appears attractive at the macro level may be beset with challenges at a micro-level. Essentially, the country’s large market size in any sector presents a compelling investment opportunity, and yet the average return available per user may challenge the viability of the business model.
With rising incomes, immense growth opportunities will emerge in the coming decades across telecom, aviation and other such infrastructure sectors. The consumption of goods and services is expected to rise to levels approximating those of more developed markets such as China and the US.
Take, as examples, the case of optical fibre cable and airline seats per capita. The optical fibre cable (much needed for 5G technology deployment) kilometres per capita in India is currently at 0.09 vis-a-vis China’s 0.87 (as per CRU). In 2014, the annual airline domestic seats per capita in India stood at 0.08 vis-a-vis 2.59 in the US (as per the Centre for Asia Pacific Aviation, or CAPA).
Bridging of the gaps in these infrastructure sectors is the opportunity investors must set their eyes on. Despite the low airline domestic seats per capita, CAPA maintains that, in terms of tickets sold, India is the third-largest and fastest-growing domestic aviation market in the world. This gives one an idea of the business opportunity. With the expected increases in incomes in the foreseeable future, these opportunities will only become more attractive.
Despite a large aggregate market size, the lower per capita income in India leads to a low revenue per user. This phenomenon poses a challenge for prospective businesses. Vodafone presents an interesting case in this regard. In fiscal 2016-17, of its total global subscriber base of 341.7 million, 209 million were in India (about 61 per cent). Yet, revenue earned here was 6.16 billion euros, or just 12.9 percent of its total global revenue of 47.6 billion euros.
In a business such as telecom that requires significant capital expenditure, a low average revenue per user is a real challenge. The fact that the large subscriber base can deliver value in the future as the average revenue per user grows cannot compensate for the fact that sustaining businesses in the short to medium term can be confounding.
This apparent paradox of an attractive business from a macro perspective beset with challenges at the micro level, is not unique to just the telecom sector in India. This is a challenge that businesses in general face in a country that has a large aggregate economy, but low per capita income.
The key to success for business in India is determined by the ability of an investor to circumvent the divide between an opportunity at a macro level and the ground-level challenges. Strategies to succeed should revolve around both sides of the balance sheet. From an asset perspective, businesses need to potentially bundle services and products so that customers are willing to give the company a larger share of their wallet.
For example, for a telecom business this could mean offering connectivity and entertainment as a package, a trend that is currently emerging. A second strategy could be to acquire the assets of or merge one’s assets with another similar company to create economies of scale, a strategy Vodafone has adopted.
On the liability side of the balance sheet, businesses can innovate through prudent capital structure management to generate access to relatively inexpensive debt. Global interest rates are still at historic lows despite the recent rate hikes in the US. The global financial investor base is awash with liquidity and hence willing to provide high quality businesses attractive borrowing terms. A high-quality company in India can create a moat around its business by borrowing for the long term at relatively low interest rates and reap long-run benefits.
India does present a unique set of opportunities and challenges for global investors and businesses. That said, it is a major economy and in the years to come is projected to have one of the highest growth rates globally. One estimate is that the India’s will be the third-largest economy globally by 2050. A global business searching for growth will need to have significant market presence in India. We would advise patience and a differentiated strategy for success.
(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. Views expressed are personal. He can be contacted at taponeel.mukherjee@development-tracks.com or @Taponeel on Twitter)
—IANS
by admin | May 25, 2021 | Economy, Markets, News
By Rituraj Baruah and Porisma P.Gogoi,
Mumbai : Forecast of normal monsoon rains, along with healthy earnings in the IT sector, lifted the Indian equity markets during the week ended Friday.
Besides, supportive global cues, coupled with expectations of healthy corporate earnings, led the two equity indices — the BSE Sensex and the NSE Nifty50 — to extend their rise for the fourth consecutive week.
However, higher crude oil prices, along with a weak rupee and heavy selling pressure in banking stocks — triggered by a likely hawkish stand of the Reserve Bank of India (RBI) in its next monetary policy review — trimmed some gains of the benchmark indices, said market observers.
On a weekly basis, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 222.93 points or 0.65 per cent to close at 34,415.58 points.
The wider Nifty50 of the National Stock Exchange (NSE) closed trade at 10,564.05 points — up 83.45 points or 0.80 per cent from its previous week’s close.
“Markets extended their winning streak to the fourth consecutive week on strong earnings from TCS (Tata Consultancy Services), Mindtree and Cyient which posted a better than expected quarterly numbers,” Prateek Jain, Director, Hem Securities, told IANS.
“Sentiments also got a boost from postive global clues and IMD’s (India Meteorological Department) forecast that India is likely to receive a normal monsoon in 2018, which further boosted sentiments,” said Jain.
Rahul Sharma, Senior Research Analyst, Equity99, said: “Investors’ sentiment also got a boost after India’s annual WPI-based inflation eased to 2.47 per cent in March, helped by a fall in food prices.”
“Positive global stocks also supported buying,” Sharma told IANS.
Official data released during market hours on Monday showed that India’s Wholesale Price Index (WPI) inflation softened to 2.47 per cent in March from a rise of 2.48 per cent reported for February and acceleration of 5.11 per cent in the corresponding month of last year.
On the currency front, the rupee weakened by 92 paise to close at 66.13 against the dollar from its previous week’s close at 65.21.
“The Indian currency got hammered and sank to a 13-month low of 66.06 against the dollar (during the week) due to rapid surge in global crude oil prices and fiscal deficit worries,” D.K. Aggarwal, Chairman and MD of SMC Investments and Advisors, told IANS.
“The minutes of the last (previous) meeting of the Monetary Policy Committee (MPC) indicated the RBI may shift to a hawkish monetary stance in June. At present, market participants looked little worried that the commodity will continue appreciating to new highs, which would spell trouble for Indian markets,” Aggarwal added.
On the investment front, provisional figures from the stock exchanges showed that foreign institutional investors sold scrips worth Rs 2,821.24 crore, while the domestic institutional investors purchased stocks worth Rs 2,124.16 crore during the week.
Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 3,096.62 crore, or $471.78 million, during April 16-20.
“The top sectoral gainers were IT, metal, fast moving consumer goods (FMCG) and realty indices and the major losers were PSU banks, energy and bank Nifty indices,” Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS.
On Friday, shares of IT bellwether Tata Consultancy Services (TCS) rose nearly seven per cent to touch a new high of Rs 3,414 per share, on the back of its robust earnings taking its market capitalisation (m-cap) to over Rs 6.50 lakh crore or around $98 billion.
The top weekly Sensex gainers were: TCS (up 8.11 per cent at Rs 3,406.40); Bharti Airtel (up 6.07 per cent at Rs 400.75); ITC (up 5.81 per cent at Rs 275.95); Power Grid (up 4.94 per cent at Rs 207.30); and Hindustan Unilever (up 3.96 per cent at Rs 1,465.50).
The losers were: Axis Bank (down 6.65 per cent at Rs 505.85); Tata Motors (DVR) (down 5.84 per cent at Rs 190.95); Tata Motors (down 5.72 per cent at Rs 336.25); State Bank of India (down 3.90 per cent at Rs 241.40); and IndusInd Bank (down 2.42 per cent at Rs 1,814.00).
(Riuraj Baruah can be contacted at rituraj.b@ians.in and Porisma P.Gogoi at porisma.g@ians.in)
—IANS
by admin | May 25, 2021 | Banking, Economy, Markets, News
Mumbai : Profit booking, along with heavy selling pressure in the banking sector stock led the key Indian equity indices to break their nine-day gaining streak on Wednesday.
According to market observers, the key equity indices, however, traded in the green for the better part of the session on the back of positive global cues and forecast of normal monsoon rains.
But heavy selling pressure in the consumer durables, banking and auto stocks pulled the key indices lower during the fag end of the session.
Index-wise, the wider Nifty50 on the National Stock Exchange (NSE) fell by 22.50 points or 0.21 per cent to 10,526.20 points.
The barometer 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 34,443.42 points, closed at 34,331.68 points — down 63.38 points or 0.18 per cent from its previous session’s close.
The Sensex touched a high of 34,591.81 points and a low of 34,270.04 points during the intra-day trade.
The BSE market breadth was bearish with 1,527 declines and 1,131 advances. The market breadth on NSE also was bearish during the day.
In the broader markets, the S&P BSE mid-cap index closed lower by 0.07 per cent and the small-cap index by 0.37 per cent.
Deepak Jasani, Head, Retail Research, HDFC securities said: “Selling emerged from the highs of 10,593 to finally bring the Nifty into negative territory.”
“Broad market indices like the BSE mid-cap index fell less, thereby
outperforming the main indices,” Jasani told IANS.
On the currency front, the Indian rupee weakened by two paise to 65.67 against the US dollar from its previous close at 65.65.
In terms of investments, provisional data with the exchanges showed that foreign institutional investors sold scrip worth Rs 915.71 crore, while the domestic institutional investors bought stocks worth Rs 869.70 crore.
Sector-wise, the S&P BSE fast moving consumer goods (FMCG) index rose by 170.16 points, followed by metal index which gained 65.26 points and basic materials which edged up by 12.41 points.
On the other hand, the S&P BSE consumer durables index fell by 272.43 points, banking index by 241.34 points and auto index by 120.13 points.
Major Sensex gainers on Wednesday were: ITC, up 2.82 per cent at Rs 275.30; Wipro, up 2.40 per cent at Rs 292.35; Bharti Airtel, up 1.29 per cent at Rs 386.20; Tata Steel, up 0.95 per cent at Rs 601.50; and Adani Ports, up 0.81 per cent at Rs 385.95 per share.
The top Sensex losers were: Axis Bank, down 2.60 per cent at Rs 518.70; Mahindra and Mahindra, down 1.55 per cent at Rs 797.05; IndusInd Bank, down 1.23 per cent at Rs 1,844.65; Hero MotoCorp, down 0.97 per cent at Rs 3,733.55; and Coal India, down 0.89 per cent at Rs 285.05 per share.
—IANS
by admin | May 25, 2021 | Opinions
By Amit Kapoor,
All economies want to produce more within national borders. This urge arises from the popular belief that manufacturing is a good source of jobs for low-skilled workers. President Donald Trump’s fixation with bringing back jobs to American factory floors by any means necessary is merely an extension of the same age-old fetish for manufacturing.
But, according to the International Monetary Fund (IMF), the obsession with manufacturing jobs has gone too far. The IMF’s World Economic Outlook released last week found that manufacturing is not a key determinant of productivity in developed economies and is not a necessary stage of development for emerging ones.
The IMF’a basic argument is that the shift of workers from manufacturing to services in the advanced world and the shift in job type from agriculture directly to services for the emerging economies has not had any negative effects on either economic growth or productivity. The report found “a sizeable overlap” between the growth in labour productivity between manufacturing and services sub-sectors. In fact, some service sectors also exhibit higher productivity growth rates than the leading manufacturing industries.
Therefore, since these structural changes across economies is effectively enhancing productivity, which determines the standard of living, the stress on revitalising the manufacturing sector seems unnecessary.
The bias towards manufacturing has been true for the field of economics since the time of Adam Smith. While writing “The Wealth of Nations” in the shadow of the Industrial Revolution, Smith was expectedly charmed by the potential of the manufacturing sector for economies. He wrote that labour, which provides services, does not provide any value: “Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production.”
Would Smith’s view have changed in modern times? Probably yes. Linda Yueh in her brilliant new book, “The Great Economists: How Their Ideas Can Help Us Today”, argues that due to rapid technological advancements since Smith’s time, the tune of the musician, which he regarded as ephemeral, now holds tangible value. Also, since Smith believed in the power of the invisible hand of the markets, he would have derided any move towards introducing market distortions like the Trump tariffs to promote manufacturing.
This does not imply that the government should sit back and do nothing. On the contrary, it should focus on creating a business-friendly environment instead of prioritising one part of the economy over the other.
It is also necessary to understand that good old manufacturing of the Henry Ford era is not achievable in the 21st century. Since the advent of technology, manufacturing has not remained a labour-intensive job. So, no amounts of tariffs can turn the clock back.
In the case of India, however, the IMF’s argument that it is not worrisome to directly transition from an agricultural-led to a service-led economy and skipping the stage of industrialisation since it has not affected productivity levels might not seem as reassuring. The fact of the matter remains that India has been unable to create jobs. Between 2004 and 2012, a period during which India experienced its highest growth phase in history and for which conclusive data for jobs is available, GDP grew at 8.1 percent per annum while jobs grew at a paltry two percent.
A report by The Boston Consulting Group (BCG) and the Confederation of Indian Industry (CII), “India: Growth and Jobs in the New Globalisation”, published last year, revealed that almost all of India’s growth since 1991 has come due to higher capital investment. The contribution of labour to India’s growth has been low or negligible during the period. The total factor productivity has been fluctuating and clearly most of it was being driven by a growth in productivity of capital. So, even though the IMF might be right in arguing that missing the industrialisation phase did not impact productivity, it does seem to have had a high bearing on the capacity of job creation.
But the emerging economies of our times, including India, do not have the luxury of leveraging on the job-generating capacity of the manufacturing sector. Programmes like Make in India cannot help in reviving that capacity in an increasingly mechanised world. India needs to play on its strengths instead, which lie in its robust service sector. Between 2010 and 2014, India’s service sector grew at 8.6 percent per annum; faster than the service economies of China and the US. Moreover, since global growth in services trade has been outpacing merchandise trade, the sector provides immense growth potential.
A possible solution lies in harnessing jobs from the growing “servitisation” of businesses or the shift towards provision of services to supplement traditional product offerings. The classic example is the Rolls-Royce airplane engine programme, where consumers “pay by the hour” for the use of the engine rather than paying for the engine itself and the company, in turn, assures regular repairs. Such shifts in business models offer significant opportunities for job creation and growth within the service sector.
The times they are a changin’ and the ideas to power economic growth need to keep up.
(Amit Kapoor is chair, Institute for Competitiveness. The views expressed are personal. He can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya. Chirag Yadav, senior researcher, Institute for Competitiveness, has contributed to the article)
—IANS
