sanity returned to the Nifty

Finally, some sanity returned to the Nifty on Wednesday. Nifty corrected 40 basis points on Wednesday to close at a level of 11,692. Even as oil counters like ONGC and GAIL were among the top gainers during the day, some of the leaders of the recent rally like Reliance Industries and Coal India came under pressure. The A/D ratio stood at 2:3 as the rupee weakened sharply. In fact, the Indian rupee weakened by 70 basis points to Rs.70.59/$. The rupee was weak on global pressures even as banks and importers were scurrying to cover their open positions in the midst of a volatile currency market.

The finance ministry finally appears to be getting serious about rationalizing the PSU banks. Finance Ministry asks RBI to identify lenders that can be merged. RBI will prepare a list of potential mergers in the 21 PSU banks that are currently in operation. The merger of PSU banks has been long spoken about to reduce the risk of duplication of banking services and to rationalize operating cost as well as to create economies of scale in treasury. Meanwhile Aditya Birla Capital and Varde of the US have launched a $1 billion fund to take strategic stakes in stressed assets in India.

Reliance Infra completed Rs.18,800 crore sale of Mumbai power business to Adani Transmission. This sale will help Reliance Infra to reduce its total debt burden from Rs.22,000 crore to Rs.7,500 crore. It plans to focus entirely on infrastructure projects and plans to become a zero-debt company by the middle of next year. RINFRA has a capacity of 1800 MW and generates Rs.7500 crore per year. The sale will represent t the biggest chunk sale out of the Reliance ADAG group and will help in substantially reducing the debt levels. The ADAG group has been plagued by high levels of debt and tepid growth.

Bharti Airtel shareholders approved their proposed merger with Tata Tele. The merger proposal was approved with 99.97% of the votes. Tata Teleservices is currently an NCLT case with unmanageable levels of debt. Tata Sons had decided to finally walk out of telecom after years of mounting losses. The situation was exacerbated by the price war triggered by Jio. The onus is now on Bharti Airtel to carry the merged entity along so as to take on the onslaught of Jio on one side and the combined entity of Idea and Vodafone on the other side.

India to become the world’s second largest steel producer by end of 2018. India had overtaken Japan in steel output last year. Now with a capacity of 300 million tons per annum and more stressed NCLT capacity coming on board, India is expected to overtake the US by end of this year. The details were revealed by steel minister, Birender Singh. Currently, China is the world’s largest steel producer with nearly 50% of the world’s steel capacity with the US far behind. By end of the year, the capacity accretion in India is likely to cross that of the US. In fact, Indian domestic steel demand is likely to increase by 200% by 2030, which is what most steelmakers are betting on. Steel is the sector that has seen a smart turnaround in fortunes in the last 2 years on the back of a favorable policy environment.

Indian Oil has lined up Rs.22,000 crore expansion plan for this fiscal year. Out of the total allocation, nearly Rs.6000 crore will be towards upgrading of its refineries and to meet BS-VI emission norms. It will also commission the Ennore – Manali LNG pipeline later this year. The big challenge for IOCL will be how they will replace their crude imports from Iran? Currently, is an assured source of high quality and low-cost crude for IOCL. It remains to be seen how IOCL is able to replace this crude supply. The company had reported fantastic GRMs but markets are wary about the potential for oil price subsidies.

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