Oil pares gains as Saudi oil policy set to continue

[Editor:  Oil prices have more than halved since the summer, when crude was more than $100 a barrel, amid an oil glut and weak global demand. A shale boom in the US has turned the US from the world’s biggest oil importer into a major producer, pumping more than 9m barrels a day.

Saudi Arabia, the world’s biggest oil exporter, led a decision by the Organisation of the Petroleum Exporting Countries in November to keep the cartel’s production unchanged at 30m barrels a day.

Meanwhile, Goldman Sachs believes that nearly $1 trillion worth of future drilling projects would no longer be profitable with Brent crude at $70 per barrel. However, it’s now trading at $45.83 per barrel, much below the benchmark level. If those projects were shut down, it would mean a production loss of 7.5 million barrels per day in 2025, equal to 8% of current global demand. This might fuel unemployment, Banking and Housing crisis in Texas, the US state, which accounts for nearly 40% of total US production; up from 25% in 2011 (The situation is actually comparable to 1986, when crude fell 50% over a matter of months). 

One the other hand, the Saudi officials have been very keen to regain the market share in the oil market by increasing supply and shaking out the weak-handed producers. But at what cost? Since September, the Saudi stock market has been one of the worst performers in the world – down 25%. At one point the index was down 35%, but rallied after the country’s finance minister implied the government would not cut spending on development projects or social benefits in 2015, despite falling oil revenues. The country which derives 90 percent of its budget from oil, is already feeling the pain due to the commodity's collapse.

Now, if oil prices continue to fall, there could be a serious economic crisis in the country. Even the current oil minister of Saudi Arabia, Ali al-Naimi (a position he held since 1995) knows that. Thus, according to my understanding, the fall in Oil cannot continue further, as the equation of demand and supply is likely to take-over from here, soon. 

Moreover, too much fall in oil will not be good for both China and India, who are Major Exporters to the US and the EU. Besides, this the Saudi’s have pegged their currency, the Riyal (SAR), to USD since 1986, meaning any rapid appreciation of USD will tighten domestic monetary conditions. 12-month USD/SAR forwards are trading at their highest levels since the financial crisis. If USD continues to rise and oil continues to fall, the country’s monetary policy would need a severe shift. So, I believe something will be done immediately to stem the tide]

Photo: Anti War Blog

23 January, 2015: Oil prices rose on Friday after the death of Saudi Arabia's king added to the uncertainty in global oil markets, although the new ruler indicated immediately there would be no policy change.

Brent crude rose to a high of $49.80, up $1.28 a barrel, before easing to $49.30 by 10:10 a.m. ET. U.S. light crude oil was at $46.28, down 3 cents.

King Abdullah bin Abdulaziz died early on Friday and his brother Salman became king of the world's top oil exporter.

Salman named his half-brother Muqrin as heir and nephew Mohammed bin Nayef, 55, as Deputy Crown Prince, moving to forestall any succession crisis at a moment when Saudi Arabia faces unprecedented turmoil on its borders.

Saudi state television said King Salman intended to keep oil minister Ali al-Naimi in place, suggesting the country's oil policy would remain unchanged.

Hans van Cleef, senior energy economist with ABN Amro, said the initial rally after King Abdullah's death was due to uncertainty over succession and Saudi oil policy.

"There was only a spike in prices over these tensions and they eased afterwards," he said.

After seeing strong volatility and price falls earlier in January, oil markets have moved little this week, with Brent prices range-bound between $47.78 and $50.45 a barrel.

The new Saudi king is expected to continue an OPEC policy of keeping oil output steady to protect the cartel's market share from rival producers.

Abdullah's death comes amid some of the biggest shifts in oil markets in decades. Oil prices have fallen by almost 60 percent since peaking last June as soaring supplies of shale oil from North America have coincided with cooling demand.

Booming U.S. production has turned the United States from the world's biggest oil importer into one of the top producers, pumping out over 9 million barrels per day.

Data from the Energy Information Administration on Thursday showed the biggest build in U.S. crude inventory in at least 14 years, driving Brent and WTI prices apart.

To combat soaring output and falling prices, many oil exporters, such as Venezuela, wanted the 12-member Organization of the Petroleum Exporting Countries to cut output in order to support prices and revenues.

Yet, led by Saudi Arabia, OPEC announced last November it would keep output steady at 30 million barrels per day.

Courtesy: CNBC

DO YOU KNOW?

On 13 January, 2015, a buy call was initiated on SPARC Ltd (Sun Pharma Advaned Research Company Ltd; BSE Code: 532872), for the Premium Members, at around Rs.200-205 for a target of Rs.245, in the next couple of weeks. The scrip made an all time high today (23/01/2015) at Rs.334.55. 

Congratulations to all those Premium Members (and those who trade through my recommended brokerage house/s), who bought the scrip on my recommendation. 

Options Traders Turn Bullish, See Big Gains for U.S. Steel

NEW YORK, January 23, 2015:  -- Option traders are turning bullish on U.S. Steel (X) less than one week before earnings are released. 

OptionMonster's Heat Seeker system detected the purchase of more than 21,000 February 24 calls Thursday, dwarfing previous open interest of 6,405 contracts and indicating new positions. The calls initially fetched 57 cents and 58 cents but appreciated to as much as 90 cents by the afternoon,  a gain of more than 50%. 

That kind of leverage is possible because calls lock in the price where a stock can be purchased. Their cheap cost ensures that investors won't miss a rally while limiting the amount of cash at risk in the event of a pullback. 

U.S. Steel shares were down slightly when the trades hit but turned almost immediately and ended the session up 2.95% to $22.71. The heavily shorted stock, which trades for less than book value, was holding support at its lowest level since October 2013. Quarterly results are due after the closing bell next Tuesday, Jan. 27. 

Overall option volume in the name was quadruple average amounts in the session, with calls accounting for a bullish 78% of the total.

-- Written by David Russell of OptionMonster 

Courtesy: The Street

Steel and mines ministry seeks pre-budget hike in import duty on finished steel

[Editor: Meanwhile, Rajat Bose of www.rajatkbose.com told CNBC-TV18, on January 23, 2015: "I have seen that any good news on Europe Tata Steel Ltd (Rs.402.65) tends to perform for valid reasons. In Tata Steel I would put a stoploss below Rs.395, on closing price basis I am looking at a price of Rs.418-421. Again this is a positional trade and the next target beyond Rs.421 would be Rs.429. Tata Steel could well be forming a bottom, getting a fillip with this new found momentum.” Yesterday, Ambareesh Baliga - Independent market expert told CNBC-TV18: "Tata Steel  is one stock where I see further movement of Rs.20-25 more from the current level". So, we could soon see a rally in the steel stocks]

Photo: Scrap Monster

KOLKATA, 22 Jan, 2015: The union steel and mines ministry has sought an immediate hike in import duty on finished steel to 10% from the present level of 5 to 7.5% and a withdrawal of duty on raw materials like, iron ore and coking coal in the light of surging steel imports. 

While these have been part of its Budget recommendations, the move gathered significance recently with the ministry shooting off an urgent letter to the finance ministry to implement a pre-Budget change in duty rates. 

The move, if implemented, will bring much needed cheer to domestic steelmakers grappling with rising imports and scare raw materials, the ministry's suggestion against lowering export duty on iron ore will disappoint the mining sector players. 

The Budget proposals were sent to the Finance Ministry as part of its budget recommendations late last month.

Steel imports grew by 58% during April-December 2014, even as exports fell by 6.6 % in the same period. In contrast, domestic steel consumption has shown a lacklustre growth of 1.4% in the first nine months of the current fiscal. 

The domestic steel industry has been urging the government to take measure to restrain steel imports, which have surged in the past months. A hike in import duty on finished steel is likely to check imports from China, which is facing an economic slowdown. 

However, a huge quantity of steel is also being imported from countries like Japan and Korea, due to the free trade agreements between India and these countries that allows preferential tariffs. 

On the raw material side, withdrawal of import duty on iron ore and coking coal will come as a huge benefit for domestic steelmakers who are facing problems in sourcing iron ore due to the mining problems. Rupee depreciation has also emerged as a threat for steel companies which have had to resort to imports of iron ore, in addition to coking coal imports. 

Removal of import duty will thus help Indian steel companies contain production costs and make them more competitive both in the domestic and export markets. 

However, if implemented, the ministry's suggestion will disappoint mining industry players who have been demanding a reduction in the 30% export duty on iron ore. 

Courtesy: The Economic Times

WINNING STROKES: THINK DIFFERENT

Mangalore Refinery and Petrochemicals Ltd reommended yesterday at around Rs.48.95, today touched Rs.51.20, before closing at Rs.50.50. The stock will give handsome returns to the investors. Please have patience, till it starts to get benefits out of the expansion.

Rohit Ferro Tech Ltd today closed at Rs.7.90, due to weak outlook of the steel sector in the international market and also due to the domestic problems. In an interview with CNBC-TV18, on 22 January, 2015, Kalyani Steel MD RK Goyal said: 

"Just for your information, particularly long products import has gone up by 550 percent in Q3 and in terms of volume it has gone up to the level of 450,000 tonnes in last quarter. On annualised basis it becomes 1.8 million tonne against the total demand of the industry around 4 million tonne and if this continues, I think the local industry will be wiped off. Major imports are coming from China besides from various other countries including Europe, including Russia. The reason is that the economic situation or the slowdown in the growth in China -- since local demand in China is going down, they are trying to find out avenues to export that material and India is a good ground for them where there are practically no restrictions and a reasonable size market for them.The government should introduce some sort of steep import duty so as to deter dumping of products from countries such as China".

Meanwhile, China's apparent crude steel consumption fell (3.4 percent from a year ago to 738.3 million tonnes in 2014), for the first time in three decades in 2014, data from an industry association showed, a further indication of how the country's economic slowdown is hurting industrial demand. Some analysts are of the view that a decline in the use of steel in China, which is both the top consumer and producer of the alloy, will dent iron ore prices that have already been roiled by a global oversupply. Spot rates of the steelmaking ingredient are currently mired near a 5-1/2 year low $65.60 per tonne. It is interesting to note that, struggling with weak demand as economic growth slowed to 7.4 percent in 2014, the lowest since 1990, Chinese steel producers turned to exports, which according to CISA rose 64.5 percent to the equivalent of 84.4 million tonnes of crude steel last year. Overseas sales got a further boost last year as exporters took advantage of a loophole that allowed them to gain tax rebates by adding tiny quantities of boron to their products. However, that loophole has since been closed. CISA said in a report published on its website that around 40 percent of exports in 2014 contained boron, and the decision to cancel the rebate this year will have "a certain impact" on the domestic market. Also, amendments to China's Environmental Protection Law, which came into effect on Jan. 1, 2015, will raise production costs in an industry which is already trying to survive on profit margins of less than 1 percent in 2014. Thus, these two points (on China) are definitely going to have positive effects on the Indian domestic steel sector as well. Moreover, some analysts, warned of a potential squeeze higher, with the market now positioned with the biggest net short since 2008 across the LME and CME Group Inc's Comex contract combined. "With the market oversold and heavily short, the likelihood of a short term squeeze is rising. We would view any further bouts of weakness as prime buying opportunities," said ANZ in a report. 

Besides, stocks and bonds surged worldwide and the euro sank to an 11- year-low on Friday, the day after the European Central Bank announced a quantitative easing plan. Oil rose following the death of the king of Saudi Arabia. European shares were on course for their strongest week since late 2011 and emerging markets headed for their best in almost 10 months. Italian, Spanish bond yields dropped to record lows. Purchasing manager surveys showed the euro zone economy began 2015 in better shape than expected, although companies are still cutting prices.  

The ECB announced on Thursday a programme to buy government bonds, which will pump roughly a trillion euros into the stagnant euro zone economy. Although QE was widely anticipated, the size of the programme was not - markets had already largely priced in QE at about 500 billion euros in total so the package of 1.14 trillion euros easily outpaced market expectations. Now, though most of the analysts are of the view that a strong dollar is negative for the metal sector, but what I feel is that, easy money from the European QE, would soon start to enter the metal (Commodities) sector, sparking the fear of inflation--i.e, this move is likely to  inflate the prices of commodities, as we saw last time. Therefore, I feel we are probably sitting, at the end of a downturn in the metal sector. So, according to my view one should start accumulating steel (and other metal) stocks on any bounce. In another development, the latest producer manufacturing index(PMI) came in better-than-expected from China. Newly released numbers saw China's PMI come in at 49.8, up from 49.6 in December. Japan's PMI was up as well, coming in at 52.1, 0.1 percentage point higher than last month's 52. Later today, a slew of PMI numbers are scheduled for release, including the ones from France, Germany, Eurozone and US. In the latter, existing home sales and the CB leading index will be watched as well. 

Jindal Saw Ltd recommended earlier and also today, rose to Rs.86.90, intra-day before closing at Rs.84.60. The company as mentioned earlier came out with decent set of numbers for the Q3FY15. In Q2FY15, too, the results were impressive. The company is in a commanding position in India's tubular market, being the undisputed leader with turnover in excess of Rs.7500 crores. It is one of the country's largest producers of SAW pipes, which is widely used in the energy sector for the transportation of oil and gas. The investors are suggested to accumulate the same on all declines for a short term target of Rs.91-92, within this week. 

Today, as expected Veer Energy and Infrastructure Ltd corrected to Rs.4.15, intra-day before closing at Rs.4.18. I had mentioned a couple of days back in this blog, to be cautious to on the scrip as it nearly touched my target of Rs.5 (rose to Rs.4.98 intra-day). I will tell you when to enter the counter once again. For the time being the scrip could. fall to Rs.3.70. I had today, asked all the Premium Members to book profits in the counter. 
Nifty today closed at 8,835.60 up 74.20 points. Nifty has appreciated around 780 points or ~9% from the low of 8065 within a few trading sessions. Bulls are in full command of the affairs, in Dalal Street. Moreover, the point that Nifty is in a “Resistance Free Zone”, gives further ammunition to the bulls. The traders are suggested to buy stocks from both the large and small / mid-cap spaces. 

Jindal Saw Ltd: Result Update

Jindal Saw  Ltd came out with good set of numbers for the quarter ended December 2014. The profit before tax in Q3FY15 came as Rs.101.3 Cr as against Rs.60 Cr  in Q3FY14. During the quarter, the net profit of the company rose 23.74% to Rs 619.20 million from Rs 500.40 million in the same quarter last year.

Net sales for the quarter  rose marginally 3.97% to Rs.17,774.30 million, compared with Rs.17,096 million for the prior year period.

Earnings per share for the quarter stood at Rs.2.21, registering 22.10% growth over previous year period.

It is pertinent to mention here that, Jindal Saw reported 239% rise in net profit for the July-September quarter, 2014-15, at Rs.74.60 crore on higher sales.

Net turnover of Jindal Saw in Q2, 2014-15 rose to Rs.1,589.50 crore from Rs.1,233.70 crore a year earlier.

As of 30th September, 2014, the company has orders worth around $1 billion and 65% of which is for large diameter pipes. The orders for large diameter pipes are slated to be executed by June 2015 and in case of ductile iron pipes, the same are slated to be executed over next 12-18 months or more.

The company which produces pipes used in different industries had clocked Rs.22 crore net profit in Q2FY14.

A buy call was given to the Premium Group members yesterday at Rs.84-84.40. The investors can still accumulate the scrip at the CMP of Rs.84.70--84.80, for a short term target of Rs.92. 

It is to b e  noted that, Jindal Saw Ltd was earlier (October, 20, 2014) recommended a buy at Rs.75.95, after which it made all time high of Rs.115.80.

DO YOU KNOW?

The new shareholding pattern of Veer Energy and Infrastructure Ltd shows the promoters holding as  33.35 % (in it 8.852 % is pledged or otherwise encumbered) as against 35.59% in September, 2014 quarter. So, the promoters' holding has gone down, isn't it? Am I right?

2ndly, Veer Energy and Infrastructure Ltd is a Re.1, Face Value share and not Rs.10. It means at the CMP of Rs.4.74, it is actually priced at Rs.47.4, considering Rs.10 as Face Value. 

3rdly, the stock has given more than 30% return in the last one week. Now the exchanges might ask for clarification from the company regarding the unusual price rise and volume. The scrip might come down, if the company says there is no  news. So, some caution needs to be maintained in the short term. 

Mangalore Refinery and Petrochemical Ltd: Buy

CMP: Rs.48.95

At the loading of MRPL’s first International solid cargo of Sulphur at Jetty #3 NMPT.

Introduction: 

Please Click on the Photo to Expand

MRPL, a schedule ‘A’ CPSE and a subsidiary of ONGC is a State of Art Grassroot Refinery located in a beautiful hilly terrain, north of Mangalore city, in Dakshin Kannada region. The Refinery has got a versatile design with high flexibility to process Crudes of various API and with high degree of Automation.

MRPL has a design capacity to process 15 million metric tons per annum and have 2 Hydrocrackers producing Premium Diesel (High Cetane). It also has 2 CCRs producing Unleaded Petrol of High Octane. MRPL produces special grade, ash less petcoke, ideal for cement kilns as the end product in their state of art Delayed Coker Unit (DCU) commissioned in April 2014. TheDCU converts low-value ‘short residue’ (bottoms) into high-value products viz Gasoil, Naphtha, LPG etc thereby increasing the distillate yield. Around 30% gets converted into special grade pet coke, which is in demand in the country.

Shareholding Pattern: 

The promoters hold 88.58%, while the general pubiic holds only
11.42%. Among the general catagory, the institutions hold 3.64%, FIIs hold 0.67% and DIIs hold 2.97% of the shares of the company. In fact the FIIs' holding has increased marginally both on Q-o-Q basis and sequentially. The non-institutions  hold only 7.78% shares of the company leaving very little shares in the open market for trade. 

Triggers: 

• In December, the Mangalore Refinery and Petrochemicals Ltd 
  
  (MRPL) entered into a MoU with STC Mauritius and Indian Oil Corp (IOC) to set up a petroleum terminal at Mauritius. The JV terminal would be constructed at an investment of around $130 million to facilitate re-export of petroleum products from Mauritius to Indian Ocean Islands and mainland Africa.
• The company has fully commissioned all units of phase-III, other than polypropylene unit, which will be fully functional by the March quarter of FY15. With that the phase-III expansion will be completed. 
• The completion of phase-III expansion of the refinery, single-point mooring system near New Mangalore Port, and facilities at OMPL (ONGC Mangalore Petrochemicals Ltd) are some of the recent milestones achieved by the company. Moreover, the first dispatch of OMPL product has gone from the company to respective customers in Q3FY15. MRPL is also one of the stakeholders in the OMPL project.  All these milestones would help improve the refining margin of the company. This will help bring better returns for stakeholders. 
• The company initially had plans of setting up of retail outlets. Accordingly, its BOD had approved the proposal for the establishment 122 outlets a few years ago. However, the company is not implementing, at the present moment, because it needs to revalidate that decision within its own team. 
• The commissioning of single-point mooring system near New Mangalore Port last year has helped the company to bring crude oil in bigger vessels.
• MRPL reported not so encouraging GRMs both in Q1FY15 and Q2FY15. This may come to end in the coming quarters as the phase III expansion completes and the plant stabilizes. Historically, MRPL has reported higher and more stable GRMs than the other PSU refineries. Now with most issues easing away and the secondary units getting commissioned by FY15E, the GRMs of MRPL is likely to bounce back in the coming months. 
• MRPL's Phase III is in the final stage of completion and is expected to be fully commissioned soon, as mentioned above. This refinery expansion & upgradation project at Mangalore includes: - (1) capacity addition of 3 MMTPA and upgradation project (2) polypropylene unit and (3) single point mooring (SPM) facility. 
• During Q1FY15, the company commissioned the delayed coker unit (DCU), that will crack the residual fuel oil into gasoil and petcoke, coker hydro treater unit (removes sulphur impurities from diesel) & two out of three SRU units. The PFCC (converts vacuum gasoil to propylene) & one train of SRU are expected has already been commissioned last year (CY14). Higher complexity on commissioning of Phase III project will lead to an increase in distillate yield from 76.5% to 80.1%, better capability to handle heavier & sourer crude and production of higher margin value-added products. 
• This month, MRPL announced that it moved its very first international solid cargo of Sulphur aboard MV Dusita Naree from NMPT Jetty #3. The loading of the 16500MT of ‘solid Sulphur’ headed to ZHENJIANG Port in China, commenced on 2nd Jan 2015 and was completed by 6th January 2015. The customer, M/s Mitsui& Co had bid online for the 16500MT of ‘solid Sulphur’ generated from the Phase I, II &III Sulphur Recovery Units of MRPL. Solid Sulphur is the by-product of the process by which desulphurization of auto-fuels is carried out to make these fuels environment-friendly EURO grade products. MRPL today manufactures EURO IV grade of petrol/diesel and is equipped for commercial production of EURO V. At a time of increasing concern at the potential for oversupply in the sulphur industry, particularly because of the increases in China’s sulphur capacity, the MRPL shipment is positive news for the sector and shows that China is still a key customer for the mineral.
• Overall, MRPL has lower policy leverage and lowest gearing on the balance sheet amongst PSU refineries. Moreover, the fuel loss which was a drag during the last few quarter may come down in the immediate future due to commissioning of new projects. This will lead to better GRMs.

Conclusion: Looking at the daily candle stick chart we find that the the stock has given a clear break-out above Rs.48.7. The scrip even closed above its 21D, SMA and EMA. 

This stock therefore, becomes a must buy for the investors at the current price of Rs.48.95. We can look forward for a target of Rs.55-62, in the coming days. The short term traders can keep a SL of Rs.45.

MARKET MANTRA

Veer Energy and Infrastructure Ltd (Face Value: Re.1 and not Rs.10) today touched Rs.4.54 and is now trading at around Rs.4.40. The traders who have entered earlier can book some profits and wait for the scrip to stabilize, before taking a fresh entry. The long term investors however can hold the scrip with a SL of Rs.4.20. 

Today's Call: (i) Buy Gitanjali Gems Ltd at Rs.52.70, for a target of Rs.61-62. With the marriage season commencing, the demand for Gems and Jewelries are set to increase in the coming days. Meanwhile, there were media reports that Gitanjali Gems Ltd. (GITG), India’s largest jeweler by revenue, has registered three new trademarks in that country, the Rapaport Report diamond news website reported. The three new trademarks, approved Dec. 22, are “Gitanjali Jewels,” “Giganjali Group,” and ‘Gitanjali Trust Forever,’’ according to the Rapaport Report. The Mumbai-based company said in its application that it has used the terms since July 2011, according to the diamond-industry trade publication. Gitanjali Group was founded in 1977 as a diamond-cutting and polishing operation and has since grown into a diamond and jewelry company, according to the Rapaport Report.
(ii) Buy Mangalore Refinery And Petrochemical Ltd at Rs.49.70-50, for a target of Rs.61-62, in the short term. The medium term target for the scrip is Rs.80. SL-Rs.46.50.

CHART CHECK

The current support for the Nifty has shifted to 8620-8630 levels, after it closed at 8,723.85 with a gain of 28.2 points, yesterday. According to some well known chartists, on the medium term basis any dip till 8430 could be a good buying opportunity for an upside upto 8750 zone. 

Which means today, it could be  day of Mid and Small Cap counters and traders are suggested to focus on this space more. However, if the Nifty slips below 8500, then it could retest 8420-8370 zone once again. 

Brokerage Report: Macro-Economic and Other Domestic / International News

(i) India may see current account surplus after 7 years: Nomura

India may see achhe din on the capital account front with analysts predicting a surplus for the first time in more than seven years as falling crude oil prices and lesser gold imports would ease the pressure on the country's trade balances.

Photo: PTI

"Based on the current trends, we expect India's current account balance to turn positive for the fourth quarter of FY15,"  CAD was 2.1% of GDP in the quarter ended September 30, a fivequarter high, on slow exports growth and rise in imports owing to a rise in demand for gold. India had last seen a current account surplus of $4.2 billion (1.6% of GDP) in the fourth quarter of 2006-07.

(ii) India's growth to reach 6.3% in 2016 

UN report India will see a gradual growth acceleration with its GDP expected to reach 5.9% this year and 6.3%t in 2016, the UN said today while partly crediting the recovery to improved market sentiment after the new government took office and announced key reforms. "India's economy expanded by an estimated 5.4% in 2014, an improvement from growth of 5.0% recorded in 2013, but still significantly below the 8.0% pace of the pre-crisis period," said the United Nations World Economic Situation and Prospects 2015 (WESP).

(iii) China GDP Growth Stable In Q4

The Chinese economy expanded at a stable rate in the fourth quarter, defying expectations for a slowdown. GDP grew 7.3% in the fourth quarter from a year ago, same as in the third quarter. This was the weakest growth since the first quarter of 2009. However, the increase was stronger than the 7.2% rise forecast by

economists. QoQ, GDP rose by a seasonally adjusted 1.5%, slower than the 1.7% increase expected by economists. 

(iv) Japan Consumer Confidence Rises More Than Expected In December

Consumer confidence in Japan increased more than expected in December, figures from the Cabinet Office showed. The consumer confidence index rose to 38.8 in December from 37.7 in the previous month. Economists had forecast the index

Cement stocks outperform markets

[Editor:  The report says that while large-cap Cement scrips have rallied 8-16% so far this year, mid-cap ones have gained 10-26%. But, I feel this will not be restricted to only cement counters, but is expected to spread to areas related to the Real Estate/ Construction space, eg. Steel, Wood, Aluminium, Copper, etc. We are already witnessing rallies, in some of the well known metal shares, including my old favourite, HINDALCO Ltd (Rs.144.40)]

New Delhi / Mumbai  January 20, 2015: Cement stocks have started the year on a firm note, with most outperforming the markets on hope of an improvement in sales and a pick-up in construction activity.

While large-cap stocks such as UltraTech Cement, ACC, Ambuja Cements and Shree Cement have rallied 8-16 per cent on the BSE this year, against a five per cent rise in the benchmark Sensex, mid-cap stocks such as Prism Cement, Heidelberg Cement India, OCL India, Birla Corporation and India Cements have gained 10-26 per cent.

“We have seen a rise in cement prices across India post December. As a result, cement stocks gathered momentum. Going ahead, we remain positive on the sector from a one-year horizon. There is a lot of capacity in place, which augurs well if the demand increases on the back of an improvement in the overall economy. We continue to favour Mangalam Cement and have a ‘buy’ recommendation on the counter,” said Sunil Jain, vice-president (equity research), Nirmal Bang.

In seven of the past 10 years, the sector outperformed the broader markets in the January-March quarter, owing to retail price increases, prominent in the peak construction season, reports suggest.

Between January and March last year, the UltraTech Cement, Shree Cement, ACC, Prism Cement, JK Cement and JK Lakshmi Cement stocks had gained 25-40 per cent, according to data compiled by Business Standard Research Bureau. During the same period, the Sensex gained 5.7 per cent.

Demand dynamics

After a decline in October 2014 due to the festive season and unavailability of labour, cement demand started recovering from November, led by a revival in construction. With an uptick in prices and an improvement in demand, analysts remain positive on the sector from a long-term perspective.

In the quarter ended December 2014, cement prices fell Rs 10-15 a bag in north India due to weak demand, non-availability of labour and the festive season.

In the south, prices were hit by monsoons and Cyclone Hudhud, reports suggest. Average prices in south India fell Rs 5-10 a bag. While prices fell Rs 10-12 a bag in western India, prices in the eastern parts of the country largely remained flat.

Analysts expect demand to improve, led by increased spending on housing in rural and semi-urban areas and an improvement in orders for infrastructure projects.

Given the demand triggers through the next two-three years (led by government investments), Mihir Jhaveri and Prateek Kumar of Religare Institutional Research expect prices to remain buoyant.

They maintain a positive outlook on the sector, estimating compounded annual growth of 9-10 per cent in demand during FY14-FY17.

Any weakness due to a moderate third quarter of FY15 should be used as an opportunity to accumulate cement stocks, they said in a recent report.

Tina Virmani, an analyst tracking the sector at Kotak Securities, however, says though cement stocks are trading at fair valuations, any weakness in these should be used to buy selectively. She continues to be positive on Grasim Industries and Shree Cements.

Courtesy: Business Standard

We moved ordinance in order to revive mining industry: Steel & mines Minister Narendra Singh Tomar

[Editor: Meanwhile, Amit Harchekar, Chief Technical Strategist at A PLUS Analytics recommends going long in Tata Steel with a target of Rs.430. This means the momentum has started to be built around the Steel Sector. Moreover, in a interview published in Free Press Journal on Jan 02, 2015, the Union minister for steel and mines, Narendra Singh Tomar said, "At present, there is an increase in the prices of iron ore, because of the shortage of the material. These prices are also impacted by global conditions, however due to the domestic scarcity of iron ore, the prices have shot up and the steel industry has been gripped by a crisis. So, the industry is facing a tough time as it has to source the iron ore at higher prices. This is the fate of large units. In so far as the smaller units are concerned, their position is all the more difficult. The situation has been complicated by the fact that in the same period, China has dumped the market with both iron ore and steel. The fact of global competition is also a reality. We are also  working in collaboration with the finance ministry to look at options to control dumping from China"]

Photo: In.com

20 Jan, 2015: Minister of steel and mines, Narendra Singh Tomar spoke to ET's Meera Mohanty in an interview, explaining the need for the recent ordinance amending the MMDR Act of 1957 that introduces the auction of non-coal minerals. The minister needs to balance the demands of the mining industry and its key end user, the steel sector. He defended the decision to allow existing leases that are more than 50 years old an extension until 2020 and 2030 in the case of captive mines. The ministry believes 199 areas, mostly limestone, would be ready for auction soon. Edited excerpts:

Was it necessary to amend the MMDR through an ordinance?

The MMDR Act was introduced way back in 1957. The previous government had attempted to introduce a new bill but it had lapsed. In the last few years, the issue of first-cum-first-served had also been raised by the Supreme Court. The MB Shah commission had also been critical of certain practices that it said were illegal. The result was that officials both in the state and at the Centre were worried about issuing any orders under a system that in itself was in question.

We had planned to introduce the Amendment Act in the winter session. However, by the time we had stakeholder and interministerial (consensus) — I personally met several chief ministers — the session had drawn to a close. Since the need to revive mining industry was pressing, we moved it as an ordinance . When it is provided for by the constitution, and it will only strengthen the economy, why doubt it. There is nothing circumventive about it. At the end of the day, it still must be cleared by Parliament.

To what extent will this simplify issues ailing the sector? And how do you react to charges that it takes away powers from the states?

In fact, this is a historic step towards decentralisation of the Centre's powers in the area of mining. For instance, , it removes the need of prior approval of the central government — which was required for notified minerals in the First Schedule earlier — except in the case of atomic minerals.

For mining plans, a provision has been made that if any state government, with approval of the Centre, institutes a mechanism with the help of third parties, for mining plans, certification and monitoring, then the plan accorded through such a mechanism can be the basis of allocation of a mining licence (ML).  Provision has been made for the central government to prescribe timelines. The Centre may intervene, exercising its revisionary powers, only in the event of a state not a taking a timely decision.

The life of a mining lease has been increased from 30 years to 50 years, doing away renewals. There was ambiguity in the earlier Act with regards to second and subsequent renewal. We know that only a few concessions (after the Supreme Court order) were granted during last year and most were pending owing to indecision of state and central government this too has been addressed. The new law allows for transfer ML and PL (prospecting licence)-cum-ML awarded through auction, which was major concern of the industry.

Will the coal auction mechanism form a template?

We are open to explore all possible mechanisms. The broad similarity with the coal ordinance is provision of a financial bid. In the ordinance we have provided for, inter-alia, a production-sharing model. However coal is nationalised. Here since states will be conducting the actual auction, we wanted their feedback and buy-in to the rules and regulations that will be drafted. (The minister met with 11 state ministers of mines and their respective secretaries on January 19.) 

Would you be providing a weightage to steel, aluminium users?

Under section 10B(6) of the new ordinance, the central government has the right to reserve a particular mine or mines for a particular end use. We will be identifying select mines for "limited auction" for end users, subject to certain eligibility conditions.

Reconnaissance, and rights thereafter, has been a persistent demand particularly of global mining giants and that hasn't been provided.

The ordinance allows for grant of nonexclusive reconnaissance permit to aid and help global miners. 

Courtesyy: The Economic Times

After surprise cut, RBI asks banks to review lending rate quarterly

Photo: Impact Design and Drafting

Jan 20, 2015: Following its interest rate cut last week after nearly two years, the Reserve Bank (RBI) on Monday asked banks to notify the base, or minimum, lending rate at least once every three months based on cost of funds.

"As hitherto, banks are required to review the Base Rate at least once in a quarter with the approval of the board or the Asset Liability Management Committee (ALCO) as per the bank's practice," the RBI said, issuing new guidelines on interest rates on advances.

Commercial banks currently do not maintain a fixed schedule for review of the base rate. While the new guidelines will come into effect from Feb 19, banks will not be allowed to change their methodology during the review cycle.

"While computing Base Rate, banks will have the freedom to calculate cost of funds either on the basis of average cost of funds or on marginal cost of funds or any other methodology in vogue, which is reasonable and transparent provided it is consistent and made available for supervisory review/scrutiny as and when required," RBI said.

The notification also said it has been decided to allow banks to review the Base Rate methodology after three years from date of its finalizing instead of the current period of five years towards greater operational flexibility.

"Accordingly, banks may change their Base Rate methodology after completion of prescribed period with the approval of their Board of Directors/ALCO," it said.

Courtesy: First Post

Need to address problems arising out of Carbon dioxide emission: Suresh Prabhu

Photo: Motherboard

[Editor: Assured of government’s backing, the Indian wind power industry has ended ending the year, 2014 on a high note. India has taken nearly a quarter century to create wind power capacity of 22,200 MW. But now, Power Minister Piyush Goyal wants the industry to ramp up installations, so that the capacity additions in 2018-19 are 10,000 MW. The most the industry added in any year was 3,168 MW in 2011-12. The government has been supporting the renewable energy sector: (i) the grant of the industry’s long-standing request for restoring the tax-saving ‘accelerated depreciation’ duty, and (ii) exemption from 4 per cent special additional duty on imported components for wind turbines. Moreover, according to some media reports, on the works there is a proposal to impose a ‘renewable generation obligation’ that will force companies putting up coal or lignite based thermal power plants to create an additional 10 per cent of their project capacities as renewable energy plants. This is expected to give that ‘extra push’, as cash-rich public sector companies such as NTPC, NLC and DVC might quickly come up with large wind (or solar) projects. Having given the industry all it wanted, the government is now gesturing: “go, do it”. In 2014-15, India will see wind power capacity additions between 2,000 MW and 2,500 MW, roughly the same as last year. Meanwhile, Motherboard, wrote on 13 October, 2014: 

A leaked report shows that wind is the hands-down cheapest energy source in Europe, beating the presumably dirt-cheap coal and gas by a mile. Conventional wisdom holds that clean energy is more expensive than its fossil-fueled counterparts; politicians who oppose incentives for solar and wind routinely point to their cost as an omnipresent hurdle. Yet truly honest cost comparisons show that renewable energy sources are often cheaper than their carbon-heavy competition. The report, which was prepared for the European Commission, shows as much: it demonstrates that if you were to take into account mining, pollution, and adverse health impacts of coal and gas, wind power would be the cheapest source of energy, period] 

New Delhi | January 20, 2015: Union Minister of Railways, Suresh Prabhakar Prabhu on Tuesday said it was imperative that problems and challenges arising out of carbon dioxide emissions are addressed approximately.

The Minister released a book "Carbon Capture, Storage and Utilization (CCSU)" which deals with the issue of mitigating climate change concerns arising out of emission of carbon dioxide in atmosphere.

It is a collection of papers prepared by eminent authors. R.V. Shahi is the Former Power Secretary, Govt. of India, Malti Goel, Former Advisor in the Ministry of Science and Technology, and M. Sudhakar, Advisor/Scientist, Ministry of Earth Sciences.

Prabhu said that the Ministry of Railways is the biggest consumer of energy in the country. While it mostly uses electricity and diesel but now using alternate sources of energy like wind, solar, CNG and Bio fuels.

Referring to the energy scenario in the country, he said that while India is making vigorous efforts to use alternate sources of energy like solar energy, wind geo thermal, bio fuels but our dependence on fossil fuel will continue for many years.

Global efforts in this direction, particularly during last ten years, have raised some optimism that in coming years Carbon Capture and Storage could become a reality and very soon thereafter could even become cost effective. All efforts have to be mobilized to see that these technologies become relevant for developing economies to adapt.

It should be the responsibility of developed economies to share the findings of various researches, so that these become affordable for developing economies. Indian Industry and Research Institutions have also to do and contribute much more than they have been doing so far.

Courtesy: Webindia123.com

Sensex, Nifty close at record highs; metal, banking stocks gain

Photo: Indiacsr.com

Mumbai, Tuesday, January 20, 2015: Rising for the fourth straight session, India’s equity markets closed at record highs, led by gains in metals and banking companies. 

Investors also hoping that the European Central Bank may announce a 550 billion euro ($640 billion) bond purchase programme on 22 January, Bloomberg reported. 

Earlier in the day, the National Stock Exchange’s Nifty index rose as much as 1.84%, or 157.20 points, to hit a record high of 8,707.90 points, while the Sensex rose as much as 2.01% or 567.28 points to 28,829.29 points. 

At the close of trading, Sensex was up 1.85%, or 522.66 points at 28,784.67 points, while the 50-share CNX Nifty of the National Stock Exchange was up 1.69%, or 144.90 points, at 8,695.60 points. 

“There has been a lot of optimism after RBI’s rate cut last week, and the reforms process is also expected to catch up speed, propelling the market to new highs,” said Dipen Shah, head of private client group research at Kotak Securities Ltd. 

“If the government announces further fiscal reforms, within or outside of budget, valuations can rise further,” added Shah. 

The sentiment was also upbeat as the International Monetary Fund (IMF) said India is projected to outpace China by growing 6.5% against the 6.3% growth expected for its northern neighbour in fiscal year 2016-17—the third year of the Narendra Modi government—becoming the fastest growing major economy in the world. 

Among the gainers, Housing Development Finance Corp. Ltd (HDFC) rose 5.8% to its record high of Rs.1,250.50, Sesa Sterlite Ltd rose 5.4% to Rs.203.50 and Tata Steel Ltd rose 4.5% to Rs.402.10. 

Among the losers, Gail India Ltd fell 1.9% to Rs.432.05 and Tata Power Co. Ltd fell 0.9% to Rs.82.05. Among sectoral indices, the BSE metal index was the top sectoral gainer, up 3%, followed by the Bankex, FMCG, oil and gas and realty indices, which were up 1.8%, 1.7%, 1.3% and 1.2% respectively. BSE Teck and auto indices were up 0.7% each while the capital goods, healthcare and IT indices were up 0.5% each. 

Metal shares were the key gainers in Tuesday’s trade.

“The metal index went up as Chinese growth rate was better than expected,” said Shah of Kotak. Jindal Steel and Power Ltd rose 3% to Rs.155.4, JSW Steel Ltd 3% to Rs.1,005.40, Hindalco Industries Ltd 3% to Rs.144.4 and Hindustan Zinc Ltd 0.8% to Rs.161.60. 

Kesoram Industries Ltd rose 20% to Rs.137.30 and MRF Ltd 0.1% to Rs.39,494.65 after The Economic Times reported that MRF is in advance discussions with BK Birla flagship Kesoram Industries Ltd to acquire its main tyre unit out of the two of Birla Tyres for a value that’s far higher than the market capitalization of the entire diversified Birla conglomerate. So far in 2015, the Sensex has gained 4.67%, while foreign institutional investors have bought $155.7 million from local equity markets and bought $2.02 billion from the debt market.

Courtesy: Live Mint

WINNING STROKES: THINK DIFFERENT

Today Veer Energy and Infrastructure Ltd touched Rs.4.15, intra-day before closing at Rs.4.07. The scrip today moved up with huge volume in the BSE. The volume of the shares traded today was 1,185,534, against 10 and 30 and day average volumes of 162184 and 166237 shares, respectively. And what is more interesting and positive for the BULLS is that, the percentage of Deliverable Quantity to Traded Quantity was whopping 82.81%, which is even higher than yesterday. Today, the stock gave a clear break out and closed above some of its prominent "Moving Averages'. The stock in all probability will touch Rs.5 in this week. Congratulations to those who are holding the scrip. The share was recommended yesterday to the Premium Group members at Rs.3.30-3.50.

My recommended Allied Digital Services Ltd today touched Rs.34.55, before closing at Rs.30.90, after profit booking was suggested in the counter. The scrip reached all its short term targets. 
Meanwhile, I do not know whether you have observed or not: Kohinoor Broadcasting Corporation Ltd (Re.0.22) is hitting continuous upper circuits since the last few days. It seems this time the scrip will touch Re.0.50, let us see......

Rohit Ferro Tech Ltd (Rs.8.10) today, closed above Rs.8 forming slightly positive pattern for the bulls. The company is selling one of its plants (The unit is located at Kalinganagar industrial Complex, District: Jajpur, Orissa) and trying to reduce the debts. It is also implementing the CDR SCHEME. You should buy the scrip when no one is looking at it, but has a story to tell.  Meanwhile, according to The Economic Times, January 5, 2014: 

India is expected to become the world's second largest producer of crude steel in 2015-16, moving up from the fourth position, as its capacity is projected to increase from 100 million tonne (MT) to about 112.5 MT in 2015-16. "All indicators suggest that India will soon move up to the second position both in production and consumption", a sectoral analysis by Frost & Sullivan's Metals & Mining Practice said. 

With infrastructure development and automotive industry driving steel demand, production is expected to hit 140 MT by the end of 2016, while consumption is expected to grow 6.8% to reach 104 MT by 2017.

According to the analysis, the Indian steel industry is forging ahead despite "chronic handicaps like poor infrastructure". It said, "The government is working proactively to provide incentives for economic growth by injecting funds in construction, infrastructure, automotive and power, which will drive the steel industry in the future."

With nearly all major domestic steel producers in the process of adding a mix of brownfield and greenfield capacity, the total planned capacity hike in crude steel production till 2017 is estimated at well over 100 MT. While total installed capacity for crude steel in 2013 was 102 MT, capacity utilisation was about 80%.

Moreover, according to India Ratings & Research (Ind-Ra), the average prices for steel making raw materials are likely to remain low in 2015, in line with 2014, as major global miners are determined to flush small, high-cost producers out of the industry and regain balance in the market. The agency expects steel consuming sectors construction, automobile and mechanical engineering - to grow in FY16 with the softening of interest rates and implementation of government policies on the revival of infrastructure and investment in the country. A better GDP forecast of 6.5% growth in FY16 supported by industrial growth of 6.5% would gradually increase steel demand in the country. Besides, there were media reports today that, according to sources, the steel ministry has sought a revision of import duty on long products and HR coils saying it is necessary to raise import duty rates to safeguard TMT/rebar industry. You should therefore, not only buy the shares of Rohit Ferro Tech Ltd, but also average out or take fresh positions in Jai Balaji Industries Ltd (Rs.15.50). One should remember that without steel, Infrastructure development is not possible. 

Anant Raj Ltd today closed flat at Rs.46.85, in the BSE, after touched Rs.47.75, intra-day. Recently, the company announced that the Credit Analysis & Research (CARE) Limited has reaffirmed the credit ratings of the Company as 'CARE BBB+ (Triple B Plus)’ for the long term bank facilities of Rs.951.32 Crores and outstanding Non Convertible Debentures (NCDs) issue of Rs.150 Crores, which had been issued by the Company on private placement basis. The stock should see Rs.55-57, in the coming days.

Climate Change: PM Modi for credit to green initiatives

Photo: Ayyati.com

New Delhi, JAN 20, 2015: Pitching for a paradigm shift in the global approach towards climate change, Prime Minister Narendra Modi today said instead of only focussing on emission cuts, due credit should be given to efforts made for clean energy generation and conservation.

Underlining that focus should shift from “carbon credit” towards “green credit”, he singled out solar energy, saying it needs to be integrated with hybrid system of energy to make it useful.

He favoured setting up of a consortium of nations having potential in solar energy which could join hands with India in innovation and cutting-edge research that would reduce the cost of solar energy, making it more accessible to people.

Chairing the first meeting of the reconstituted ‘Prime Minister’s Council on Climate Change here, PM Modi said that “instead of focussing on emissions and cuts alone, focus should shift on what we have done for clean energy generation, energy conservation and energy efficiency, and what more can be done in these areas,” a PMO statement said.

He called for a careful evaluation of all the initiatives that have been taken by India in this regard.

These include initiatives in solar energy, wind energy, biomass energy, and transportation projects that have reduced distances or travel times.

PM Modi said India looks at the global concern and awareness on Climate Change, as a great opportunity for working towards improving the quality of life of its citizens, and making a positive contribution for mankind.

He also directed ministries to prepare a concept note on five uncovered areas — health, urban waste management, coastal areas and wind energy — while dealing with climate change as these are not covered under the ongoing missions.

“The ministries concerned have been asked to work on these new areas and prepare a concept note in the next four-five months. Once the concept is finalised, the funds will allocated accordingly,” a source said.

Courtesy: NITI Central