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Daily Market Commentary : 18th May 2016

After two consecutive weeks of gains, the Indian equity market shut with modest losses on Wednesday amid a sharp late recovery. Weak global cues dragged the Indian indices to open with a negative gap down. However, the day progressed; benchmarks staged a smart recovery led by gains in the realty, metals and capital goods stocks. The auto, power, utilities and consumer durables stocks ended with losses. Nifty closed with a loss of 21 points at 7,870 while Sensex ended with a loss of 69 points at 25,705.

A bulk of this supply would go to the power sector where around 30,000 MW of plants do not have any Coal supply agreement from Coal India. Coal India is looking to offer 8 mt of coal to power companies and 2 tonnes to other sectors every month.

At present, despite surplus coal, some 57,000 MW of thermal power units are fuel deprived since they do not have supply contract from Coal India. Reportedly, 9,000 MW of capacity is already achieved commercial operation with coal received on ad hoc sources and the rest (48,000 MW) of capacity is in various stages of construction. These plants would come up from this year onwards till 2020.

In another development, Coal India and NTPC have formally inked a joint venture agreement for the revival of now defunct gas-based Sindri and Gorakhpur plants of Fertilizer Corporation of India. The revival of these plants was estimated to cost about Rs 180 billion over the next four years. Gas for the plants will be supplied through the proposed Jagdishpur-Haldia pipeline. State utility GAIL has been reportedly asked to expedite the pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal. Having failed to revive the plants through auctions, the government asked NTPC and Coal India to take over the units. India’s urea production touched a record 24.5 million tonnes in 2015-16. While the country’s total demand is about 30 million tonnes, the rest is met through imports.

Coal India finished flat while NTPC closed on a negative note (down 0.6%) on the BSE.

Moving on to news from textile sector. According to The Economic Times, SRF is planning to invest Rs 35 billion over the next four years, 70% of which would go into its fast-growing chemicals business. SRF, which exports 90% of its chemicals and counts Syngenta, BASF, Bayer CropScience and other global biggies as its clients, has over the years steered its focus away from technical textiles to chemicals, where it has witnessed a rapid revenue growth and fat operating margins.

Reportedly, SRF will use internal resources to fund the planned investment as the company generates about Rs 10 billion of free cash flow every year. In four years, even as it completes its planned expansion, SRF’s net debt-equity ratio will improve to 0.3 from 0.74 now.

SRF’s shares have risen more than 25% in the past year as its focus on chemicals intensified. SRF is confident of capturing a larger share of the chemicals market because of its rising knowledge and technological capabilities(Subscription Required) in a world where increased demand for food and medicine require food and drugs companies to engage more with innovative chemicals suppliers.

SRF finished the day up by 0.2% on the BSE.

Top of Form

USDINR trade today trading down 10 paise at 66.97 per US dollar.

Out of 1,432 stocks traded on the NSE, 692 declined and 649 advanced today.

Top 5 Nifty Gainers: Lupin Ltd (2.06%), Tata Motors (1.35%), Tata Steel (1.02%), BHEL (0.92%) and Wipro (0.57%).

Top 5 Nifty Losers: HDFC (-1.62%), NTPC (-1.61%), ITC Ltd (-1.55%), Bharti Airtel (-1.18%) and Wipro (-0.97%),

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Daily Market Commentary : 18th May 2016


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