Indian Markets Monday Wrap-Up: Six Day Winning Streak Halted

Although the benchmark indices made a valiant attempt at recovery towards the closing stages, it did not prove to be enough, thus leading to the indices closing the day in the negative. While the BSE Sensex ended the day down around 50 points (0.3%), NSE Nifty edged lower by around 10 points (0.2%). BSE Mid cap and Small cap indices on the other hand, had a relatively better day, ending higher by 0.2% and 0.5% respectively. Advances and declines split themselves up rather evenly on the overall BSE today with the former having a slight edge.

While most Asian indices ended in the red today, most of Europe is also trading in the negative currently. The rupee was trading at 48.8 to the dollar at the time of writing.

Today’s decline effectively snaps a six day winning streak of the markets. However, the decline was not as bad as it was threatening to become at the start of the day. Nor could it be attributed to something very significant. To our mind, it was a case of investors looking to take a breather and take some profits off the table. Anyways, until something unexpected pops out of somewhere or a big gush of liquidity is waiting to enter the Indian markets, we see very few reasons to take them significantly higher than the current levels if one were to go by fundamentals and assessment of intrinsic values. Agreed that the revival of rains has helped boost sentiments a great deal but we are of the belief that while they have indeed helped put a floor to the market levels, their ability to take the markets into new uncharted territories on the upside may be limited in the near term.

Looks like Tata Motors (TTM), India’s largest CV manufacturer got the opening it was looking for to de-leverage its balance sheet and bring its D/E ratio to more reasonable levels. As per reports, the company is looking to raise a little over US$ 400 m through GDRs and is in talks with a few merchant bankers to do the needful this month itself. It should be noted that in order to consummate the acquisition of Jaguar Land Rover, it had taken a loan to the tune of US$ 3.2 bn, thus putting its consolidated balance sheet under some amount of duress. Hence, the GDR fund raising is an effort to ease balance sheet concerns a bit. However, the current round of funding may not suffice and the company may have to resort to either stake sale in subsidiaries or further fund raising or both to make its balance sheet healthier. The company ended 2% stronger on the bourses today.

As per a leading daily, Reliance Industries, India’s largest private sector company is looking to change its exploration strategy. It had been focusing exclusively on India in the last few years as far as its exploration work is concerned. Now that the company is off that project after the huge discovery they made in the D6 block that is all set to double India’s gas output, Reliance will start drilling wells in such distant locations such as Oman, Kurdistan and East Timor. Furthermore, with the company having established itself as a deep water player, it is also keen to buy acreages in the Gulf of Mexico and Brazil. All in all, the company is looking to diversify its risk of focusing on exploration in only one market, India and is moving towards a well diversified portfolio of exploration assets. The company ended marginally higher on the bourses today.