The BSE Sensex and NSE Nifty opened on a flat note on Tuesday tracking weak global cues. (Photo: PTI)

12.11 pm: Bouts of profit-booking were witnessed in capital goods, metal, auto, banking and consumer durable sectors, along with mid-cap and small-cap shares, while buying marked realty, FMCG, health care and IT segments. Sensex was down 115 points at 25,742.

12.06 pm: Goldman Sachs upgrades private lenders Axis Bank, ICICI Bank and YES Bank to ‘Buy’ from ‘Neutral’ citing attractive entry after recent underperformance of bad loand concerns. BSE Bankex was down 0.76 per cent at 19,205.57.

11.23 am: Texmaco Rail & Engineering gained over 3 per cent on BSE after the company said its board has approved acquiring a majority 76 per cent stake in Bright Power for Rs 100 crore. Sensex was down 110 points at 25,746. Nifty was down 45.70 points at 7,826. Sun Pharma and HUL were trading 1.16 per cent and 0.76 per cent higher at Rs 867 and Rs 801, respectively.

10.34 am: Nifty was down 27.50 points at 7844.75. Vedanta, Tata Power and Kotak Mahindra Bank were down over 1 per cent.

10.25 am: Sensex was down 95.20 points 25,761. In the 30-share index, Maruti Suzuki and ITC were up 1.32 per cent and 0.85 per cent at Rs 4,379.50 and Rs 315.80.

9.49 am: Brokers said sentiment turned somewhat weak as investors booked profits after Monday’s gains even as retail inflation fell to a new low of 3.66 per cent in August, which may prompt the Reserve Bank to cut rates at its September 29 policy meet. Sensex was down 43 points at 25,813.

9.24 am: Sensex was down 12.18 points at 25,844.52. Maruti Suzuki was trading 1.72 per cent higher at Rs 4,394.50. Share price of Maruti Suzuki gained after the Reserve Bank of India allowed foreign investors to invest up to 40 per cent of the paid up capital in the auto maker under the Portfolio Investment Scheme.

9.15 am: Domestic equity markets opened on a flat note on Tuesday tracking weak global cues. The BSE Sensex opened 51.64 points, 0.20 per cent, up at 25,908.34. NSE Nifty opened 5 points down at 7,867.35.

The Consumer price inflation (CPI) data that eased to 3.66 per cent in August from 3.69 per cent in July 2015, failed to boost market sentiments on Tuesday.

The rupee fell 5 paise to 66.38 against the dollar in early trade due to fresh dollar demand from importers.

Global Markets

New York: US stocks closed down on Monday as many investors put off making big bets ahead of the Federal Reserve’s policy meeting this week and others worried about weak economic data from China. The Dow Jones Industrial Average lost 62.13 points or 0.38 per cent to 16,370.96, the Nasdaq was down by 16.58 points or 0.34 per cent to 4,805.76 while, the S&P 500 dropped by 8.02 points or 0.41 per cent to 1,953.03.

London: Britain’s top share index fell on Monday, with miner Glencore and supermarket group Morrison underperforming as weak Chinese data and the possibility of a U.S. rate rise weighed on markets.

Tokyo: Japanese stocks rose on Tuesday morning as food processing firms rallied on a report of a merger, while most investors were fairly relaxed ahead of the outcome of the Bank Of Japan’s two-day policy meeting.

Hong Kong: The Hang Seng Index was down 0.37 per cent.

(With inputs from agencies)

Domestic equity markets gained around 1 per cent on Monday on the back of positive macro economic data.

The BSE Sensex and NSE Nifty are likely to open flat with negative bias on Tuesday tracking SGX Nifty and mixed Asian cues.

At 8.29 am (IST), SGX Nifty was down 20 points, or 0.26 per cent, at 7,853.50.

China’s major stock indexes fell more than 1 per cent in early trade on Tuesday. China’s securities regulator said late on Monday that the government’s ongoing clean-up of illegal margin financing has had limited impact on the market, in a apparent move to soothe investors.

Asian peers, Hang Seng and Shanghai were down 0.30 per cent 1.62 per cent and at 21,497.78 and 3,064 while Nikkei was up 1.33 per cent at 18,205.25.

The US markets closed lower on Monday, as investors remained hesitant to buy stocks ahead of the Federal Reserve’s much anticipated policy meeting this week. The Dow Jones Industrial Average lost 62.13 points or 0.38 per cent to 16,370.96, the Nasdaq was down by 16.58 points or 0.34 per cent to 4,805.76 while, the S&P 500 dropped by 8.02 points or 0.41 per cent to 1,953.03.

Back home, domestic equity markets gained around 1 per cent on Monday on the back of positive macro economic data. The consumer as well as wholesale price inflation dived to new lows in August on falling global commodity prices, bolstering chances of an interest rate cut by RBI.

JSW Energy formally announced the final closure on its hydro assets purchase from JPVL. While the original deal was announced at Rs 9,800 crore, the actual transaction happened at Rs 9,275 crore after discounting for the capacity of Karcham Wangatoo. There was a slackening in generation from the thermal projects of JSW in Q1FY15 and in July due to the planned shutdown of the Vijaynagar plant. However, the generation from the project is in full steam for last 40 days as per the data available.

In addition, the generation from the hydro assets now acquired by the company has been strong in the current year, though with only two months of hydro operations remaining, the full benefit of the hydro generation will flow to the company only in the next fiscal year.

The asset sale was made necessary due to the high interest cost for the company and losses on account of cancellation of coal blocks of its 1.3GW Nigrie project, which still continues to recover only about 38% of its fixed cost.

The company, which won the coal block is looking to sign the PPA as well as to start operations of its 1-GW Bara project before the end of this financial year.

Upgrade JSW Energy to buy with a target price R112 and retain buy on JPVL with same TP of R9.2 — we believe the stock correction over last few months provides valuation comfort for both stocks. However, the new assets are likely to be an earnings driver for JSW Energy. Downside risks remain: The sector level issues, high debt cost, and SEB finances.

The Securities and Exchange Board of India (Sebi) on Monday asked all fund houses to furnish details of their investments in corporate bonds that have been downgraded by rating agencies. The move comes in the wake of a series of downgrades by rating agencies with mutual funds coming under the scanner for failing to make adequate disclosures about their debt exposure to investors.

A senior official told FE on the condition of anonymity: “We were asked to inform the regulator about how many downgrades have taken place of corporate bonds present in our portfolio. We were asked to submit all details within a day to Sebi.” This is the third time in the recent days that Sebi has sought to know details relating to debt funds. A series of downgrades over the last few days has raised concerns about their overall impact on performance of debt schemes.

In the last week of August, CARE suspended the rating of Amtek Auto as the company failed to furnish information required to monitor the ratings. Consequently, two of JPMorgan Asset Management’s fixed-income schemes sank sharply. JPMorgan India Short Term Income Fund lost 3.38% in just one day while JPMorgan India Treasury Fund fell 1.73%.

There was a sudden rush from investors to redeem their units, but the fund house capped its redemptions at 1% of the total outstanding units.

According to Value Research, as on August 31, JPMorgan India Treasury Fund and JPMorgan India Short Term Income Fund hold 5.87% and 10.78%, respectively, in the debt papers of Amtek Auto with a coupon of 10.25%. Later, Sebi sought information from MF houses on their exposure to Jindal Steel and Power (JSPL) after Icra downgraded the ratings on non-convertible debentures, commercial papers, term loans and fund-based and non-fund based limits of the company.

As on August 31, the MF industry has an exposure of over R4,500 crore to JSPL. Several schemes of Franklin Templeton MF, LIC Nomura MF and JM Financial MF, among others, also have exposure to JSPL papers.

A spokesperson of Franklin Templeton India said: “At Franklin Templeton, we attempt to optimise the tradeoff between safety, liquidity and returns within the investment objective and positioning of the individual product. Our approach to investing in fixed income goes beyond just macroeconomic parameters and is driven by a focus on stringent and well-defined processes, robust risk management and an active approach to identifying investment opportunities.”

Genesis of the problem
* In the last week of August, CARE suspended the rating of Amtek Auto as the company failed to furnish information required to monitor the ratings. Consequently, two of JPMorgan Asset Management’s fixed-income schemes sank sharply. JPMorgan India Short Term Income Fund lost 3.38% in just one day while JPMorgan India Treasury Fund fell 1.73%
* There was a sudden rush from investors to redeem their units, but the fund house capped its redemptions at 1% of the total outstanding units
* Later, Sebi sought information from MF houses on their exposure to JSPL after Icra downgraded the ratings on its papers. As on August 31, the mutual fund industry has an exposure of Rs 4,500 cr to JSPL

Metal producers witnessed renewed buying interest on Monday after it was reported that the government will soon notify imposition of safeguard duty on some steel products.

While all metals and mining stocks rallied, Tata Steel, Jindal Steel and Power and JSW Steel each added more than 3% in Monday’s session to close at Rs 241.3, Rs 64.10 and Rs 992.60, respectively. Ever since the directorate general of safeguard duty recommended a 20% safeguard duty on import of several products, including hot-rolled coils for 200 days, steel stocks have added anywhere between 7% and 12%.  The measure was considered after the steel industry urged the government to take steps to counter the impact of a sharp jump in imports from China, Japan, Korea and Ukraine amid plunging global steel prices.

Amid anemic local demand, the onslaught of imports has impacted revenues and profits of most domestic players. In the quarter ended June 2015, JSW Steel, SAIL and Jindal Steel & Power all reported net losses. According to JPMorgan, imposition of safeguard duty is very positive for Indian flat-rolled manufacturers like Tata Steel, SAIL and JSW as it allows these producers to push higher volumes as well as increase prices.

“Given that the safeguard duty imposition would be applicable to Japan and Korea, we estimate that it will eventually open a window to raise prices by Rs 2,000-2,500/t over the coming months as imported inventory declines,” said analysts Pinakin Parekh and Neil Gupte in a note.

While since June the government has increased import duty on various steel products by 5%, the industry was of the opinion that more stringent steps were necessary. After the annual general meeting of Tata Steel on August 12, TV Narendran, MD, India and South East Asia, had suggested that safeguard duty may act as a deterrent as import duty hikes have short-term impact on speculative booking (imports). However, the same is not good enough for long-term structural issues that capital intensive Indian steel producers are facing. “We are requesting the government to investigate and apply safeguard duties retrospectively, if there are breaches on quality and steel is being dumped,” said Narendran.

While the ministry of finance is required to approve the suggested safeguard duty, analysts believe that there is a strong case for such an approval to come soon. Citing a similar instance of safeguard duty on aluminium products in 2009, Bank of America Merrill Lynch said the case for imposition on steel products is much stronger this time around.

“In both cases, imports had led to a declining market share of domestic producers and they started making losses.

However, while aluminum rolled product capacity utilisation had started to fall, in the case of steel, capacity utilisation is stagnant, but inventory is increasing,” said the foreign brokerage house in a research note dated September 14.

It added that an imposition of safeguard duty would likely raise steel prices by 7-8%, which, in turn, could lead to 35-40% and 20-25% upgrade in consensus Ebitda estimates, respectively, for SAIL and JSW Steel.