Domestic indices trade marginally in green in early afternoon session

Domestic equity markets traded marginally in green in early afternoon session on account of buying in Larsen & Toubro, Maruti Suzuki, ICICI Bank, Sun Pharma and Infosys companies’ stocks. Meanwhile, broader indices outperformed their large peers with BSE Mid cap index and Small cap index gaining in the range of 0.40-0.46%. Sentiments got some support as the foreign institutional investors (FIIs) extended their buying as they bought equities worth Rs 483 crore on August 26. However, gains remained limited on account of rising crude oil prices. On the BSE sectoral front, traders were seen pilling up positions in Capital Goods, Realty, Industrials, Healthcare and Bankex, while selling was witnessed in FMCG, Metal and Consumer Durables. 

On the global front, Asian markets were trading mostly in red tracking losses in the S&P 500 and the Nasdaq overnight, while investors assessed industrial profit data out of China. China’s industrial profits from January to July climbed 3.6% year on year, compared to a 3.5% growth between January and June. In the stock specific development, KPI Green Energy rallied after the company announced that its wholly-owned subsidiary, Sun Drops Energia, has received a 13.30 MW solar power plant project.  

The BSE Sensex is currently trading at 81812.97, up by 114.86 points or 0.14% after trading in a range of 81600.51 and 81919.11. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.40%, while Small cap index up by 0.46%.

The top gaining sectoral indices on the BSE were Capital Goods up by 0.84%, Realty up by 0.79%, Industrials up by 0.64%, Healthcare up by 0.41% and Bankex up by 0.33%, while FMCG down by 0.65%, Metal down by 0.35% and Consumer Durables down by 0.22% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.30%, Maruti Suzuki up by 1.62%, ICICI Bank up by 1.08%, Sun Pharma up by 0.98% and Infosys up by 0.91%. On the flip side, JSW Steel down by 1.50%, Titan down by 1.18%, Tata Motors down by 1.15%, Hindustan Unilever down by 1.04% and NTPC down by 1.00% were the top losers.

Meanwhile, ratings agency ICRA in its latest report has said that the enforcement of the new mining cess by some states following the Supreme Court ruling may bring challenges for the domestic steel industry by adding to the cost pressures. On August 14, 2024, the Supreme Court upheld the power of states to levy tax on mineral rights and mineral-bearing land, and allowed them to seek refund of royalty from April 1, 2005 onwards. This development is poised to compress operating margins across the sector, impacting both primary and secondary steel producers. 

ICRA estimated that primary steel producers margins could shrink by approximately 60-180 basis points, while secondary producers, with already lower profitability, may face a more severe impact, with margin declines ranging from 80 to 250 basis points, based on various scenarios that cess rates could potentially vary between 5% and 15%. The power sector, which is heavily dependent on coal, may see a rise in the cost of supply by 0.6% to 1.5%, potentially leading to higher retail tariffs. Further, primary aluminium producers will also be impacted due to their high-power consumption.

According to the report, Odisha, a key mineral-rich state, holds a particularly vital role in this context. The recent Supreme Court ruling has brought renewed focus on the Orissa Rural Infrastructure and Socio-Economic Development Act, 2004 (ORISED), which permits around 15% cess on iron ore and coal. If fully enforced, it could result in around 11% increase in the landed costs of iron ore, directly impacting the cost competitiveness of domestic steel entities. In a related move, the Government of Jharkhand recently imposed a modest increase of Rs 100/tonne on iron ore and coal, setting a precedent that other states may follow. This increase is expected to have a minimal impact on steel entities’ operating margins, reducing them by around 30-40 basis points. Even if other states adopt similar measures, the overall impact will likely remain modest.

The CNX Nifty is currently trading at 25047.40, up by 36.80 points or 0.15% after trading in a range of 24973.65 and 25073.10. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 2.29%, SBI Life up by 2.00%, HDFC Life Insurance up by 1.70%, Maruti Suzuki up by 1.65% and Bajaj Finserv up by 1.36%. On the flip side, JSW Steel down by 1.60%, Tata Motors down by 1.25%, Titan down by 1.18%, Hindustan Unilever down by 1.04% and NTPC down by 1.01% were the top losers.

Asian markets were trading mostly in red; Jakarta Composite plunged 51.43 points or 0.68% to 7,554.77, Shanghai Composite weakened 7.38 points or 0.26% to 2,848.14.  KOSPI dropped 7.88 points or 0.29% to 2,690.13 and Taiwan Weighted lost 55.12 points or 0.25% to 22,185.00. However, Hang Seng advanced 37.41 points or 0.21% to 17,836.14, Straits Times rose 0.33 points or 0.01% to 3,396.36 and Nikkei 225 surged 178.4 points or 0.47% to 38,288.62.