A bull case for investing in gold

Gold prices have touched a six-month high on account of changing structural dynamics

Just when everyone thought that investment in gold is unlikely to give positive returns the yellow metal has surprised by rising to a six-month high. Gold is trading near a key technical level of $1,300 per ounce in the international market.

Traditionally considered a safe haven, gold was ignored for most of 2018 despite a number of negative events affecting global markets. They key factor was a strong US dollar.

In 2018, the strength of the US dollar came from rising interest rates in the US. The year saw aggressive monetary tightening by the Federal Reserve. It was the first time that the Fed raised rates on four separate occasions during a calendar year. The hikes were in addition to liquidity tightening to the tune of $50 billion every month.

But by the end of 2018, it was clear that the interest rate hikes by the Federal Reserve were tapering off mainly on account of growth concerns. Fresh data accentuate these concerns. For instance, US treasury yields accelerated their decline on Thursday after a weaker-than-expected manufacturing index number from The Institute for Supply Management (ISM) for December. The index fell to 54.1 percent for December as against an expectation of 57 percent, and much lower than the 59.3 percent in November. A weakness in the index indicates a slowing economy.

On Thursday, the 10-year treasury yield plunged 10.2 basis points to 2.557 percent, its lowest since January 16, 2018, to mark its biggest one-day decline since May.

Goldmoney, a world leader in precious money investment services in its December 2018 Gold outlook said, “The world is awash with dollars at a time when markets act as if there is a shortage. When the truth emerges, the dollar has the potential to fall substantially against other currencies, leading to a rise in the price of gold.”

Further, the ongoing trade war between the US and China has now reached the US shores. Earlier China was taking the blows on account of the restrictions imposed by the US but now Chinese consumers have hit back. A surprising warning from Apple about slowing sales, especially in China, has delivered the message home to US President Donald Trump about slowing growth.

Building a case for gold investment, Goldmoney’s head of research Alasdair Macleod said that the great dollar unwind is now the overhang on markets. The move towards gold and against the dollar in Asia accelerated in end-2018, with Russia having replaced the dollar with gold as its principal reserve currency. Further, China has laid the foundation with an oil-yuan futures contract, which can be a bridge to yuan-gold contracts in both Hong Kong and Dubai. This is a direct challenge to the dollar as a reserve currency, Macleod noted.

Finally, gold prices are also reacting to the increased demand for the precious metal from various quarters. 2019 is expected to see a balancing of gold supply and demand. Central banks are accumulating bullion; they added 425 tonnes in the year to September 2018.

Moreover, the Chinese private sector continues to hoard gold as seen in the withdrawals from the Shanghai Gold Exchange. India’s total gold imports are not showing any signs of slowing and were at 919 tonnes in the year to September, according to the World Gold Council.  These three sources of demand alone add up to 3,344 tonnes annually, which is the same as global mine supply. If you add supply restriction like those imposed by China on exporting gold, then there is a solid bull case for gold as an investment vehicle in 2019.

Source: https://www. moneycontrol.com/news/business/markets/quick-take-a-bull-case-for-investing-in-gold-3354481.html

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For Warren Buffett, sinking Apple shares a wish come true

Buffett sees Apple more as a consumer stock than a tech stock, reflecting the iPhone's status as a must-have possession for so many people.

Billionaire Warren Buffett has said he would love to see Apple Inc shares decline in price so he could buy more. He is getting his wish.

Apple's warning on Wednesday about weak iPhone demand in the holiday quarter due to slower sales in China sent its stock down 7.5 percent during after-hours trading. Class B shares of Buffett's Berkshire Hathaway Inc traded down 2 percent in the same session on Wall Street.

Buffett, the folksy Nebraska investor known more for buying railroads, energy firms and classic American corporate brands than for his acumen picking tech stocks, in recent years has lamented missing the boat on buying shares in US technology giants. He admitted an earlier investment in IBM Corp was not one of his best.

Yet Buffett has made Apple a centerpiece of his portfolio of other company's stocks, touting his own use of the Cupertino, California-based company's products and saying at his annual shareholders' meeting in Omaha last May, "We would love to see Apple go down in price," so he could buy more at a bargain.

Buffett sees Apple more as a consumer stock than a tech stock, reflecting the iPhone's status as a must-have possession for so many people.

Including its after-hours drop on Wednesday, Apple's stock market value has tumbled to below $700 billion from over $1.1 trillion at its peak in October. Although Apple has fallen behind Amazon.com Inc and Microsoft Corp in value, it remains one of Wall Street's most widely held companies.

Shares of Berkshire itself have held up well even as the broader market sank last quarter. Last year, Berkshire returned 2.8 percent, while the S&P 500 fell 4.4 percent, including reinvested dividends.

But the $3 billion hit to Berkshire's Apple shares in evening trading on Wednesday could show in future reported earnings. Those figures do not reflect any long-term gains on Berkshire's investments, and Buffett has encouraged investors to ignore the profit statistic mandated by US accounting practices.

Source: https://www .moneycontrol.com/news/business/for-warren-buffett-sinking-apple-shares-a-wish-come-true-3349221.html

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Banks recover Rs 40,400 crore from defaulters: RBI report

The various channels through which lenders recovered their bad loans include the Insolvency and Bankruptcy Code (IBC), SARFAESI Act, debt recovery tribunals (DRTs) and Lok Adalats.

Banks have seen a significant improvement in recovery of stressed assets helped by the Insolvency and Bankruptcy Code (IBC) and amendments in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, during FY18, according to the RBI data.

In the fiscal ended March 2018, banks recovered Rs 40,400 crore worth of bad loans as against Rs 38,500 crore recovered in FY17.

The various channels through which lenders recovered their bad loans include the Insolvency and Bankruptcy Code (IBC), SARFAESI Act, debt recovery tribunals (DRTs) and Lok Adalats.

While banks recovered Rs 4,900 crore of bad loans through the IBC, the amount recovered through SARFAESI was Rs 26,500 crore in FY18, the RBI said in its annual report on Trends and Progress of Banking in 2017-18, released to over the weekend. "Apart from vigorous efforts by banks for speedier recovery, amending the SARFAESI Act to bring in a provision of three months' imprisonment in case the borrower does not provide asset details and for the lender to get possession of the mortgaged property within 30 days, may have contributed to better recovery," the report highlighted.

During the year, recovery through Lok Adalats and DRTs declined alongside the number of cases referred, partly indicative of the growing clout of the IBC mechanism for resolution of stressed assets, the monetary authority noted.

The average recovery through IBC is greater than other mechanisms (SARFAESI, DRTs and Lok Adalats) and is also improving gradually, pointing to the need and efficiency of such a channel, the report said.

"Strengthening the infrastructure of the insolvency resolution process, including the proposed increase in the number of benches of the National Company Law Tribunals (NCLTs), should help reduce the overall time currently being taken for resolution under the IBC," the RBI said.

Besides recovery through various resolution mechanisms, banks are also cleaning up theirs balance sheets through sale of doubtful/ loss assets to assets reconstruction companies (ARCs) and other banks/NBFCs/financial institutions by taking haircuts, the report said.

During 2017-18, the acquisition cost of ARCs as a proportion to the book value of assets, has gone up, indicating better realisations by banks on sale of stressed assets.

While private sector banks have been most aggressive on asset sales, state-run lenders lagged, mainly owing to large haircuts and various management issues, the report said.

Source: https://www .moneycontrol.com/news/business/banks-recover-rs-40400-crore-from-defaulters-rbi-report-3337351.html

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Max India’s decision to check out of healthcare shines spotlight on regulatory risks

The owner’s decision to exit seems to be a mixture of personal and business reasons. But the regulatory risks in the business have played a bigger role in the decision, for certain.

Max India’s decision to exit the healthcare business flies in the face of conventional thinking that India’s private healthcare business is one with immense potential. The reality appears to be somewhat different.

A trend of consolidation has taken root in the sector, with institutional money funding entrepreneurial ambitions. While IHH Healthcare eventually got hold of Fortis Healthcare, let’s not forget that the TPG-Manipal Health combine was also interested.

They will continue to be on the lookout for targets. IHH Healthcare’s acquisition itself signals tougher competition, as the parent company has deep pockets and expertise in running hospitals.

Then there are the regulatory risks that Max faces. In its FY2018 annual report, it lists them out. It has cited mandatory cashless treatment of road accident cases that will be reimbursed at government-determined rates.

Then there’s the well-known issue of price capping of coronary stents and knee implants. Margins on syringes were capped after intervention by the National Pharmaceutical Pricing Authority. The guidelines for treating patients belonging to the economically weaker sections were also made more stringent. These affected its performance in FY18, and its revenue and Ebitda both declined.

The dust on many of these issues has settled down. But the fear that more regulatory risks may be waiting has not gone away. The industry feels threatened that the measures which were acceptable till some years ago are now being seen as extortionist. That may change the way the promoter, the majority shareholder in the business, perceives the business risk.

In fact, the September quarter results had shown Max Healthcare’s performance improve with its Ebitda margin recovering sequentially. In its conference call post-results, the company management had talked about a 5-7 year investment plan that would see its number of beds double to 5,000 in number. It said that the long-term trajectory was intact.

So, what changed their mind then? The group chairman Analjit Singh’s interviews to Mint and Business Standard have some answers. He talks about how the business has changed in two years (in September 2016 he had told Mint that this was a focus business for them with huge growth opportunities).

The concentration in the National Capital Region had become a risk for them. He talks about a 10-year timeframe in which to invest and scale up this business to make it viable. It appears that he did not have the appetite to invest that kind of capital and devote that kind of time to the business. And, he does not seem to have had anyone else he could depend on to do it too.

The owner’s decision to exit seems to be a mixture of personal and business reasons. But the regulatory risks in the business have played a bigger role in the decision, for certain. After acquiring Max Healthcare, Radiant Life Care and KKR will now attempt to prove that their business model can work despite the existing risks in the business and new ones that may be lying in wait.

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Oil plunges 6% as economic slowdown fears grip market

U.S. crude futures settled at $42.53 a barrel, down $3.06 or 6.7 percent in the session. Brent crude futures settled down $3.35, or 6.2 percent at $50.47 a barrel. The market settled early ahead of the Christmas holiday.

Oil prices plunged more than 6 percent to the lowest in more than a year on Monday, pulling back sharply late in the session as fears of an economic slowdown rattled the market.

U.S. crude futures and global benchmark Brent fell to the lowest since 2017 during the session, putting both benchmarks on track to lose about 40 percent in the quarter.

"What's happening in the stockmarket is raising fears that the economy is grinding to a halt and thereby will basically kill any future oil demand," said Phil Flynn, an analyst at Price Futures Group in Chicago. "They're pricing in a slowdown in the economy if not a recession, with this drop."

The price decline during the quarter is likely to cause producers to throttle back on their output, he said.

U.S. crude futures have hit the lowest since June 22, 2017, as jitters have grown about the impact of an escalating U.S.-China trade dispute on global growth and crude demand. Brent crude is at its lowest since Aug. 17, 2017.

Markets across asset classes have come under pressure as a U.S. government shutdown intensified growth concerns. Investors have flocked to safe-haven assets such as gold and government debt at the expense of crude oil and stocks.

A gauge of stocks worldwide hurtled towards an eighth straight decline on Monday as investors ignored the U.S. Treasury secretary's actions to reinforce confidence in the economy and U.S. President Donald Trump criticized the Federal Reserve as "the only problem our economy has."

The U.S. Senate has been unable to break an impasse over Trump's demand for more funds for a wall on the border with Mexico, and a senior official said the shutdown could continue until Jan. 3.

U.S. crude futures settled at $42.53 a barrel, down $3.06 or 6.7 percent in the session. Brent crude futures settled down $3.35, or 6.2 percent at $50.47 a barrel. The market settled early ahead of the Christmas holiday.

Brent fell 11 percent last week and hit its lowest since September 2017, while U.S. futures slid to their lowest since July 2017, bringing the decline in the two contracts to 35 percent for the quarter.

The macroeconomic picture and its impact on oil demand continue to pressure prices. Global equities have fallen nearly 9.5 percent so far in December, their biggest one-month slide since September 2011, when the euro zone debt crisis was unfolding.

The U.S.-China trade dispute and the prospect of a rapid rise in U.S. interest rates have brought global stocks down from this year's record highs and ignited concern that oil demand will be insufficient to soak up any excess supply.

The Organization of the Petroleum Exporting Countries and allies led by Russia agreed this month to cut oil production by 1.2 million barrels per day from January.

Should that fail to balance the market, OPEC and its allies will hold an extraordinary meeting, United Arab Emirates Energy Minister Suhail al-Mazrouei said on Sunday.

"Oil ministers are already taking to the airwaves with a 'price stability at all cost' mantra," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.

Source: https://www .moneycontrol.com/news/business/markets/oil-plunges-6-as-economic-slowdown-fears-grip-market-332339If you want more information regarding the Market News & many other tips like Intraday Tips, MCX Normal Calls, Bullion Market Tips, Share Market Services, NSE & BSE Market Tips, Free MCX Market Tips , MCX Premium Tips, Bullion Energy Tips, commodity market tips.

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Weekly Tactical Pick | Improving operating parameters to drive higher earnings

At the current market price of Rs 149 a share, NTPC is trading at 1.1 times its price to book value of FY19 estimates, which very attractive

The Central Electricity Regulatory Commission (CERC) recently released draft norms for the power sector reducing the plant availability factor (PAF) threshold to 83 percent as against 85 percent earlier. Additionally, the draft also says that the plant shut down for the maintenance would not be included for the purpose of calculation of the PAF, which typically reduce the PAF by about 6-7 percent. Relaxation in the PAF would mean the companies would be able to avail incentives that are offered in terms of higher return on equity (RoE) on the regulated equity. Regulated equity is the net worth that is deployed in the operational power generation projects, which avail fixed RoE.

Key beneficiary

This brings good news for NTPC that is sitting on regulated equity close to Rs 51,000 crore. Moreover, the company and shareholders get huge big relief as the regulator kept the RoE unchanged. This was a big overhang for its stock as investors were fearing that in the falling interest rate scenario the regulator would cut the RoE offered on the regulated equity. While this would improve the operational efficiencies and return ratios, NTPC should also benefit because of the improving earnings visibility. It has expressed its intention to buy a few power plant thus utilising its cash in the books. This is in addition to its plans to add another 20000 MW of capacity in the long run including 5000 MW each in the year 2019 and 2020.

Attractive valuations

Among utilities, NTPC is the most stable company having extensive experience and strong balance sheet. Moreover, at the current market price of Rs 149 a share, it is trading at 1.1 times its price to book value of FY19 estimates, which very attractive.  The stock offers a close to 4 percent dividend yield. Out of 28 analysts (based on consensus) tracking the stock 26 of them have a buy and outperformer rating on the stock with an average target price of Rs 191 a share, which is about 28 per cent higher compared to its current market price.

Source: https://www .moneycontrol.com/news/business/moneycontrol-research/weekly-tactical-pick-improving-operating-parameters-to-drive-higher-earnings-valuations-for-ntpc-3314221.html  

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Stocks in the news: Tata Steel, NMDC, Ashoka Buildcon, Glenmark, Graphite India

Godrej Industries | Glenmark Pharma | Bombay Dyeing | Bank of Baroda | Graphite India | Infibeam Avenues and Tata Steel are stocks which are in the news today.

Tata Steel: Andreas Goss, currently Chief Executive Officer (CEO) of thyssenkrupp's Steel division, will be the future Chief Executive Officer of the planned Joint Venture and chair the Management Board of thyssenkrupp Tata Steel BV. Hans Fischer, currently the CEO of Tata Steel Europe, will be the Deputy CEO & Chief Technology Officer of the Joint Venture.

Standard Chartered Plc: The Group agreed terms for the spin out of its private equity business and a sale of the majority of its private equity investment portfolio to funds managed by ICG Strategic Equity, part of Intermediate Capital Group Plc (ICG).

NMDC: Company fixes lump ore price at Rs 3,250 per tonne and price of fines at Rs 2,860 per tonne from December 13.

Ashoka Buildcon: Subsidiary raises Rs 150 crore from Morgan Stanley India Infrastructure.

Godrej Industries: National Company Law Tribunal approved the Scheme of Amalgamation of Vora Soaps Limited with company.

Bank of Baroda to shut three overseas branches by June

Glenmark Pharma: Company announces new data on GBR 1302, a HER2xCD3 Bispecific antibody, presented at the ESMO Immuno-Oncology Congress 2018.

Bombay Dyeing: Company has given its consent by signing the shareholder's resolution of its subsidiary in Indonesia i.e. PT Five Star Textile Indonesia (PTFS) for closure of the same.

Graphite India: Kamataka State Pollution Control Board has renewed the consent for operations at Bengaluru graphite electrode plant for a period up to 30.6.2020 only with condition to shift the unit from the existing location.

IL&FS Transportation Networks: The interest due and payable on December 17 on the NCDs was not paid to the debenture holders due to insufficient funds.

Mahindra & Mahindra Financial Services: India Ratings reaffirmed its AAA/Outlook-Stable rating for Rs 10,000 crore worth public issue of non-convertible debentures.

Infibeam Avenues: Suvidhaa Infoserve Private Limited acquires 5 percent equity stake in company's subsidiary NSI Infinium Global Private Limited.

RITES: Board fixed December 28 as the record date for the purpose of payment of dividend.

Punjab and Sind Bank revised MCLR rate w.e.f. December 16

Goldiam International: Company announces the closure of the buyback with effect from December 17.

M&M signed agreement with Sampo Rosenlew Oy, Finland, an Associate of the Company to increase stake from 35% to 49.04%

Mac Hotels: Goa based public listed company will add another 160 rooms effective from 1st January 2019, taking the total number of rooms to 238.

Corporation Bank - ICRA reaffirmed rating on certificate of deposits of Rs 30000 crore to ICRA A1+

Sadbhav Infra

Ongoing litigation amongst the Company, Sadbhav Engineering on the one side and Montecarlo on the other have arrived at amicable settlement

NCLT and High Court of Gujarat dispose the matter and accordingly the said legal matters now stands closed

Bulk Deals on December 17

DRS Dilip Roadlines: Babulal Vadilal Shah sold 94,400 shares of the company at Rs 75.5 per share on the NSE.

Godha Cabcon Insulat: Mark Corporate Adviosrs sold 72,000 shares of the company at Rs 30 per share on the NSE.

Manaksia Steels: Payal Agrawal bought 3,38,715 shares of the company at Rs 26.91 per share on the NSE.

BC Power Controls: Deepen Bharat Shah bought 3,00,000 shares of the company at Rs 28.71 per share on the BSE.

Analyst or Board Meet/Briefings

Sandhar Technologies: Board meeting is scheduled on February 2, 2019 to consider the un-audited standalone financial results, for the quarter and nine months ended December 2018.

JCT Limited: Board meeting is scheduled on December 31 to consider fresh issuance of equity shares aggregating to Rs 9.16 crore on preferential basis to term lenders.

Tube Investments of India: Meeting with institutional investors/analysts on the unaudited financial results for the second quarter ended September 2018 is scheduled on December 18.

Dishman Carbogen Amcis: Management meet and plant visit at company's Bavla plant with certain institutional investors and analysts has been scheduled on December 18 and 19.

Genus Power Infrastructures: Officials of the company will be meeting investors and analyst at its plant in Jaipur on December 18.

Great Eastern Shipping: Company's officials will be meeting ICICI Pru AMC on December 18.

Source: https://www .moneycontrol.com/news/business/markets/stocks-in-the-news-tata-steel-nmdc-ashoka-buildcon-glenmark-graphite-india-3300311.html

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