Oil prices down in Asian trade on concerns over weakening US demand

Oil prices fell further in Asia Thursday on ebbing fears about armed conflicts around the world and concerns about weakening US demand, analysts said. 

US benchmark West Texas Intermediate for September delivery dipped 24 cents to $96.68 in late-afternoon trade, after falling 46 cents in New York to its lowest closing level since February 3. 

Oil prices have seen a build in risk premium in recent months over armed insurgencies in crude producers Iraq and Libya, as well as Ukraine, a key conduit for Russian energy exports to Europe. 

But a market awash with supplies have since eased worries that disruptions caused by these geopolitical crises will have any significant impact on prices. 

The US Energy Information Administration's weekly inventory report released Wednesday showed a 4.4 million barrel drop in gasoline stocks and a 1.8 million barrel decline in diesel inventories. Both products had been expected to show increases. 

Despite the bullish figures, market watchers are concerned about lower gasoline use once the summer driving season ends in a few weeks. 

The driving season is the peak demand time for gasoline demand in the US as long road trips are taken for vacations. 

Jubilant Food Q1 net down 19%, same store sales contracts

Same-store-sales (SSS) growth contracted at 2.4 percent in the first quarter of current financial year 2014-15 compared to 6.3 percent growth in same quarter last year. SSS growth has been in negative for the third consecutive quarter followed by negative 3.4 percent in Q4FY14 and negative 2.6 percent in Q3FY14.

Jubilant Foodworks  , which operates Domino's pizza chain in India, missed street expectations on every parameter with the first quarter (April-June) net profit falling 18.5 percent to Rs 27.7 crore compared to Rs 34 crore in the year-ago period, impacted by weak operational performance. "Aligned to the overall subdued consumption pattern coupled with inflationary impact on costs, opening of new Domino’s Pizza restaurants and development of Dunkin’ brand, the profitability during the quarter stood moderated," the company reasoned. Analysts had expected the Jubilant Bhartia Group Company to report net profit at Rs 32.4 crore on revenue of Rs 485 crore for the quarter. Total income from operations grew by 20.3 percent to Rs 477 crore in the quarter ended June 2014 from Rs 396.5 crore in corresponding quarter of last fiscal, aided by addition to number of restaurants, entry into new cities, ongoing and tactical promotional offers, benefit from the price hike taken and upside from new product launches in Domino’s Pizza and Dunkin’ Donuts. "Restaurant network for Domino’s pizza spans over 158 cities with 772 restaurants. We have also grown our network for Dunkin’ Donuts and we are now present across 11 cities with 34 restaurants," said Ajay Kaul, CEO. Same-store-sales (SSS) growth contracted at 2.4 percent in the first quarter of current financial year 2014-15 compared to 6.3 percent growth in same quarter last year. SSS growth has been in negative for the third consecutive quarter followed by negative 3.4 percent in Q4FY14 and negative 2.6 percent in Q3FY14. During the quarter, operating profit (EBITDA) of the company dropped 11.5 percent on yearly basis to Rs 59 crore and margin declined by 440 basis points to 12.4 percent, which both were expected at Rs 68.3 crore and 14.1 percent, respectively. Margin was impacted by increase in expenditure related to employee cost, rentals, advertising and promotion and Dunkin’ Donuts development, said the company in its filing.

Cabinet approves raising FDI cap in defence to 49 per cent, opens up railways

The Union Cabinet on Wednesday allowed foreign investment in the Railways for the first time and raised limit for such investment in the defence sector, steps intended to raise funds for expansion of the Railways and encourage domestic manufacture of arms. 

100 per cent foreign investment in railway infrastructure projects will be allowed while in the case of defence the limit has been raised to 49 per cent from the current 26 per cent, subject to the Indian owners exercising management control.

The FDI hike in defence is intended to cut imports by indigenising defence production as India is one of the world's largest arms importers. 

Foreign investment in defence will be though the approval route, implying it will have to be cleared by the Foreign Investment Promotion Board (FIPB). Though the 49 per cent cap will be general rule for the defence sector, 100 per cent overseas ownership will be allowed in case the investments comes bundled with state of the art technology. Such investment proposals will have to be cleared by the Cabinet Committee on Security (CCS). 

FDI is now allowed in PPP projects, suburban corridors, high speed train systems, and dedicated freight lines. Estimates suggest that the opening of railways to foreign investors will add 1-1.5 percentage points to the overall GDP growth. China and Japan are keen to invest in the railways sector. 

As a result of these changes, railways transport will be removed from the list of prohibited sectors in the consolidated FDI policy. 

Jindal Steel & Power Q1 net profit at Rs4181.30 mn

Total Income has increased from Rs. 45935.50 million for the quarter ended June 30, 2013 to Rs. 50687.90

Jindal Steel & Power Ltd has posted a net profit/(loss) after taxes, minority interest and share in profit/(loss) of associates of Rs. 4181.30 mn for the quarter ended June 30, 2014 as compared to Rs. 4942.80 million for the quarter ended June 30, 2013. Total Income has increased from Rs. 45935.50 million for the quarter ended June 30, 2013 to Rs. 50687.90 million for the quarter ended June 30, 2014. Steel JSPL’s new pellet plant with a capacity of 4.5 MTPA went into operation during Q1 FY15; however the production had to be curtailed due to restricted availability of iron ore fines. Both Blast Furnaces and two EAFs were upgraded. With these, the modernisation of Iron & Steel shops at Raigarh was completed and the plant’s capacity has been enhanced to 3.5 MTPA as against 3.0 MTPA earlier. JSPL’s continued focus on NSR saw it increase by 8% in Q1, FY 15 compared to same quarter last year. The Company continued  its relentless effort to reduce its working capital, which resulted in its Finished Good inventory reduce by 27% to an all-time low of 207,731MT. JSPL’s retail sales grew by an impressive 26% during Q1, FY15 compared to Q4, FY14 and by 284% compared to Q1, FY14. With this, the company consolidated its presence in retail market on a country wide basis. Although Rupee’s strengthening against US$ adversely affected the price competitiveness, JSPL increased their exports by 6% in volume terms during Q1, FY15. Company successfully entered the High Grade plate and structural steel market of US, Canada and Mexico. Power Although 3 out of the 4, 600 MW Power Units of JPL under Tamnar Phase II were successfully completed, only one unit was operated. With improved availability of coal and transmission capacity, we are hopeful to operate other units. JPL’s Phase – I, 1000 MW plant was operated at 97.8% PLF. The average NSR for Q1, FY 15 of JPL was at Rs.3.29 compared to Rs. 3.21 in Q1, FY 14. JSPL’s 4x135 MW captive power plant at Dongamuha, achieved substantial improvement in its availability and PLF, as a result of which it posted impressive increase in its profitability. Although, all 6 x 135 MW units of Angul Power plant have been commissioned, the utilization remained low due to restrictions on export of power. Global Ventures JSPL Global Venture’s SMS plant in Oman was successfully completed in April, 2014 and the billet deliveries to the market started from May, 2014. The plant’s PBT in Q1, FY15 increased by 180 % compared to Q1, FY14. However, Company’s WCL Australia’s coking coal mines continued to make losses due to operational reasons and restructuring costs. A major restructuring of WCL was undertaken under which the manpower has been reduced by 38% compared to Q4, FY 14.

Religare Invesco launches Corporate Bond Opportunities Fund

Religare Invesco Mutual Fund has launches Religare Invesco Corporate Bond Opportunities Fund, an open ended income scheme with the investment objective to generate returns and capital appreciation by predominantly investing in corporate debt securities of varying maturities across the credit spectrum.

Religare Invesco Mutual Fund has launched a new fund as Religare Invesco Corporate Bond Opportunities Fund, an open ended income scheme. The investment objective of the scheme is to generate returns and capital appreciation by predominantly investing in corporate debt securities of varying maturities across the credit spectrum. The New Fund Offer (NFO) will be open for subscription from August 14 to August 28, 2014. The New Fund Offer price for the scheme will be Rs 1,000 per unit. The scheme offers Regular Plan and Direct Plan with growth & dividend (reinvestment / payout) option. The minimum application amount is Rs 5000 and in multiples of Rs 1 thereafter. The entry load for the scheme is nil, while exit load will be 2% if redeemed / switched-out on or before 18 months from the date of allotment in respect of each purchase / switch-in of units. No exit load is payable of units are redeemed / switched-out after 18 months from the date of allotment in respect of each purchase / switch-in of units. The scheme would allocate 80%-100% of assets in corporate debt and money market securities issued by public and private sector entities (excluding instruments issued by Banks) with medium to high risk profile, invest upto 20% of assets in instruments issued by banks with low to medium risk profile and invest upto 20% of the asset would be invested in CBLO, T-Bills & Repo with low risk profile. Investment in securitized debt including pass through certificate (PTC) shall not exceed 50% of the net asset of the scheme. The scheme will not invest in foreign securitized debt. The benchmark Index : 32.5% of CRISIL AAA Long Term Bond Index, 32.5% CRISIL AAA Short Term Bond Index, 17.5% of CRISIL AA Long Term Bond Index and 17.5% of CRISIL AA Short Term Bond Index has been currently selected as the benchmark for the scheme.

Gold well bid above $1,300 as Ukraine boosts safe-haven appeal

Gold held on to overnight gains above $1,300 on Thursday, trading near its highest in more than a week as fears of Russian military action against Ukraine and retaliation by Moscow over Western sanctions burnished gold's appeal as a safe haven.

Russia will ban all imports of food from the United States and all fruit and vegetables from Europe, the state news agency reported on Wednesday, even as NATO said Russia had massed around 20,000 combat-ready troops on Ukraine's border.

The troop build-up sapped risk appetite, sending equities lower and global bond prices higher.

The metal hit $1,309.60 in the previous session - its highest since July 29. US gold was also steady at $1,308.60 after rising 1.8 per cent in the previous session.

Gold is seen as an alternative investment to riskier assets such as equities, especially during times of economic and geopolitical uncertainties. It has gained more than 8 per cent this year on geopolitical tensions. 

Railway related stocks rally as Cabinet approves 100% FDI proposal

some railway operations and projects were allowed to receive up to 100% FDI.

The Union Cabinet approves proposal to set the composite cap for foreign investment in the defence sector at 49%, compared with the current 26% foreign direct investment (FDI) ceiling.

Report said that some railway operations and projects were allowed to receive up to 100% FDI.

This move came after the Cabinet approved similar proposal to set the composite foreign investment cap for private insurance firms at 49 per cent.

Following the cabinet plan to raise the amount of FDI in defence and railways industries, stocks associated with defence and railways will be on investors’ radar.

Global steel demand turnaround to give HEG a growth spark

HEG is probably at an inflection point. The manufacturer of graphite electrodes, a material used in electric arc steel furnaces, is set to benefit from a gradual turnaround in global steel demand. Increasing popularity of electric arc furnaces where the electrodes are used also augurs well for the company. 

At present, 30% of steel globally is manufactured using electric arc furnace (EAF) method and the rest in basic oxygen furnace (BOF). But steel manufacturing is increasingly moving to the electric furnace method. 

According to the management, EAF's share in crude steel making is likely to grow exponentially to eventually overtake BOF. "In the first half of 2014, electric arc furnace production has gone up by more than 8% (globally) while total steel output has gone up by only 2.5%," said R Rastogi, chief financial officer, HEG. 

As a result, HEG's June 2014 operating profit nearly increased 140% yoy. The primary reason for this is China,  which accounts for more than half the global steel production and consumption. The share of EAF in Chinese steel production is just 9.5% - it is more than 50% in developed economies - but is increasing at a rapid pace due to rising inventory of scrap iron. 

However, with the gradual but important shifts in the global economy, the worst seems to be over for the company. More than 75% of HEG's revenue is from exports. Its India revenue too could grow with a pickup in the domestic steel demand. All these could lead to sharp earnings growth for HEG.