Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.04% while the Hang Seng is up 0.07%. The Nikkei 225 is trading up by 0.18%. Meanwhile, the Dow industrials broke above the 25,000 level for the first time on Thursday and other major indices hit closing record highs again, propelled by strong global economic data that extended the New Year's rally for the stock market.
Back home, India share markets opened the day on a firm note. The BSE Sensex is trading higher by 111 points while the NSE Nifty is trading higher by 18 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.5%.
All sectoral indices have opened the day in green with consumer durables stocks and PSU stocks witnessing maximum buying interest. The rupee is trading at 63.39 to the US$.
Idea Cellular share price surged over 5% on the reports that Promoters of the company will invest Rs 32.5 billion and the company plans to raise a similar amount to strengthen its balance sheet amid intense competition and before a planned merger with Vodafone India Ltd.
As per an article in The Economic Times, India's services sector bounced back into the growth zone in December after a contraction in November, adding to a clutch of upbeat data in the new year.
The Nikkei India Services Purchasing Managers' Index (PMI) Business Activity Index rose to 50.9 in December from 48.5 in November. A reading above 50 on the survey-based index indicates economic expansion, while a reading below 50 points toward contraction.
The Nikkei India Composite PMI Output Index, which includes both services and manufacturing, rose to 53 from 50.3 in November, the highest since October 2016.
Data released earlier in the week showed core sector growth at a 13-month high of 6.8% in November, manufacturing PMI at a five-year high in December as well as robust double-digit growth by the automobile sector in that month.
The government will release the first official estimate of GDP for FY18 today. Reportedly, the growth is expected in the range of 6.4-6.7% for FY18, which suggests a sharp recovery in the second half led by higher growth in the fourth quarter, from 6% in the first half of the year.
In terms of job creation both sectors, manufacturing and services - outstripped historical averages signalling a continued revival of the labour market.
On the prices front, GST continued to exert upward pressure on manufacturers' cost burdens in December.
Overall, input cost inflation quickened to the sharpest since April and subsequently, firms raised their average selling prices at the fastest pace in 10 months.
Moving on to the news from the . As per an article in a leading financial daily, Hindalco Industries Ltd. is among potential buyers that submitted bids for US aluminum producer Aleris Corp., as Indian billionaire owner Kumar Mangalam Birla moves ahead with plans to expand his overseas operations.
Reportedly, Hindalco made a non-binding offer through its US unit, Novelis Inc., and will now conduct due diligence. A deal could value Aleris at around US$2.5 billion including debt.
Any deal could help buck the decline in overseas acquisitions by Indian companies, which fell to an eight-year low of US$4.25 billion in 2017. Novelis swung to a profit in the quarter ended September and raised its pretax earnings guidance for the financial year, buoyed by a rally in aluminum prices.
Speaking of the aluminum industry, aluminium demand in India has been growing at a decent rate. This is on the back of increased usage of aluminium and its alloys in the automobile sector. However, the aluminium industry has been plagued by a massive oversupply that has put pressure on prices.
Interestingly, the top-performing asset class for 2017 were base metals, such as copper, zinc, nickel, and other industrial metals.
Base Metals Outperformed Commodity Index in 2017
From the data revealed in the chart above, base metals such as aluminium, copper, zinc, and lead went up by 20-30% compared to the Bloomberg commodity index of 2.4%. This rally was driven by increased economic activity, economic stimulus in China, and global supply disruptions.
But what about 2018?
Here's an excerpt of what Tanushree Banerjee, Co-head of Research wrote about the sector recently:
- "China supply-side reform holds the key to metals' outlook, and this will be the main focus for the market in 2018.For example, in 2017, China's supply reform policies supported the price rise in aluminium. However, going forward aluminium faces the rising risk of a supply response, both inside and outside China.
In the short term, however, restocking of steel, iron ore in the first quarter of 2018 could generate a typical seasonal rally. Beyond this, it is sustained demand, industrial production levels, particularly in China, and supply-side discipline that will determine the long-term outlook for metals."
Hindalco share price opened the day up by 1.3%.
This article was originally published in English at www.equitymaster.com
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