China’s manufacturing saw only a slight improvement in September over August, with the Caixin China General Manufacturing PMI (Purchasing Managers’ Index), released by IHS Markit, rising to 50.1 from 50 earlier.
Although small, this is only the second time that the index has been positive since February 2015.
China’s output and new orders expanded by a bit and purchasing activity increased too.
The index also flagged off sustained pressure on capacity as outstanding business increased. Inflationary pressures have intensified.
The past three months’ PMI data indicates the economy has begun to stabilize, although there are risks that could cause industrial output to decline in future.
Regulatory headwinds ahead for NTPC
Regulations continue to affect the operating environment for NTPC Ltd.
The Central Electricity Regulatory Commission, which formulates tariff regulations for the power sector, tightened NTPC’s fuel cost recovery norms for some plants.
The new norms could lead to significant under-recoveries on fuel cost due to lower energy charge rate, according to India Ratings and Research Pvt. Ltd.
The regulator approved a lower energy charge rate than was sought by NTPC.
At present, the order applies to only some power plants and the ratings agency also expects NTPC to contest it.
Considering the direction in which regulations are headed, analysts fear the company’s earnings will face a significant hit if the norms are implemented.
“Prima facie negative for NTPC and raises risks to FY17/18 EPS estimates,” Edelweiss Securities Ltd said in a note. “A simple extrapolation from the current tariff order indicates NTPC’s consensus estimates could drop by 20-35% in the interim.”
Sales of heavy commercial vehicles go downhill
The medium and heavy commercial vehicle (MHCV) segment can see a sharp decline in sales during September, in spite of higher movement of goods ahead of the festive season.
This is due to unusually higher sales clocked during the previous corresponding period, when truckers had to buy new vehicles fitted with anti-lock braking systems, which had been made mandatory from October 2015.
This boosted truck sales before the deadline, creating a high base.
Even otherwise, the market is dull. Fleet utilization rates remain low.
A Nomura Securities Ltd report estimates that there is a risk of MHCV sales slowing down to single digits, against the earlier expectation of 15% growth.
Among the three leading companies, Tata Motors Ltd and Ashok Leyland Ltd would post lower sales growth over a year ago.
However, Eicher Motors Ltd, a relatively smaller contender, is likely to clock higher sales and gain market share in the months ahead.