Sensex Opens Flat on New Year; Realty & Capital Goods' Stocks Gain

Majority of the Asian stock markets are closed on account of new year eve. The US stock indices slid into negative territory on Friday as trading activity remained light for the day. The Dow Jones Industrial Average lost 118 points, the Nasdaq edged down 47 points and the S&P 500 dropped 14 points.

Back home, India share markets began the New Year on a flat note. The BSE Sensex is trading higher by 33 points while the NSE Nifty is trading higher by 3 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.3% & 0.4% respectively.

Barring IT stocks, all sectoral indices have opened the day in green with capital goods stocks and realty stocks witnessing maximum buying interest. The rupee is trading at 63.93 to the US$.

2017. What a year this has been for equity investors. The BSE Sensex is trading close to 34,000 mark. The Nifty is trading above 10,500 levels.

India was among the three emerging markets, which gained more than 35% in dollar terms. The other two are Hungary and South Korea.

The BSE Sensex earned a 35.1% return in the dollar terms and 28% in the local currency in 2017. However, this wasn't enough to beat the midcap and smallcap indices. The midcap and smallcap indices saw a sharp increase of 47% and 58% respectively in 2017.

With this, the market cap to GDP ratio is close to 100%, indicating market at its peak. So, how will 2018 turn out? Here's what Tanushree Banerjee, Co-head of Research thinks:

• "In 2018, the market would be more volatile and under pressure. Investors should brace themselves for the increasing volatility. Although, earnings are likely to recover, profit margins could get squeezed as companies face rising input cost pressures. Rising oil prices may prompt the government to abandon fiscal prudence at a time when GST collections have been lower than expected.
  
  2018 will, therefore, be critical for Indian companies to justify their valuations with earnings growth. If the earnings growth does not materialize, correction could be on the cards."

Bank stocks opened the day on a mixed note with Bank of Maharashtra and Syndicate Bank being the most active stocks in this space. As per an article in a leading financial daily, Punjab National Bank (PNB) has announced it will raise interest rates by up to 1.25% on domestic term deposits of up to Rs 100 million for different tenures, effective from today.

As per the new PNB rates, for domestic retail term deposits of less than Rs 10 million with the tenure of 7 to 29 days, the rate has been increased by 1.25 percentage points to 5.25% from the current 4%.

Similarly, in the maturity bucket of 30 to 45 days, rate has been raised from 4.5% to 5.25%. For the tenure of 46 to 90 days, the interest would be up from 5.5% to 6.25%.

In the maturity bucket of 91 to 179 days, the rate is up from 6 to 6.25%.

For domestic bulk term deposits of Rs 10 million to Rs 100 million, the bank has increased the rate from 4% to 4.8% in the maturity bucket of 7 to 45 days.

Similarly, for 46 to 179 days, the rate is increased from 4% to 4.9%. In the maturity bucket of 180 days to less than one year, the rate went up from 4.25% to 5%.

For 1-year term, PNB has increased the rate from 5% to 5.7% on bulk term deposits. For the maturity term of more than 1 year to 3 years, the rate would be up from 5% to 5.5%.

In the maturity buckets of 3 years to 10 years, the rate has been increased from 5% to 5.25% from today.

PNB share price opened up by 0.5%.

Moving on to the news from the IT sector. As per an article in a leading financial daily, Infosys announced that it had signed an agreement for divestment of its entire investment in ANSR Consulting Holdings, Inc.

The divestment will be made for a total consideration of US$1 million. This is with reference to the announcement made by Infosys earlier this year on 21 July 2015 to exit the stake in its minority investment in ANSR Consulting Holdings, Inc., a Delaware corporation.

Reportedly, the company had picked up a 5% stake in the ANSR in 2015 for US$1.4 million, with no board rights.

ANSR services include establishment and operations of global in-house centres, and captive units of MNCs. The venture is backed by Accel Partners, who had infused US$9 million in June 2015.

This deal had marked the first investment by Infosys from its US$250 million Innovate in India fund. This fund was carved out of a larger US$500 million corpus earmarked to invest in global startups.

One shall note that, Infosys has invested in several startups across the world in the past through its Innovation Fund.

In 2016, the fund had invested in UNSILO, a Danish artificial intelligence startup focussed on advanced text analysis, besides US-based big data startup TidalScale.

Last year, Infosys had also invested US$4.6 million in the maiden fund of homegrown early-stage venture capital firm Stellaris Venture Partners, which was launched by three former executives at Helion Venture Partners, through the Innovation Fund.

Infosys share price opened down by 0.1%.

This article was originally published in English at www.equitymaster.com

Read the complete Indian stock market update. For the terms of use, go here.

Indian Indices Trade Marginally Higher; Realty Sector Up 2.3%

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a positive note with stocks in the realty sector and healthcare sector witnessing maximum buying interest.

The BSE Sensex is trading up 18 points (up 0.1%) and the NSE Nifty is trading up 3 points (up 0.02%). The BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 1.1%. The rupee is trading at 63.72 to the US dollar.

In the news from the banking sector, as per an article in the Economic Times, the government has provided Rs 75 billion of fresh equity to six stressed public-sector banks (PSBs) in order to help them meet the prescribed regulatory requirement.

The six banks include Bank of India, IDBI Bank, UCO Bank, Bank of Maharashtra, Dena Bank and Central Bank of India. These banks have received equity through preferential issue of shares from the government with two of them informing stock exchanges about the development.

The government, as a part of its Indradhanush Plan to revitalise state-owned lenders, had proposed to infuse Rs 700 bn out of Budgetary Allocations in them. However, so far, it has infused Rs 518 bn in public sector banks (PSBs).

In October, the government also announced the recapitalisation plan to inject Rs 2.11 trillion into public sector banks over a period of two years. This move was mainly aimed at resolving the long standing non-performing assets (NPA) problem of PSBs. It is expected to shore up the capital of state-run banks, spurring them to clean up the bad loan mess and revive lending.

The implementation of this initiative will, however, take some time. As we wrote in a recent edition of The 5 Minute WrapUp...

• ...if historical data is anything to go by, implementation of such initiatives take a long time, especially in India. Recovery takes the longest time here as compared to other developed nations. India takes an average of 4.3 years to resolve insolvencies as compared to one year in the US. Also, recovery rates in India are amongst the lowest at 26.4%.

This is also evident from the chart below:

Loan Recovery Data of Major Economies

So while recapitalisation will benefit PSBs, it appears to be a temporary cure for a recurring disease. The main problem is the lending and corporate governance processes these banks follow.

In the news from the GST space, the government is suspecting that the composition scheme rolled out for small businesses is being misused as there is been noted a leakage of tax revenues.

As per the news, for July-September, around 10 lakh entities had opted for the composition scheme under GST, where only the turnover details have to be disclosed and tax is paid at a flat rate. Of these, only 6 lakh have filed returns till December 25.

The transition to goods and service tax (GST) is a tough one. However, if implemented properly, the tax will reap huge benefits for such businesses in the long run. Also, the tax regime will aid India's tax revenues to a greater extent in the coming future. This augurs well for the country that has one of the lowest tax revenue as a percentage of GDP compared with other countries.

The higher tax revenue receipt will help bolster the country's financials and also provide further ammunition for the government to spend on social welfare and providing additional infrastructure to its citizens.

In order to capture the above revenues, the government should monitor the leakage of tax revenues and ensure efficient compliance of GST. It needs to be seen how this pans out. We'll keep you updated on the developments from this space. Stay tuned.

This article was originally published in English at www.equitymaster.com

Read the complete Indian stock market update. For the terms of use, go here.

Sensex Above 34K; Infosys, Bharti Airtel PSU Banks & Other Top Cues to Sway the Market Today

Indian share markets finished at fresh life-time highs on the last trading day of 2017, capping off a remarkable year which saw the benchmark surging by 28%.

At the closing bell last week, the BSE Sensex closed higher by 209 points and the NSE Nifty finished higher by 53 points. The S&P BSE Mid Cap finished up by 0.7% while S&P BSE Small Cap finished up by 0.6%. Gains were largely seen in power sector, auto sector and software sector.

Top Stocks to Watch Out

Biocon share price is expected to be in limelight today after the company's proposed biosimilar trastuzumab has been approved by Brazilian regulatory agency ANVISA, through their partner Libbs Farmaceutica. Biosimilar trastuzumab, indicated for breast cancer treatment, has been co-developed by Biocon and Mylan.

Infosys share price is expected to see some action today after it was reported that the company will divest its entire investment in ANSR Consulting Holdings, Inc, for a total amount of US$1 million.

In news from telecom sector, as per an article in The Economic Times, Bharti Airtel is set to enter into a deal with Amazon that will allow India's top telecom market leader to distribute the American ecommerce giant's content through the Airtel TV app. Through the content tie-up, Bharti Airtel is aiming to ring-fence its high-paying customers in an intensely competitive market.

Shriram Transport Finance share price is expected to see some action today as after it was reported that the company has raised Rs 4 billion by issuing bonds on private placement basis.

As per a leading financial daily, the government has provided over Rs 75 billion fresh equity to six stressed state-run banks to help them meet the prescribed regulatory capital requirement and state its commitment to keep banks well-funded. Bank of India, IDBI Bank, Uco Bank, Bank of Maharashtra, Dena Bank and Central Bank of India have received equity through preferential issue of shares with two of them informing stock exchanges about the decision.

NTPC share price is expected to see momentum today as the group company will cross the 51,000-MW mark on Sunday midnight with the beginning of commercial operations of Unit-2 of the Kudgi Super Thermal Project.

DLF share price finished the previous trading session down by 1.7% on the BSE. As per an article in The Livemint, the promoters of the company have infused Rs 90 billion in the company and the amount will be utilized to reduce debt significantly. In the previous week, DLF promoters concluded the sale of a 40% stake in rental arm DLF Cyber City Developers Ltd for Rs 119 billion.

IPO Segment

As per an article in The Financial Express, IPO's in India saw inflows of about US$24 billion into Indian markets from local and overseas investors.

Year 2017 has seen the highest number of grossly oversubscribed issues. Latest to join the list of grossly oversubscribed issues is the IPO of Astron Paper and Board Mill Ltd which got subscribed by more than 243 times last week, and listed at a staggering 140% premium over issue price on BSE.

After such stellar response to IPOs in the current year, all focus and attention will shift to the major IPOs in the upcoming new year 2018 which includes IPOs of HDFC Asset Management Company, NSE and IRCTC to name a few.

To know more, you can download our FREE report - How to Get Rich with IPOs. This guide will show you how to safely profit from the 2017 IPO rush.

However, The market euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space. For every Reliance Power - like issue, there have been issues like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders. A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it.

Bitcoin Falls Below US$14,000

Bitcoin prices rebounded below US$14,000 after moves by South Korea to curb speculation and protect retail customers took the cryptocurrency down more than 8%.

The digital currency has slumped about 23% from its record US$19,511 reached on 18 December, when CME Group Inc. introduced its futures contract.

Meanwhile, the ministry of finance on Friday cautioned people against the risks of investing in virtual currencies such as Bitcoin that are not backed by government fiat, and compared them with Ponzi schemes.

Global Markets Remain Mixed

Global stock indices were mostly higher on Friday, putting them on track to close out the year with strong gains.

When investors return from the New Year holiday, they'll have a week full of economic data to mull. Purchasing manager indices and data on the services industries come before the monthly government jobs report and the minutes from the Federal Reserve's last meeting.

Oil Prices Rise

Oil prices hit their highest since mid-2015 on the final trading day of the year as an unexpected fall in American output and a fall in commercial crude inventories stoked buying. Oil prices settled above US$60 a barrel on Friday for the first time since late June 2015.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentaryfrom the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.

This article was originally published in English at www.equitymaster.com

Read the complete Indian stock market update. For the terms of use, go here.

Sensex Ends Day in Red; PSU Stocks Top Losers

After opening the day flat, share markets in India witnessed volatile trading activity throughout the day and ended the day on a weak note. Losses were seen across most sectors with stocks in the PSU sector and stocks in the oil & gas sector, leading the losses. While stocks in the realty sector gained the most.

At the closing bell, the BSE Sensex stood lower by 64 points (down 0.2%) and the NSE Nifty closed down by 13 points (down 0.1%). The BSE Mid Cap index ended the day up by 0.1%, while the BSE Small Cap index ended the day up by 0.3%.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was up by 0.9% and the Shanghai Composite was up by 0.6%. The Nikkei 225 was down by 0.6%. European markets were trading flat. The FTSE 100 was down by 0.1%. The DAX too, was down by 0.1% while the CAC 40 was flat.

The rupee was trading at Rs 64.09 against the US$ in the afternoon session. Oil prices were trading at US$ 59.74 at the time of writing.

In news from global financial markets. Minutes of the Japan central bank's last policy meeting released this week showed that a majority of policymakers agreed that central bank must persistently purse powerful monetary easing. But additional stimulus measures were unnecessary for now.

The BOJ kept its policy steady as preferred by most of its policymakers at the two-day meeting that ended on 31 October 2017. But newly added member, Goushi Kataoka preferred more easing. Thus, complicating future efforts by the bank to withdraw stimulus.

A majority of the members were of view that extreme monetary easing only to achieve price goal could prevent monetary accommodation from producing intended policy effects. So taking additional monetary easing now would have more demerits than merits.

Most members felt that maintaining current policy was sufficient, though conceding it may take some time before firms more actively raise prices and wages, the minutes showed.

The minutes also noted that the effects and costs of buying risky assets like exchange traded funds (ETFs) must be looked from every angle even if the move had yet to distort market functions at this point.

The BOJ is lagging behind the US Fed and ECB in exiting the ultra-easy policy. But sooner or later, Japan will have to withdraw the easy money policy.

Moving on to news from stocks in the pharma sector. Dr Reddy's share price ended the day on an encouraging note after it was reported that the company has received final approval from the United States Food & Drug Administration (USFDA) for Sapropterin Dihydrochloride (100 mg) tablets.

These tablets are indicated to reduce blood phenylalanine concentrations in patients.

Dr Reddy's share price ended the day up by 1.3%.

Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

With an aim to lower the overall healthcare costs in the country, the US Food and Drug Administration (FDA) approved a record 763 generic drugs for the financial year ending 30th September. As per Mint Analysis, Indian pharma companies received 295 approvals accounting for 40% of the overall approvals during the year.

Meanwhile, the BSE Sensex will include Private sector lenders - IndusInd Bank and Yes Bank from December 18, while two pharmaceutical stocks - Cipla and Lupin will exit the index.

Pharma Weightage in BSE Sensex Going Down

With this change, the weight of the pharmaceutical industry in the index declines to a five-year low. Four drug makers, namely, Sun Pharma (1.7% weight), Dr Reddy's Laboratories (0.8% weight), Lupin (0.6% weight), and Cipla (0.9% weight) together had a 4% weight in the Sensex. With Cipla and Lupin dropping from the index, the pharmaceutical industry's weight would drop to 2.5%, assuming that the rest of the Sensex stocks remain in the index. And with this, only two pharma companies will represent the Sensex.

And here's a note from Profit Hunter:

Hindalco is among the top gainer in the Nifty 50 Index today - up 3.5%.

In our earlier note, we mentioned 200 as important resistance for the stock. In July 2014, the stock topped out at this level. It also reacted from this level several times from February to June 2017. But the stock finally broke above this level in July 2017. Once a stock breaks above such an important resistance level, it usually results in a big move.

So it rallied nearly 40% from that level to hit a life-time high of 278 in October 2017. It corrected for a while to hit a low of 229 earlier this month. Thereafter, the stock resumed it up move with healthy volumes.

Today, it made a new life-time high of 279 but immediately slipped lower. It looks like the stock has found resistance from its October high. Life-time highs usually act as a good resistance point.

So will Hindalco overcome this resistance level or will it have to struggle like it did near 200 levels. We'll keep a tab of it. Stay tuned...

Hindalco Near its Life-time High

This article was originally published in English at www.equitymaster.com

Read the complete Indian stock market update. For the terms of use, go here.