Sensex Opens 200 Points Higher; Metal & Realty Stocks Lead the Gains

Asian stock markets are higher today bouncing back from strong losses in the previous session as trade tensions between the US and China appeared to ease. The Nikkei 225 is up 1.91% while the Hang Seng is up 0.90%. The Shanghai Composite is trading up 0.97%. Overnight, US markets closed in green.

Meanwhile, Indian share markets too have opened the day in green. BSE-Sensex is trading higher by 200 points and NSE-Nifty is trading higher by 51 points. S&P BSE Mid Cap is trading higher by 1.3% and S&P BSE Small Cap is trading up by 1.5%.

Gains are largely seen in metal stocks, capital goods stocks and realty stocks. The rupee is trading at Rs 65.06 against the US$.

The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it's relatively high.

FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India's GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.

The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.

In news from steel sector, as per an article in The Livemint, JSW Steel Ltd would invest up to US$500 million to expand its Texas operations through its US unit, as part of a Memorandum of Cooperation signed with the Texas Governor's office.

The governor has also approved a grant worth US$3.4 million from the Texas Enterprise Fund to JSW Steel (USA) Inc.

The capex plan, which will be completed by March 2020, includes setting up a melt manufacture contiguous plate and pipe facility in Texas. The investment comes at a time of rising concerns about an escalating trade war between US and other countries over tariffs.

Trade minister Suresh Prabhu said last week the country will bilaterally discuss import curbs on steel with US after President Donald Trump had pressed ahead with import tariffs on steel and aluminium products.

JSW Steel share opened the trading day up by 2.1% on the BSE.

Moving on to news from IPO segment, as per a leading financial daily, the Rs 40.17 billion initial public offering (IPO) of ICICI Securities could only manage 78% subscription on the last day of the issue on Monday.

However, including anchor allotment, the issue received a total of 87.9% subscription.

In a statement, the the company has successfully closed its proposed offer for sale (OFS) and has raised around Rs 35 billion. Out of this, around Rs 17.17 billion was raised from anchor investors.

The company's announcement meant it lowered the issue size to sail through. This is third subsidiary firm from the ICICI group to hit the market in past two years. The QIB portion was fully subscribed, but the quota for retail investors (88%) and non-institutional investors (33%) remained undersubscribed.

Overall, this was the fourth issue of the ICICI Group after ICICI Bank, ICICI Prudential Life and ICICI Lombard General Insurance.

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.

In news from cryptocurrency market, Bitcoin began the week on a down note, declining as much as 8.7%, pushing the biggest cryptocurrency's decline for March to about 25%.

Bitcoin's price is back below US$8,000, a move that comes amid a broader decline in the global cryptocurrency market.

After reaching a record high of almost US$20,000 in December, Bitcoin has slumped about 60% as investors reconsider the prospects of the digital currency and regulators around the world increase scrutiny.

Twitter confirmed Monday it's banning the advertisements on its platform due to concern the content is often related to deception and fraud, according to a company spokesperson. The decision comes after Facebook Inc. banned cryptocurrency ads in January and Alphabet Inc.'s Google said it would do the same starting in June.

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 Trades in Red; Metals Sector Leads Losses

After opening the day in red, share markets in India have continued the downtrend and are presently trading below the dotted line. Sectoral indices are trading mixed with stocks in the metals sector and stocks in the realty sector trading in red. While stocks in the IT sector are trading in green.

The BSE Sensex is down by 450 points (down 1.4%) and the NSE Nifty is trading down by 143 points (down 1.4%). Meanwhile, the BSE Mid Cap index is trading down by 1.8%, while the BSE Small Cap index is trading down by 2%. The rupee is trading at 65.13 to the US$.

In news from stocks in the IPO space. Bharat Dynamics’ IPO made a dull debut and got listed at Rs 370, a discount of over 15% to the issue price of Rs 428.

The Rs 9.6-billion initial public offering (IPO) of state-run Bharat Dynamics barely sailed through in the subscription phase, with the retail portion subscribed just 1.3 times.

Headquartered in Hyderabad, Bharat Dynamics is the sole manufacturer of Surface to Air Missiles (SAM), Torpedoes and Anti-Tank Guided Missiles (ATGM) in India. It is a public sector undertaking under the Ministry of Defence.

The company has grown its revenues and profits at a compounded annual growth rate of 130% and 5% respectively in the preceding three years. At the upper price band of Rs 428, the company is valued at 16 times it’s FY17 earnings.

It had set a price band of Rs 413 and Rs 428 and planned to raise up to Rs 9.8 billion.

We had analysed the IPO and released a recommendation note for the Bharat Dynamics IPO, you can access it here.

At the time of writing, Bharat Dynamics share price was trading up by 18% from its issue price.

IPO Subscription Times (2017)

One space which tests the investor’s contrarian philosophy is the IPO space. The demand for IPO’s has reached sky-high levels. Avenue Supermarts was the first company this year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies lately, with MAS Financial Services being the newest entrant to the list.

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. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

Moving on to news from stocks in the IT space. Infosys share price is in focus today after the IT services major disclosed additional investments.

The IT major said that it has made an additional investment of US$ 1.5 million in Waterline Data Science, a data discovery and data governance software provider firm, through the Infosys Innovation Fund.

Infosys had in 2016, picked up a stake worth US$ 4 million in the US based Waterline Data Science.

With this investment, Infosys has a minority holding not exceeding 20% of the outstanding share capital of the company, said the company in a filing to the stock exchange.

Originally incorporated in December 2013, Waterline provides data scientists and business analysts with a self-service data catalogue to help discover, understand and provision data. It also gives an automated data inventory that enables agile data governance across metadata, data quality and data lineage.

Notably, the investment was made through the Infosys Investment Fund, which is a US$ 500 million worth of fund for investments in startups that work on big data & analytics, machine intelligence and other disruptive technologies. It has so far invested in 11 such firms.

At the time of writing, Infosys share price was trading up by 0.8%.

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 Plunges as Trump Sparks Trade War Fears; Metal & Bank Stocks Fall

Asian stock markets plunged in morning trade tracking losses in the US markets after US President Donald Trump announced tariffs on Chinese goods stoking fears of a trade war. The Nikkei 225 is off 3.54% while the Hang Seng is down 2.97%. The Shanghai Composite is trading down 3.12%.

The US president instructed US Trade Representative to levy tariffs on at least US$50 billion in Chinese imports. Trump also directed Treasury Secretary to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the US views as strategic.

The US also stated that China engages in a range of violations, including policies that force American companies to transfer technology and the accessing of trade secrets through hacking.

Meanwhile, Indian share markets have opened the day deep in red. BSE Sensex is trading lower by 355 points and NSE Nifty is trading lower by 150 points. S&P BSE Mid Cap is trading lower by 1.7% and S&P BSE Small Cap is trading down by 1.8%.

Losses are largely seen in metal stocks, bank stocks and realty stocks. The rupee is trading at Rs 65.06 against the US$.

The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it’s relatively high.

FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India’s GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.

The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.

In news from automobile sector, as per an article in The Livemint, Mahindra and Mahindra Ltd and Ford India Pvt. Ltd on Thursday said they have agreed to jointly develop connected vehicles, electric cars, drivetrains, compact SUVs and mid-sized SUVs.

Specifically, the two automakers will co-develop a small electric car. Reportedly, Mahindra would share its affordable EV technologies with Ford, which the American company plans to use in its small entry-level cars such as Figo and Aspire.

The report also said Mahindra was in early talks with Ford to procure a vehicle platform Ka on which the M&M aims to build an all-new electric sedan.

Aiming to leverage the benefits of Ford’s global reach and Mahindra’s scale in India, M&M will try to assess the possibility of increasing its support in global emerging markets via Ford’s manufacturing and distribution network, in addition to evaluating future mobility needs.

M&M share price opened the trading day down by 0.5%.

In another development, as per a leading financial daily, Hero MotoCorp Ltd has raised its stake in its joint venture in Colombia from the existing 51% to 68%.

Hero MotoCorp opened its fifth overseas manufacturing capacity-its first in Columbia-to cater to demand from the neighbouring Latin American countries and to set up a base for exports outside India.

The Colombia facility was the first step by the firm to expand its footprints, especially in the South and North American markets.

Reportedly, the manufacturing capacity was built over a project cost of US$70 million, of which US$38million was used in capital expenditure and the rest as working capital.

Hero Motocorp share price opened down 0.8% on the BSE.

Moving on to news from banking sector. The Central Bureau of Investigation (CBI) registered a Rs 13.94 billion bank fraud case against Hyderabad-based Totem Infrastructure Ltd on a complaint by state-run Union Bank of India.

The number of bank fraud cases has been piling up after the Reserve Bank of India (RBI) directed banks to file complaints against erring companies. The latest case comes just a day after the investigating agency filed a case of loan fraud against Kanishk Gold Pvt. Ltd on a complaint by State Bank of India (SBI).

It was alleged in the complaint by Union Bank that the company had diverted funds by opening accounts outside the consortium and through payments of wages by showing excess expenditure and inflated stocks. The entire sale proceeds were not allegedly routed through the dealing branches of consortium banks.

Meanwhile, this comes after reports of about Rs 127 billion fraud at the country’s second largest state-run lender Punjab National Bank.

Union Bank of India share price opened the trading day down by 7%.

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 Opens Higher; ONGC & Sun Pharma Top Gainers

Asian stocks are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.38% while the Hang Seng is down 0.77%. The Shanghai Composite is trading down by 0.81%. US stocks ended slightly lower on Wednesday, with major indices giving up gains in choppy trade after the Federal Reserve raised US interest rates, while a strong gain in the energy space helped limit losses.
Back home, India share markets opened the day on a positive note. The BSE Sensex is trading higher by 75 points while the NSE Nifty is trading higher by 25 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.2% & 0.3% respectively.

Barring bank stocks, all sectoral indices have opened the day in green with energy stocks and consumer durables stocks witnessing maximum buying interest. The rupee is trading at 65.22 to the US$.

In the news from the pharma sector. Sun Pharmaceutical Industries Ltd. has announced its first US approval for an innovative medicine, marking a milestone in the company’s bid to diversify out of generic drugs by building a portfolio of novel ones protected by patents.

Reportedly, Sun’s drug Ilumya was approved by the US Food and Drug Administration (USFDA) to treat adults with moderate to severe cases of the skin condition plaque psoriasis, who are also candidates for systemic therapy or phototherapy.

The approval comes as Sun’s core business making copies of other companies’ medicines has been squeezed by a wave of competition in the US, putting pressure on prices for these generic drugs.
Sun has been particularly exposed because its ability to offset the price declines with new revenue has been hampered by a US sanction preventing new product launches from a key plant in India, the reports noted.
The roll out of innovative medicines has been seen not only as a new revenue stream, but one that will deteriorate less quickly because other generic firms won’t be able to copy them until the patents expire.
Sun licensed Ilumya from Merck & Co. in 2014, agreeing to fund Merck’s efforts to complete the Phase 3 trials and get it approved, and then take over the commercialization and regulatory upkeep after. Merck is eligible for milestone payments and royalties on the drug.

One shall note that, 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, there was a sharp pick-up in new drug approvals in FY17.

Generic Drug Approvals Hit The Roof

With an aim to lower the overall healthcare costs in the country, USFDA 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. Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in the previous year.

In such an environment, it makes sense for investors to be selective while buying stocks. Focus on value and the underlying fundamentals of the business. Then, they need not worry about the market.

So, what is key to identifying potential multibagger stocks? How does one pick them at the right time and ride them to their full potential? How many multibaggers do you really need to achieve the big riches that you desire?

Most importantly, are there any stocks right now that could turn out to be multibaggers? Click here to know everything that you need to know right now about mutlibagger stocks…

Moving on to the news from the . As per an article in a leading financial daily, JSW Steel Ltd may bid in Essar Steel auction after lenders to the bankrupt steel maker rejected the two bids that had been received and invited fresh bids for the distressed asset.

On shall note that, the committee of creditors (CoC) to Essar Steel at its meeting rejected the resolution plans submitted by steel major ArcelorMittal India and Numetal Mauritius.

Further, five firms had submitted resolution plans for Essar Steel. Apart from ArcelorMittal and Numetal, the other firms which participated in the first round of bidding were Nippon Steel, Tata Steel and Vedanta Group.

If JSW Steel enters the new round of bidding for Essar Steel, it will be the fourth distressed steel asset that the Sajjan Jindal-led company has set its eyes on since the debt resolution process under the insolvency and bankruptcy code began.

JSW Steel has partnered with at least two private equity funds, Aion Capital and Bain-Piramal fund, to bid for distressed steel assets.

Notably, JSW Steel is looking to set up a platform for acquiring distressed assets and is open to various options, including partnering with financial sponsors as it looks for inorganic growth and opportunities in the distressed assets space where a number of large steel companies are facing bankruptcy.

JSW Steel share price opened the day up by 0.2%.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!
Originally published at www.equitymaster.com.

Sensex Opens Flat; Metal & Realty Stocks Lose

Asian stocks are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.99% while the Hang Seng is down 0.84%. The Shanghai Composite is trading down by 0.32%. Overnight, the US markets closed lower as market participants positioned to US Federal Reserve policy.

Back home, India share markets opened the day on a flat note with negative bias. The BSE Sensex is trading lower by 31 points while the NSE Nifty is trading lower by 23 points. The BSE Mid Cap index and BSE Small Cap index both opened the day down by 0.6%.

Barring information technology stocks, all sectoral indices have opened the day on a negative note with metal stocks and realty stocks witnessing maximum selling pressure. The rupee is trading at 64.04 to the US$.

In the news from the IPO space. The initial public offer (IPO) of Bandhan Bank has been oversubscribed 14.6 times so far on the final day of bidding Monday.

The Rs 44.73-billion IPO has received bids for 1218.1 million equity shares against the total offer size of 83.5 million shares.

The IPO also consists of an offer for sale of up to 140.5 equity shares by IFC and up to 7.6 million equity shares by IFC FIG. The bank is aimed to raise Rs 44.13 billion — Rs 44.73 billion at a price of Rs 370–375 per share, respectively.

Meanwhile, state-owned Hindustan Aeronautics’ initial public offer was subscribed 45% on the second day of bidding on Monday.

The IPO, through which the Bengaluru-based firm aims to raise Rs 42.3 billion, received bids for 15.4 shares against the total issue size of 34.1 million shares.

The IPO is of 34.1 million shares and is scheduled to close today. The price band for the issue has been fixed at Rs 1215–1240. SBI Capital Markets and Axis Capital are managing the issue.

To know our view on the above IPOs, you can read our IPO note here.

Speaking of IPOs, the demand for IPO’s has reached sky-high levels. Avenue Supermarts was seen as the first company last year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies, among others.

IPO Subscription Times (2017)

This 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.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

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 ongoing IPO rush.

Moving on to the news from the FMCG sector. As per an article in a leading financial daily, Godrej Agrovet Ltd is planning to bid for Ruchi Soya Industries Ltd, which is undergoing bankruptcy resolution, with an eye on its palm oil business.

A bid would mark Godrej joining the race for Ruchi Soya, in which companies such as Patanjali Ayurved Ltd, ITC Ltd and Emami Ltd have evinced interest.

According to the report, the company, which is currently undergoing bankruptcy proceedings, has received as many as 26 applications from Indian and foreign conglomerates to acquire a 51% stake.
In December 2017, NCLT’s Mumbai bench admitted Ruchi Soya’s insolvency resolution process under the Insolvency and Bankruptcy Code, 2016, following petitions by Standard Chartered Bank and DBS Bank.

Ruchi Soya is among the 26 companies on the second list of bad loan accounts that the Reserve Bank of India sent to banks last year asking them to conclude a debt resolution.

Godrej Agrovet share price opened the day down by 0.6%.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!


Originally published at www.equitymaster.com.