Sensex Trades Flat; IT Stocks Top Losers

After opening the day flat, share markets in India have continued to trade rangebound, and are trading marginally below the dotted line. Sectoral indices are trading on a mixed note with stocks in the capital goods sector and stocks in the IT sector leading the losses.

The BSE Sensex is trading down by 11 points (down 0.1%), and the NSE Nifty is trading down by 12 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 65.62 to the US$.

In news about the economy. The World Bank forecast a growth rate of 7.3% for India this year and 7.5% for 2019 and 2020, and noted that the country’s economy has recovered from the effects of demonetisation and the Goods and Services Tax.

The bank said that factors such as sustained recovery in private investment and private consumption will spur growth going forward.

In its report the World Bank said, India should strive to accelerate investments and exports to take advantage of the recovery in global growth.

Teething issues related to implementation of GST, which hampered operations of small and medium sized enterprises and exporters, also contributed to growth moderation.

GDP Growth Getting Back on Track

According to the World Bank, the most substantial medium-term risks are associated with private investment recovery, which continues to face several domestic impediments such as corporate debt overhang, regulatory and policy challenges, along with the risk of an imminent increase in US interest rates.If the internal bottlenecks are not alleviated, subdued private investment would put downside pressures on India’s potential growth

India’s GDP grew by 7.2% in Q3 FY18. Manufacturing grew by 8.1% for the quarter compared to 7.9% in the same quarter last year. Cement, electricity, coal, and steel, the bedrock of the economy, all witnessed robust growth.

India also surpassed China as the world’s fastest growing economy. Rest assured, we’ll keep a close eye on this trend.

Moving on to news from stocks in the consumer durables sector. Bajaj Electricals share price hit an all-time high today after the company bagged large orders.

Bajaj Electricals share price surged over 7% in morning trade after the company bagged orders worth Rs 35.7 billion from Madhyanchal Vidyut Vitaran Nigam Ltd (MVVNL).

The orders are for over ten rural and urban electrification projects in Uttar Pradesh.

The electrification and related work will be carried out on turnkey basis under the Saubhagya Yojna of Government of India.

Bajaj electricals added that the projects would be completed within 15 months from the date of the issue of letter of intent.

At the time of writing, Bajaj Electricals share price was trading up 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.

The consprds Index at All Time High; HIND. UNILEVER Among Top Gainers

HIND. UNILEVER share price has hit an all-time high at Rs 1,438 (up 1.3%).

Meanwhile, the BSE FMCG Index is at 10,770 (up 0.3%).

Among the top gainers in the BSE FMCG Index today are HIND. UNILEVER (up 1.28%) and P&G HYGIENE (up 0.18%)

PIDILITE INDUSTRIES (down 0.08%)

Over the last one year, HIND. UNILEVER has moved up from Rs 913 to Rs 1,438, registering a gain of Rs 525 (up 57%).

The BSE FMCG has moved up from 9,273 to 10,770, registering a gain of 1,497 points (up 16.12%) during the last 12 months.

The top gainers among the BSE FMCG Index stocks during this same period were TATA GLOBAL BEV. (up 89.85%), UNITED SPIRITS (up 81.04%) and HIND. UNILEVER (up 57.44%).

What About the Benchmark Indices?

The BSE Sensex is at 34,398 (up 0.16%). The top gainers among the BSE Sensex stocks today are TATA STEEL (up 1.86%), M&M (up 1.53%) and HIND. UNILEVER (up 1.28%). Other gainers include NTPC (up 1.18%) and COAL INDIA (up 0.89%). The most traded stocks in the BSE Sensex are DR. REDDYS LAB and SBI.

In the meantime, NSE Nifty is at 10,558 ( up 0.09%). HINDALCO (up 2.80%) and POWER GRID (up 2.61%).

Over the last 12 months, the BSE Sensex has moved up from 29,414 to 34,398, registering a gain of 4,984 points (up 16.82%).

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.

DIVIS LABORATORIES at 52 Week High; BSE HEALTHCARE Index Up 0.2%

DIVIS LABORATORIES share price has hit a 52-week high at Rs 1,180 (up 0.47%).

Meanwhile, the BSE HEALTHCARE Index is at 13,867 (up 0.0%).

Among the top gainers in the BSE HEALTHCARE Index today are DIVIS LABORATORIES (up 0.47%) and MEDICAMEN BI DR. LAL PATHLABS LTD (down 3.00%) and WYETH LTD (down 2.27%) are among the top losers today.

Over the last one year, DIVIS LABORATORIES has moved up from Rs 640 to Rs 1,180, registering a gain of Rs 540 (up 83.69%).

The BSE HEALTHCARE has moved down from 15,478 to 13,867, loss of 1,611 points (down 10.61%) during the last 12 months.

The top gainers among the BSE HEALTHCARE Index stocks during this same period were PANACEA BIOTECH (up 85.22%), DIVIS LABORATORIES (up 83.69%) and BIOCON LTD (up 70.45%).

What About the Benchmark Indices?

The BSE Sensex is at 34,398 (up 0.10%). The top gainers among the BSE Sensex stocks today are M&M (up 1.97%), ADANI PORTS & SEZ (up 1.51%) and TATA MOTORS (up 0.72%). Other gainers include TATA STEEL (up 0.72%) and L&T (up 0.64%). The most traded stocks in the BSE Sensex are DR. REDDYS LAB and M&M.

In the meantime, NSE Nifty is at 10,558 ( up 0.10%). POWER GRID (up 3.97%) and HINDALCO (up 2.09%) are among the top gainers in NSE Nifty.

Over the last 12 months, the BSE Sensex has moved up from 29,414 to 34,398, registering a gain of 4,984 points (up 16.74%).

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 Pares Losses; Pharma Stocks Top Gainers

After opening the day in red, share markets in India witnessed positive trading activity and are presently trading marginally below the dotted line. Sectoral indices are trading on a mixed note, with stocks in the pharma sector and stocks in the realty sector witnessing buying interest. While stocks in the IT sector are leading the gains.

The BSE Sensex is trading down by 76 points (down 0.2%) and the NSE Nifty is trading down by 14 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.1%, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 65.44 to the US$.

In news from the goods and service tax (GST) space. According to a leading financial daily, Goods and Services Tax (GST) collections are expected to bounce back to Rs 930-950 billion, and perhaps more, when returns for March 2018 are filed by April 20.

This is against the average of about Rs 870 billion in the past five months.

Total GST collections - the sum of Central, State and integrated GST - have been on a rollercoaster since the new tax regime came into force in July 2017. After three months of robust collections - in excess of Rs 900 billion each month - they dipped in the following two months.

However the situation seems seems to be improving as GST collections rose to Rs 893 billion in March as opposed to Rs 840 billion in December last years.

Steady Decline in Fiscal Deficit Over the Years

A steady stream of GST collections could boost the government's chances of meeting its fiscal deficit target.

The government missed its previous fiscal deficit target for FY18 by 30 basis points. Against a target of 3.2%, the government managed to keep fiscal deficit at 3.5% in FY18. It has also outlined the projected fiscal deficit target of 3.3% in FY19 in its budget.

Maintaining this deficit target in FY19 won't be easy. Fiscal deficit basically means the amount a government earns minus the amount it has to spend. The lesser the fiscal deficit, the better the government has performed.

In the past, the government has relied on reducing expenditure to keep the fiscal deficit in check.

For the next year, the government is banking on earning much more than it has in the past. It expects a major portion of the revenue to be collected through GST tax collections. Also, the recent rise in crude oil prices has cast a doubt over how much the government will be to curb its spending. It also needs to revive the economy from the shock of Notebandi.

The dual pressure of increasing expenditure and lower inflows makes this FY19 deficit target an uphill challenge.

Moving on to news from . share price is among the top losers on the bourses today as media reports suggested that the Central Bureau of Investigation (CBI) has booked former chairman-cum-managing director of the bank's Arun Kaul and others in connection with a Rs 6.2 billion loan fraud.

The CBI said the loan was secured by producing false end-use certificates issued by the chartered accountants and by fabricating business data and it was not utilised for the sanctioned purpose.

The account was declared a non-performing asset on July 7, 2013 by the bank and the present balance as on December 31, 2017 is Rs 7.3 billion.

At the time of writing, was trading down by 8%

Frauds like these would only add to the pressures faced by the country's banking sector. The NPA problem is getting messier by the day.

Out of the ten major economies facing NPA problems, India is ranked seventh.

Further, according a leading financial daily, a comparison of the NPAs of 25 large Asia-Pacific banks shows that the large Indian banks have the worst NPA ratio when compared to their large cap peers in the region. For FY16, India has been the worst performer with NPAs of 4.6%. Thailand has been the second performer with NPAs of 3.2%.

The state owned banks have suffered more than its private peers. This will have serious consequences on India's overall credit growth as state-owned banks account for two-thirds of overall credit disbursed by scheduled commercial banks in India.

The overhang of bad debts has not only hit their profitability, but has also restricted their loan book growth. Given the scale of the bad loan problem, the bankers may remain cautious in granting new loans and approving new projects. This may delay India's investment cycle.

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 Lower; Infosys Drops 4.5%

Asian share markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.3% while the Hang Seng is down 1.6%. The Shanghai Composite is trading down by 1.5%. Over the weekend, US stocks closed mixed.

Back home, India share markets opened the day on a negative note. The BSE Sensex is trading lower by 113 points while the NSE Nifty is trading lower by 26 points. The BSE Mid Cap index and BSE Small Cap index both opened the day down by 0.1% & 0.3% respectively.

Sectoral indices have opened the day on a mixed note with FMCG stocks and consumer durables stocks witnessing buying interest. While, IT stocks & energy stocks have opened the day in red. The rupee is trading at 65.22 to the US$.

In the news from the IT sector. Infosys share price opened the down by 4.5% after the management guided for 100 bps reduction in EBIT (earnings before interest & tax) margin guidance for FY19.

Although the results came in-line, and the management gave out an in-line FY19 revenue growth guidance of 6–8% in constant currency terms, the street showed disappointment in the 22–24% margin guidance. This was reflected in its ADR opening 5% lower on Friday from its previous close of US$18.

After opening at US$17.1, the ADR touched lows of US$16.5 before closing at US$16.6.

The management has attributed the drop in margin guidance to required investment in the digital business, localisation within markets, especially developed ones (scaling up of local talent and data centres), investing in reskilling its employees and for revitalizing its sales team.

Further, the reaction that resulted in ADR decline was slightly overdone as these steps would mean that the revenue generation would be enhanced at the cost of margins.

Moreover, the company has identified an amount of up to Rs 104 billion to be paid out to shareholders in FY19 (apart from regular dividend), which would provide support to the stock price.

In another development, non-performing assets (NPAs) or bad loans in the banking sector are set to shoot up by at least Rs 80 billion as advances to the scam-hit Gitanjali Gems group have turned bad during the quarter ended 31 March.

Reportedly, banks will have to make provisioning of Rs 80 billion for Gitanjali alone as there has been no servicing of the working capital loan during the fourth quarter of last fiscal. Gitanjali, among others, is the major account which has turned bad in the fourth quarter of 2017–18.

Gross NPAs of all the banks in the country amounted to Rs 8409.6 billion in December, led by industry loans followed by services and agriculture sectors, as per the government estimates.

Gitanjali is promoted by Mehul Choksi, uncle of billionaire diamantaire Nirav Modi, who defrauded Punjab National Bank (PNB) of over Rs 130 billion by getting fake letters of undertaking/credit (LoU/LoCs) issued from one of the bank’s branches in Mumbai.

A special CBI court in Mumbai has issued non-bailable warrants (NBWs) against Modi as well as Choksi.

A consortium of 21 banks led by Allahabad Bank had first extended working capital loan to it in 2010–11. In 2014, ICICI Bank became the lead banker as it had highest exposure of about Rs 9 billion and in line with the revised guidelines of the Reserve Bank of India.

Till December 2017, the loans to Gitanjali Gems were standard and regular debt servicing was being done. There is no servicing of debt in the last quarter ended 31 March, so it has to be declared NPA by all banks, the reports noted.

Unlike the real gold, the mineral lookalike hardly has any intrinsic, social, or market value. However, its deceptive appearance has fooled many into believing that they have stumbled upon a gold mine, just like Gitanjali Gems, a stock that has fallen from grace yet again.

Most investors in stock markets suffer from short-term memory. The past debacles are quickly forgotten with investors making a beeline for dud stocks, only to burn their fingers repeatedly. Back in July 2013, after the stock of Gitanjali Gems had slumped on charges of market manipulation by its promoters, it was being lapped up by institutional investors hoping to cash-in the long run.

Gitanjali Gems, the Fall Guy

The stock of Gitanjali Gems has nosedived on several occasions since 2013, eroding market capitalisation by over 80%.

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 Flat; Energy Stocks Top Losers

After opening the day flat, share markets in India have continued to trade rangebound, and are trading marginally below the dotted line. Sectoral indices are trading on a mixed note with stocks in the PSU sector and stocks in the energy sector leading the losses.

The BSE Sensex is trading down by 3 points (down 0.1%), and the NSE Nifty is trading down by 15 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is trading flat. The rupee is trading at 65.16 to the US$.

In news from the global economy. US and Asian shares witnessed buying activity after Chinese President Xi Jinping eased escalating tensions in the US-China trade war.

The Chinese president promised to open the country’s economy further and lower import tariffs on products including cars, which is seen address the concerns of US President Donald Trump as the two countries edged towards an all-out trade war.

Xi also said China would raise the foreign ownership limit in the automobile sector as soon as possible and push previously announced measures to open the financial sector.

Without mentioning Trump’s concern over the huge trade deficit, Xi said China does not seek trade surplus and have a genuine desire to increase imports and achieve greater balance of international payments under the current account.

Trump has been demanding China to cut down US$375 billion trade deficit by US$100 billion in about a month.

In addition, the Chinese president also promised that China will take measures to liberalise automobile investment, significantly lower the import tariffs on cars and protect intellectual property, indirectly addressing major complaints by the US amid the trade row.

The comments sent U.S. stock futures, the dollar and Asian shares higher.

The world’s top two economies had edged towards an all-out trade war after Trump administration last week published a list of about 1,300 Chinese exports worth US$50 billion that could be hit by US tariffs because of Beijing’s alleged theft of intellectual property and technology.

China hit back with a levy 25% tariffs on imports of 106 US products, bringing the total to US$3 billion in retaliation to Trump’s move to impose tariffs on steel and aluminium.

Moving on to news from the domestic economy. Asian Development Bank (ADB) in its latest report said that India’s GDP growth is set for a turnaround and will grow 7.3% in 2018–19 and 7.6% in 2019–20.

The bank said that factors such as policy oriented growth measures will spur growth going forward. It also highlighted that the below par growth of 6.6% in 2017–18 was driven in part by lingering effects of demonetisation, which impacted the informal sector in the first half of 2017–18.

Teething issues related to implementation of Goods and Services Tax (GST), which hampered operations of small and medium sized enterprises and exporters, also contributed to growth moderation.

GDP Growth Getting Back on Track

ADB said the growth will pick up as the new tax regime improves productivity, and bank reforms take their course, followed by corporate deleveraging to reverse a downtrend in investment.

India’s GDP grew by 7.2% in Q3 FY18. Manufacturing grew by 8.1% for the quarter compared to 7.9% in the same quarter last year. Cement, electricity, coal, and steel, the bedrock of the economy, all witnessed robust growth.

India also surpassed China as the world’s fastest growing economy. Rest assured, we’ll keep a close eye on this trend.

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 Share Markets Open Flat; Banking & PSU Stocks Drag

Asian share markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.63% while the Hang Seng is up 0.63%. While, the Nikkei 225 is trading down by 0.20%. US stocks rallied on Tuesday as Wall Street breathed a sigh of relief after China’s president said he would work to “open” the country’s economy, easing trade war fears.

Back home, India share markets opened the day on a flattish note. The BSE Sensex is trading lower by 6 points while the NSE Nifty is trading lower by 5 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.1% & 0.2% respectively.

Sectoral indices have opened the day on a mixed note with metal stocks and information technology stocks witnessing buying interest. While, bank stocks & PSU stocks are trading in red. The rupee is trading at 64.94 to the US$.

Pharma stocks have opened the on a mixed note with Aarti Drugs & J.B. Chemicals witnessing maximum selling pressure. In the latest development, Dr Reddy’s Laboratories has received establishment inspection report from the US health regulator for its Cuernavaca facility in Mexico.

Reportedly, the audit of its active pharmaceutical ingredient (API) Cuernavaca plant in Mexico by the United States Food and Drug Administration (USFDA) was completed with zero observations.

One shall note that, Dr. Reddy’s subsidiary Industrias Quimicas Falcon De Mexico, which contributed Rs 3.8 billion (2.6% of consolidated revenue) in FY17 and Rs 0.2 billion in PAT (1.6% of consolidated PAT), operates this unit.

In 2010, the USFDA had inspected this facility and issued a warning letter in 2011. Subsequently, USFDA also issued an import alert on this plant. In 2012, the import alert was lifted. The plant underwent inspection in July 2017 and received zero observations.

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.

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Dr. Reddy’s Lab share price opened the day up by 0.6%.

Moving on to the news from the oil & gas sector. As per an article in a leading financial daily, India’s Oil and Natural Gas Corp Ltd and Reliance Industries Ltd have started discussions with buyers to sell natural gas from their fields in the Bay of Bengal that are expected to start production over the next three years.

The plan is to transport the gas from the east coast to the industrial heart belt of western India.

ONGC plans to use Reliance Industries’ 1,375 km pipeline connecting Kakinada on the east coast to Bharuch in Gujarat in the west.

Further, ONGC will bring east coast gas onstream by 2019 onwards and ramp up production to around 15 million standard cubic metres per day (mscmd).

One shall note that, Reliance built the pipeline in 2009, but has been operating at very low capacity utilisation for several years due to a drastic fall in output from the company’s venture in the Krishna-Godavari basin in the Bay of Bengal.

Billionaire Mukesh Ambani-controlled Reliance Industries and partner BP Plc, which together own three natural gas fields next to ONGC’s in the east coast, has also started discussions with customers to market the natural gas, the reports noted.

Notably, Prime Minister Narendra Modi has set a target to increase the share of gas in India’s energy mix to 15% by 2030 from below 6.5% now.

India’s current total consumption of natural gas at end of March 2018 stood at 145 mscmd.

Energy stocks opened the day on a mixed note with Hindustan Oil Exploration & Chennai Petroleum leading the gainers.

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.