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Strong Start to the Week; HDFC Hits All Time High
Mon, 15 Jan Closing | Karan Janani, TM Team

Indian share markets continued to witness buying momentum in the afternoon session and closed on record highs. At the closing bell, the BSE Sensex closed higher by 251 points and the NSE Nifty finished higher by 60 points. The S&P BSE Mid Cap finished down by 0.1% while S&P BSE Small Cap finished up by 0.3%. Gains were largely seen in consumer durables stocks, bank stocks and power stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.26%, while the Shanghai Composite & the Hang Seng fell 0.54% and 0.08% respectively. European markets are lower today with shares in Germany off the most. The DAX is down 0.30% while France's CAC 40 is off 0.25% and London's FTSE 100 is lower by 0.05%.

Rupee was trading at Rs 63.41 against the US$ in the afternoon session. Oil prices were trading at US$ 64.22 at the time of writing.

Vedanta's oil and gas vertical Cairn India is planning to invest Rs 370 billion to ramp up crude production at its Barmer oil fields in Rajasthan.

The investment will be made over the next few years, which will enhance the production of crude oil.

The programme will help the company in achieving the production target of 5 lakh barrels oil per day (BOPD) from the Barmer oil fields.

Vedanta share price finished the day down by 0.4% on the BSE.

In news about the economy. According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Wholesale Price Index (WPI) decelerated to 3.58% in December, a marginal drop from of 3.9% in November 2017.

Wholesale inflation rate, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

The index portrays new series of WPI data released by the government earlier this fiscal, with 2011-12 as the base year, replacing existing the base year of 2004-05.

Food articles turned out to be major drivers as the data showed that inflation of wholesale food articles fell to 4.7% in October, as against a 6% rise in the previous month. However, fuel inflation was up by 9.1% as compared to a rise of 8.8% in November.

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Data released by the Central Statistics Office (CSO) last week showed inflation measured by the Consumer Price Index (CPI) accelerated to a 17-month high at 5.2% in December from 4.8% a month ago.

This is the final set of data that finance minister will have before him as he sits down to finalize the Union budget for 2018-19, to be presented on 1 February.

Moving on to news from engineering sector. As per an article in The Economic Times, Larsen & Toubro (L&T) today said its construction arm has won contracts worth Rs 13.1 billion in various business segments.

Its Water & Effluent Treatment Business has won orders worth Rs 6.31 billion including a contract from Bihar Urban Infrastructure Development Corporation Ltd to lay a new sewerage network and construct pumping stations at Saidpur.

The Buildings & Factories Business has won an order worth Rs 3.4 billion. Besides, its Power Transmission & Distribution Business has bagged orders worth Rs 3.39 billion.

L&T share price finished the day down by 0.1% on the BSE.

Moving on to news from finance sector. HDFC share price surged 6.2% in today's trade and crossed Rs 3 trillion market capitalisation mark for the first time.

The company plans to raise up to Rs. 130 billion via QIP and preference shares. On January 13, HDFC said its board has approved raising up to Rs. 130 billion primarily to maintain its holding in its banking arm and enter segments like stressed assets and health insurance.

HDFC's fund-raising is mainly aimed at investing in a preferential share issue by HDFC Bank, which will help the mortgage lender maintain its about 21% stake in the bank.

Last month, HDFC secured board approval to raise as much as Rs 130 billion. It said it may need capital for health insurance and acquisition of stressed assets in the real estate sector.

The preferential share sale announced on Saturday comprises 3.9% of the company's enhanced share capital after the issue.

A GIC affiliate will buy about 30.1 million shares, while the administrator of the pension plan for Canada's Ontario municipal employees is buying 10 million shares. The KKR affiliate will buy about 9.3 million shares.

Pharma stocks finished the day in red with Orchid Pharma share price and Cadila Healthcare share price leading the losses.

The BSE healthcare index was the worst performing sector in 2017. In fact, the sector has underperformed over the past three years.

While 2018 earnings of pharma companies are expected to be better considering the low earnings base in 2017, certain challenges still remain.

The valuations of the top five companies by market capitalization on BSE healthcare tell a different story though. Average Price to Earnings Ratio of the top five companies stands at 36. Considering the headwinds these companies are facing, it certainly seems rich.

Valuations of Top Pharma Companies Still High

An improved earnings performance in 2017 will certainly get these valuations to reasonable levels, provided the share price remains the same. But, the headwinds for the sector still exists.

Quicker ANDA approvals has intensified competition amongst generic players. Also, the recent warning letter to Lupin shows the regulatory overhang hasn't been completely resolved yet.

2018 looks likely to be another challenging year for the sector. The uncertainties make it important to be stock specific in the sector.

And here's a note from Profit Hunter:

Housing Development Finance Corporation (HDFC) Ltd is among today's top gainers in the Nifty 50 Index - up 6%. Let's have a look at its chart.

The stock bottomed around 1,200 in January this year and traded in a strong uptrend tracking the rising channel line. In July, the stock resisted from the channel's resistance after hitting a life-time high of 1,800. It then consolidated for more than a month to trade near the channel's support line. It broke down of the channel in September and traded in a range of 1,650 - 1,800.

Today, the stock broke above the range and soared 6% with heavy volumes. It hit a new life-time high of 1,886.

Does this indicate that the stock has now resumed its uptrend? Let's wait and watch.

HDFC Ltd Surged 6% for the Day
HDFC Ltd Surged 6% for the Day 

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