Sensex, Nifty Close at Record Highs; Bank & Realty Stocks Rally

Fri, 19 Jan Closing

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After opening the day marginally higher, Indian share markets extended gains in the afternoon session after the government decided to cut tax rates on certain products and services. At the closing bell, the BSE Sensex finished higher by 251 points. While, the NSE Nifty finished higher by 78 points. Meanwhile, the S&P BSE Midcap Index and S&P BSE Small Cap Index ended up by 0.9%.

All the sectoral indices ended the day in green with bank stocks, realty stocks and PSU stocks leading the pack of gainers.

Overseas, Asian stock markets finished higher today with shares in Hong Kong leading the region. The Hang Seng is up 0.41% while China's Shanghai Composite is up 0.38% and Japan's Nikkei 225 is up 0.19%. European markets are mixed today. The DAX is up 0.46% while the CAC 40 gains 0.13%. The FTSE 100 is even.

The rupee was trading at Rs 63.72 against the US$ in the afternoon session.

Pharma stocks ended the day on a mixed note with Biocon Ltd & Indoco Remedies leading the gainers. As per an article in a leading financial daily, Lupin has launched its Doxycycline Hyclate Tablet USP, 100 mg having received an approval from the United States Food and Drug Administration (USFDA) earlier.

As per IMS MAT November 2017, Doxycycline Hyclate Tablet USP, 100 mg had annual sales of around US$144 million in the US.

Lupin's Doxycycline Hyclate Tablet USP, 100 mg is the AB rated generic equivalent of Pfizer's Vibra-Tabs, 100 mg. It is indicated in the treatment of infections caused by various microorganisms and as an adjunctive therapy in severe acne.

Meanwhile, the USFDA has completed an inspection at Cadila Healthcare's API manufacturing facility at Dabhasa.

The facility was inspected in the period from 15 January 2018 to 19 January 2018. At the end of the inspection, no observation (483) was issued.

Speaking of pharma space,  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.

Valuations of Top Pharma Companies Still High

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.

Here's what Kunal Thanvi, our Research Analyst has to speak about the sector:

• "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.

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.

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...

Lupin share price and Cadila Healthcare share price ended the day up by 0.5% & 1.1% respectively.

Moving on to the news from banking sector. HDFC Bank share price ended the day on an encouraging note after the bank reported a record high quarterly profit, as an increase in interest and fee incomes as well as a steady non-performing loan ratio boosted the bottom line.

Net profit for the lender rose 20% to Rs 46.4 billion (US$728.4 million) for the third quarter ended 31 December from Rs 38.7 billion a year ago.

Further, the bank's gross bad loans as a percentage of total loans were 1.3% at end-December, versus 1.3% at end-September.

HDFC Bank, the most valuable in the sector with a market capitalisation of more than US$78 billion, has the lowest bad-loan ratio among top lenders as it focuses on retail clients. It has relatively smaller exposure to segments such as infrastructure financing.

That has helped it grow loans faster at a time when rivals, especially the state-backed lenders, are struggling with record levels of soured loans in the sector.

HDFC Bank's net interest income rose 24.1% from a year to Rs 103.1 billion, helped by average asset growth of 16.6%. Its core net interest margin was 4.3%. Non-interest income rose 23.1% to Rs 38.7 billion.

And here's a note from Profit Hunter:

The Nifty 50 Index traded on a strong note during the week. On Monday, it opened the session 61 points gap up to touch a new life-time high of 10,782 before correcting a bit in the next session. But the selling was temporary as the index continued the bullish momentum and hit a new life-time high daily for the next three sessions. Finally, the Nifty index ended its weekly session 2% up.

The RSI indicator, which suggest the strength of the trend, is now trading in its overbought territory.

So can the index maintain the bullish momentum in the week to come or will it see some correction before scaling up? Let's keep a close watch on it...

Nifty 50 Index Ends at Life-time High

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