Sensex, Nifty at Record Close Yet Again; IT & Realty Stocks Rally

Mon, 22 Jan Closing

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   09:30 am   

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Indian share markets extended rally in the final hour of the trade, hitting fresh record highs while the Bank nifty touched 27,000 level for the first time. At the closing bell, the BSE Sensex finished higher by 286 points. While, the NSE Nifty finished higher by 72 points. Meanwhile, the S&P BSE Midcap Index and S&P BSE Small Cap Index ended up by 0.7% & 0.8% respectively.

Barring metal stocks and PSU stocks, all the sectoral indices ended the day in green with information technology stocks and realty 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 0.43% while China's Shanghai Composite is up 0.39% and Japan's Nikkei 225 is up 0.03%. European markets are mixed to lower. Shares in France are off as the CAC 40 drops 0.23%. The DAX is down 0.11% while the FTSE 100 in London is unchanged.

The rupee was trading at Rs 63.89 against the US$ in the afternoon session.

Indian shares have been on a record-setting run, bolstered by a string of positive corporate results and recent government measures, including a cut in the goods and services tax for certain sectors.

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.

India Outperforms Emerging Market Peers in 2017

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."

ONGC share price jumped as much as 3.3% to their highest in nearly a year after the explorer said it would buy a majority stake in HPCL for US$5.8 billion.

Meanwhile, Reliance industries share prices gained as much as 4.4% after the company posted a record net profit in the third quarter after its telecoms business, Jio, turned in a profit for the first time.

Engineering stocks ended the day on a mixed note with BHEL & GE Power India leading the gainers. <BHEL share price> surged 7.2% on the reports that the company will be setting up a 660 MW coal-based thermal power project with supercritical parameters in Maharashtra.

Reportedly, the Rs 28 billion-project will be built as an expansion project (unit 6) of Maharashtra state power generation company (MAHAGENCO)'s Bhusawal thermal power station (TPS) in Maharashtra's Jalgaon.

The 1,420 MW Bhusawal TPS is presently equipped with two sets each of 210 MW and 500 MW ratings. All these sets have been supplied and commissioned by BHEL.

The key equipment for the contract will be manufactured at BHEL's Trichy, Haridwar, Bhopal, Ranipet, Hyderabad, Jhansi, Thirumayam and Bengaluru plants while the company's power sector- western region shall be responsible for civil works and erection and commissioning of the equipment, the reports noted.

Notably, BHEL has a long-standing partnership with MAHAGENCO and has a significant share of 81% in the coal-based power stations installed in the state by the utility.

The company has secured orders for 50 supercritical Steam Generators (SG) and 43 supercritical Steam Turbine Generators (STG) - the highest in the country by any power equipment manufacturer. Of these, 15 SGs and 13 STGs have already achieved capacity addition.

Moving on to the news from steel sector. In order to boost the steel sector, the steel ministry has sought waiver of the import duty on coking coal.

Ahead of the Union Budget 2018-19, the steel ministry in its recommendations to the finance ministry has suggested bringing down the import duty on coking coal to 0% from 2.5%.

Further, the ministry also suggested bringing down the import duty on steel scrap to nil. India has to heavily depend on import of coking coal, as the domestic quality has higher ash content, which is unsuitable for the steel industry with present technology.

To bring down the imports of coking coal, the steel ministry had earlier said that it was in discussion with the coal ministry for investment in washeries.

According to the Coal Minister Piyush Goyal, during April-September of the ongoing fiscal, 22.6 million tonne (MT) (provisional) of coking coal was imported. He added that while 41.6 MT coking coal was imported in 2015-16, the import was 43.5 MT.

Meanwhile, India's annual steel production crossed 100 million tonne (MT) mark last year. The country's total steel production in the year 2016 was around 95 MT.

Between 1 January 2017 and 31 December 2017, the country crossed 100 MT-mark and produced 101 MT steel.

And here's a note from Profit Hunter:

Today, the Nifty 50 Index is up 72 points. TCS (+5.31%) is the major contributor to this rally and the top gainer in the index.

The last time we reviewed the stock, TCS had broken out of the falling trendline (red line). It was trading very close to its life high, which worked as a good resistance point. As a result, the stock dropped nearly 10% to touch a low of 2,494.

But as mentioned in earlier note, this could only be a hiccup in its uptrend movement. So it resumed the uptrend and hit a new life-time a few days back. The volumes during this uptrend was also strong indicating buying interest.

But the recent rally has been quite steep. The stock rallied nearly 25% in just one month.

So will the stock continue its steep rally or will it correct for some time before resuming it up move. Let's wait and watch...

TCS at a New Life-time High

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