Sensex Opens Firm; Maruti Suzuki Gains 2%

Mon, 29 Jan 09:30 am

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Asian stock markets are mixed in morning trade as shares in China and Hong Kong fall. The Hang Seng is down 0.3% and the Shanghai Composite is trading down by 0.6%. The Nikkei 225 is up 0.50%. Stock markets in US and Europe closed the previous session on a positive note.

Meanwhile, Indian share markets have opened the day on a positive note. BSE Sensex is trading higher by 159 points and NSE Nifty is trading higher by 14 points. S&P BSE Mid Cap is trading up by 0.5% and S&P BSE Small Cap is trading up by 0.6%.

Gains are largely seen in metal stocks and auto stocks. The rupee is trading at Rs 63.50 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, Maruti Suzuki reported net profit of Rs 17.99 billion for the third quarter ending December 2017, which was up 3% compared with Rs 17.47 billion in the same period last year.

The numbers are much lower than the street's expectations. Total revenue from operations rose slightly to Rs 192.83 billion during the period against Rs 191.96 billion in October-December 2016.

During the quarter, the company sold a total of 4,31,112 vehicles, posting a growth of 11.3% over the same period of the previous year when it sold 3,87,251 units.

In another development, the company expects to reduce the waiting period on its popular models as its parent Suzuki Motor will supply 2.5 lakh units from its Gujarat plant next financial year. The increased supply from Gujarat has helped in reducing waiting period of popular models such as the Baleno and the compact SUV Vitara Brezza.

Maruti Suzuki share price opened the trading day up by 2% on the BSE.

Moving on to news from steel sector. As per an article in The Livemint, JSW Steel Ltd is expected to double its bid value for debt-laden Bhushan Steel Ltd in a bid to give tough competition to competitors.

Reportedly, JSW steel is expected to double the bid amount between Rs 250 billion to Rs 300 billion as the liquidation value has been set at Rs 150 billion.

ArcelorMittal and Tata Steel Ltd are also in the race for Bhushan Steel, which is undergoing insolvency proceedings.

JSW Steel has roped in its Japanese business partner JFE Steel Corp. and Piramal Enterprises Ltd, which is the flagship firm of Piramal Group, for the purpose.

Bhushan Steel is the third largest secondary steel producer in the country with an existing steel production capacity of 5.6 million tonne per annum.

JSW Steel share price opened the trading day up by 1.1%.

In another development, as per Livemint, Indian Hotels Co. Ltd (IHCL), the operator of the Taj chain of hotels, is looking to enter the branded homes business.

Reportedly, the company is in talks with Kathmandu-based Chaudhary Group (CG) to set up a residential project under the Taj brand in Colombo, where both the firms jointly own over 10 acres of land.

The company is about to follow global companies like Four Seasons, Ritz Carlton and Grand Hyatt that lend their brands and provide hospitality services to luxury homes across the world.

Reportedly, getting into the branded residence space would be a strategic move for Taj to expand its brand and reach, apart from improving its cash flow. Besides, developing branded residential projects over land parcels it owns could also help unlock the value of the land assets.

The Indian Hotels Co share price opened the day down by 0.4% on the BSE.

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