Sensex Opens Marginally Lower; Telecom and Energy Stocks Witness Selling

Thu, 14 Feb 09:30 am

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Asian shares are trading on a mixed note today. The Nikkei 225 is up 0.1% while the Hang Seng is down 0.6%. The Shanghai Composite is trading down by 0.3%.

Back home, India share markets opened the day marginally lower. The BSE Sensex is trading down by 50 points (down 0.1%), while the NSE Nifty is trading down by 15 points (down 0.1%). The BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index has opened the day down by 0.2%.

Sectoral indices have opened the day on a mixed note with telecom stocks and energy stocks witnessing maximum selling pressure.

The rupee is trading at 70.95 to the US dollar.

Market participants will be tracking Ashok Leyland share price, ONGC share price, Jet Airways share price, Voltas share price, and GSK Pharma share price today as these are among companies which are scheduled to report their quarterly earnings today.

You can also read our recently released Q3FY19 results of other companies here: Reliance Industries, Infosys, TCS, Trident, HDFC bank, Maruti Suzuki, Tata Motors, Tata Steel, Aurobindo Pharma, MRF, Gillette.

In the news from the commodity space, crude oil continued its momentum seen yesterday and went on to trade higher.

Note that crude oil prices inched up 1.5% yesterday as the Organization of the Petroleum Exporting Countries (OPEC) said it had deeply cut supply in January.

Gains were also seen as US sanctions hit Venezuela's oil exports.

Saudi Arabia, the world's top exporter and de facto leader of OPEC, said on Tuesday that it would reduce oil production to nearly 9.8 million barrels per day (bpd) in March, about half a million bpd more than it originally pledged.

Also at the radar are hopes expressed by US and Chinese officials that a new round of talks, which began in Beijing on Monday, would bring them closer to easing their months-long trade war.

It will be interesting to see how this pans out. Meanwhile, we will keep you updated on the latest news from this space.

Moving on, as per a leading financial daily, Dewan Housing Finance Corporation Ltd (DHFL) share price will be in focus today as the company said its Chief Executive Harshil Mehta has resigned.

However, the company said in its regulatory filing that Harshil Mehta would continue to be associated with the company and shall hold the designation of Executive President - Retail Business with effect from February 14, 2019.

Besides, the board has recommended appointment of Sunjoy Joshi as an Independent Director and Srinath Sridharan as a Non-Executive Director.

Note that the stock of the company has been witnessing sharp selling pressure lately after Cobrapost said that DHFL diverted funds to shell companies to buy assets, and that firms linked to DHFL's controlling shareholders - the Wadhawan group made political donations beyond mandated levels.

DHFL is also facing questions about its financial health after the IL&FS default pushed up the cost of funds for the mortgage lender and made borrowing difficult.

Rating company Care ratings today downgraded ratings on the company's debt worth over Rs 1.2 lakh crore issued by DHFL.

As per an article in The Economic Times, the company revised the rating grade of AAA to AA+ for nonconvertible debentures and long-term bank loans. Commercial papers, short-term debt securities rated as A1+ have been put under credit watch.

The company has decided to divest its stake in Aadhar Housing Finance to Blackstone.

Private equity major Blackstone agreed to buy nearly 80% of affordable homes-focused Aadhar Housing Finance from the financially stretched Wadhawan group.

The group's holding company Wadhawan Global Capital (WGC) will be selling its 70% stake in the company, while DHFL will also be exiting its investment, which is reported to be around 9%.

Besides, with DHFL group companies' debt mess coming under lens, global brokerage Credit Suisse warned that it could trigger a second wave of risk aversion in India's debt mutual fund industry.

A report from the global brokerage stated that DHFL is among the largest borrowers from mutual funds and the aggregate exposure of debt mutual funds to the home financier's securities is Rs 85 billion.

This amounts to about 0.7% of debt mutual funds' assets under management (AUM) as of December 2018.

Furthermore, the exposure for some fund houses is larger, at 2-10% of total debt AUM, with some schemes having up to 30% of their AUM invested in Dewan securities.

How this all pans out and what effect it might have on the debt mutual funds remains to be seen. Stay tuned to get all the updates from this space.

Data available with NSE showed foreign portfolio investors (FPIs) sold Rs 6.7 billion worth of domestic stocks yesterday.

On the other hand, domestic institutional investors (DIIs) were net buyers to the tune of Rs 7.1 billion.

Speaking of FII data, 2018 was a turbulent year for the Indian stock markets. Foreign investors dumped Indian equities worth Rs 33,014 crore and debt instruments worth Rs 47,795 crore. In fact, they have continued to be net sellers in Indian stocks even in 2019. So far in January 2019, they have sold equities worth Rs 2,675 crore.

Had it not been for the solid participation from domestic investors, the Indian markets would have witnessed a much steeper fall.

The chart below puts things in perspective.

The Rapid Growth of the Indian Mutual Fund Industry

Ankit Shah shares an interesting observation in the rapid growth of MF Industry.

Here's what he wrote in one of the editions of The 5 Minute WrapUp...

• Ten years ago, the total assets under management (AUM of the Indian mutual fund industry were Rs 4.13 trillion (1 trillion equals 1 lakh crore) as on 31 December 2008.
  
  Over the subsequent five years, the industry grew at a compound annual growth rate (CAGR) of 15% to take the total AUM to Rs 8.2 trillion as on 31 December 2013.
  
  Thereafter, the Indian mutual fund industry took off like never before, compounding at 23% CAGR, and taking the total AUM as on 31 December 2018 to Rs 22.86 trillion.
  
  In just 10 years, the AUM of the Indian MF Industry has multiplied 5.5 times, compounding at 19% CAGR.
  
  The total number of mutual fund folios as on 31 December 2018 stood at 8.03 crore (80.3 million).

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