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Sensex Finishes Marginally Lower; Capital Goods & Realty Stocks Fall
Tue, 20 Feb Closing | Karan Janani, TM Team

Indian share markets witnessed selling pressure in the final hour of trade to finish just below the dotted line. At the closing bell, the BSE Sensex closed lower by 71 points and the NSE Nifty finished lower by 18 points. The S&P BSE Mid Cap finished down by 0.1% while S&P BSE Small Cap finished down by 0.2%.

Losses were largely seen in realty stocks, capital goods' stocks and bank stocks.

Asian stock markets finished in red as of the most recent closing prices. The Nikkei 225 & the Hang Seng fell 1.01% and 0.78% respectively. European markets are mixed to lower. Shares in London are off as the FTSE 100 drops 0.35%. The DAX is down 0.07% while the CAC 40 in France is unchanged.

Rupee was trading at Rs 64.52 against the US$ in the afternoon session. Oil prices were trading at US$ 61.83 at the time of writing.

The Market cap to GDP ratio for Indian companies too 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.

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 Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

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 banking sector, as per an article in The Livemint, credit rating agency Moody's placed Punjab National bank (PNB) under review for downgrade following the biggest scam in the country's banking sector to the tune of Rs 113.4 billion.

The agency has a Baa3/P-3 rating on the bank now while it has a Baa3 rating on its foreign currency issuer rating. It has also placed the bank's baseline credit assessment (BCA) and adjusted BCA of Ba3 and the counterparty risk assessment (CRA) rating of Baa3(cr)/P-3(cr) under review for downgrade.

The bank stated that the primary driver for rating action is the risk of weakening standalone credit profile of PNB, as a result of a number of fraudulent transactions through fake letters of undertakings to other lenders worth US$1.8 billion over the past many years.

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In another development, IndusInd Bank stated that it has no direct or indirect exposures to firms floated by scam-hit Nirav Modi.

The bank, one of the most active lenders in the gems and jewellery sector, however has a "small" exposure to Gitanjali Gems, promoted by Modi's uncle Mehul Choksi.

The IndusInd statement said the fraud has taken place due to non-adherence of procedures and norms laid down.

IndusInd bank share price finished the day on a flat note.

Moving on to news power stocks. As per an article in The Economic Times, NTPC Ltd will call bids in a month to acquire hydropower plants of upto 1000-mw capacity.

The company in November called bids from developers and lenders to acquire coal-based power plants.

Jaiprakash Power Ventures Ltd has reportedly offered its Nigrie power project to NTPC for acquisition while State Bank of India has proposed stake sale in three stressed plants of Bajaj Lalitpur, Jaypee Infratech and Jindal India Thermal to NTPC.

This is part of the NTPC plan for inorganic growth as the corporation is eyeing the plants that are close to coal sources and running with an eye on cost of generation from these plants.

NTPC is currently working on new thermal projects totalling 21,000 mw for capacity addition in the next the 3-4 years. Going by the projection of 7-8% economic growth on an annualised basis, the company expects the demand for electricity is expected to grow up significantly.

NTPC share price finished the day up by 0.5% on the BSE.

In news from the economy, with an aim to provide fillip to exports and make global trade the foundation of Indian economy, the commerce minister Suresh Prabhu has said that the government will soon come out with a comprehensive strategy to increase the share of exports to 40% of the gross domestic product (GDP) and is expected to touch US$5 trillion by 2025.

According to the Federation of Indian Export Organisation (FIEO), the current share of exports in GDP is only 18-19%. Elaborating further, Prabhu said that out of the US$5 trillion, as much as US$3 trillion will come from the services sector, while US$1 trillion each will come from the manufacturing and agriculture sectors.

He added that the more than doubling of shipments will demand that the economy massively increase the share of manufacturing in the overall GDP basket, which is around 14%. He also urged the business community to come up with a proper business plan to increase exports.

At present, the size of India's GDP is US$2.6 trillion, which is the fifth largest in the world after the US, China, Japan, Germany and Britain, while its share in global trade is paltry and is under 2% only.

And here's a note from Profit Hunter:

Coal India is among the top gainers in the Nifty 50 Index - up 2%. Let's have a look at its chart.

Last time we reviewed the stock, it had formed a double bottom pattern near the neckline of the head and shoulder pattern. It broke out of the double bottom pattern and the falling trendline (blue line) and rallied nearly 15% to achieve a high of 311 in January 2018.

It then consolidated for more than a month, where it again formed a double bottom pattern. Today, the stock rallied 2% to break above the neckline (red line) of the pattern with healthy volumes.

So can we see the stock resume its up move after the break-out? Let's track the stock closely.

Coal India Rallied 2% for the Day
Coal India Rallied 2% for the Day 

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Mar 20, 2018 01:25 PM