Indian Indices Open Strong; Telecom & Energy Stocks Lead

Mon, 11 Mar 09:30 am

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Asian share markets fell in the early trade today after US employment data raised doubts about the strength of the global economy. Wall Street's main indexes posted their biggest weekly decline last week on Friday, on the shocking payrolls data. The US economy created only 20,000 jobs in February, the weakest reading since September 2017.

Back home, India share markets have opened the day higher. The BSE Sensex is trading up by 241 points while the NSE Nifty is trading up by 69 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.9%

All sectoral indices have opened on a positive note with stocks in the energy sector, telecom sector and consumer durables sector witnessing maximum buying interest.

Speaking of Indian share markets in general, how do things look on the valuations front?

The Sensex price to earnings ratio has moved over the last five years. It has mostly been in a rising trend, except some intermittent declines.

But the Sensex tells a very a selective, skewed story of just the 30 largest companies.

So, it would be worth seeing the valuation trend of a much broader index.

Ankit Shah just did that and picked the NSE 500 for his latest study.

What he found was the NSE 500 index was trading cheap before the BJP came to power at the Centre in 2014. Since then, the price to earnings ratio of the index has been trending higher, like the Sensex.

It is interesting to note that the NSE 500 index has almost doubled between February 2014 and now. The price to earnings multiple of the index has gone up almost 70% during the same period, as can be seen from the chart below.

Market Valuations - 2014 to 2019

What does all of this mean?

Here's what Ankit wrote about it in today's edition of The 5 Minute WrapUp...

• What this means is that the gains have mostly come from valuation multiple expansion and only about 30% from earnings growth.
  
  While the NSE 500 P/E ratio is down 12% from its August 2018 high of 34.5, it's still quite on the higher side.
  
  As such, I believe the key to the next bull run would be a good growth in earnings of listed Indian companies.

Whether this growth comes in, and how, remains to be seen. We will keep you updated on developments from this space.

The rupee is currently trading at Rs 69.96 against the US$.

The domestic currency hit a fresh two-month high against US dollar, tracking gains of its Asian peers and ahead of key consumer price inflation (CPI) data.

In the news from the banking space, IDBI bank share price is in focus today as the lender, with India's worst-bad loan ratio, is seeking to curtail its soured debt by selling Rs 100 billion of stressed assets and stepping up efforts to recover dues from borrowers.

Indian lenders burdened with the world's worst bad-loan ratio are stepping up effort to recover debt after the Reserve Bank of India announced tougher rules.

The Mumbai-based lender's turn-around efforts gathered pace after LIC bought a controlling stake in the bank from Prime Minister Narendra Modi's government.

The insurer has infused more than Rs 210 billion into the bank to bolster its risk buffers and bring it out of the regulator's emergency program that restricts lending.

According to reports, IDBI Bank will be out of the RBI's prompt corrective action framework by September as bad-loan ratio narrows and profits rise.

IDBI bank share price has opened the day up by 4%.

Moving on to the news from the pharma sector, Suven LifeScience share price is witnessing buying interest today as the company has received approval to form Wholly Owned Subsidiary Company - Suven Pharma, Inc. a Delaware Company in US under CRAMS Division.

The board also approved investment of $75 million in the said subsidiary for new business opportunities and acquisitions.

To know more about the company' you can read Suven LifeScience Q3FY19 result analysis on our website.

In another news, Cipla share price is also in focus today as the company's wholly owned subsidiary - Golden cross Pharma has completed the closing of Wellthy Therapeutics, transaction representing an acquisition of 11.7% stake in Wellthy on fully diluted basis.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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