Sensex Opens Flat; TCS Slumps 4.9% on Block Deal

Tue, 13 Mar 09:30 am

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Asian stocks are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.30% while the Hang Seng is down 0.28%. The Nikkei 225 is trading down by 0.16%. Meanwhile, The Dow Jones industrial average fell on Monday as market participants worried a trade war could develop after President Donald Trump implemented tariffs on steel and aluminium imports.

Back home, India share markets opened the day on a flat note. The BSE Sensex is trading higher by 28 points while the NSE Nifty is trading lower by 9 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.2% & 0.1% respectively.

Sectoral indices have opened the day on a mixed note with capital goods stocks and consumer durables stocks witnessing maximum buying interest. While, information technology stocks and metal stocks are trading in red. The rupee is trading at 65.02 to the US$.

Tata Stocks opened the day on a mixed note with Titan & Tata Communications leading the gainers. In the biggest block trade this year, Tata Sons will sell a 1.5 % stake in TCS, worth nearly US$1.3 billion (Rs 85 billion), through the stock exchanges between 13 March and 15 March.

Reportedly, Tata Group's telecom business has a debt of over Rs 400 billion even as the sale of the consumer wireless unit to Bharti Airtel awaits regulatory approvals.

Tata Sons announced the sale of the consumer mobile services business to Airtel in October 2017 and had agreed to take care of the unit's debt obligations. Last week, Tata Sons said that it will buy a 7% stake in group company Indian Hotels for over Rs 10 billion on or after 13 March, which will increase its stake from 30% to 37% in the hospitality chain.

Tata Sons' move to sell over 28 million shares of TCS comes almost 10 months after it received Rs 117.2 billion by participating in the software major's share buyback programme.

After the block deal, Tata Sons will hold about 73% in TCS, which generated US$18 billion in revenues in fiscal 2017.

Our team of Equitymaster analysts have been working on a project to track the smartest minds in value investing. They have compiled a special report on them, called The Superinvestors of India.

Now, because of insights from these interactions, the team has glued their eyes on insider activity and bulk and block deals...

As per them...

• "The three approaches - tracking superinvestor shareholdings, catching these moves early through bulk and block deal disclosures, and keeping tabs on changes in promoter holdings - have unveiled some critical smart money secrets..."

TCS share price opened the day down by 4.9%.

Moving on to the news from the economy. In the latest development, India's retail inflation fell to a 4-month low of 4.44% in February on cheaper food articles and lower cost for fuel.

Based on Consumer Price Index (CPI), retail inflation was at 5.07% in January. In February 2017, however, it was 3.65%. It was 4.88% in November last year.

Data released by the Central Statistics Office (CSO) showed that the rate of price rise in the consumer food segment was lower at 3.26% in February, as against 4.7% in the previous month.

Inflation in vegetables was 17.57% last month, down from 26.97% in January, and for fruits it was 4.8% (as against 6.24%).

Milk and its products too were less expensive with inflation print of 4.21%, cereals and products at 2.1%, meat & fish at 3.31% while for eggs the prices grew at a slower pace of 8.51%.

Retail inflation, measured by Consumer Price Index (CPI) is the main price gauge that the Reserve Bank of India (RBI) tracks. February's data is an indication that prices are at a safe distance from the apex bank's upper tolerance level of inflation at 6%.

Last month, the RBI's Monetary Policy Committee (MPC) estimated inflation at 5.1% in the quarter ended March, including the impact of house rent allowance. It also estimated the retail inflation for 2018-19 in the range of 5.1-5.6% during April-September and 4.5-4.6% in the second half of the year.

The RBI's monetary policy statement is one of the most tracked events in the financial world. With both core and retail inflation easing to new lows, a rate cut in key interest rates was widely expected.

The chart below shows how India's inflation and policy rates stand in comparison with other Asian economies.

India's Policy Rates Compared to Asian Economies

Rate cut or not, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies. The ValuePro team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles.

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

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