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Sensex Trades Marginally Lower; HCL Technologies & Reliance Industries Top Losers
Fri, 22 Mar 12:30 pm | Monish Vora, TM Team

Share markets in India are presently trading on a negative note. Sectoral indices are trading mixed with stocks in the energy sector, IT sector and telecom sector witnessing maximum selling pressure while realty stocks and power stocks are witnessing buying interest.

The BSE Sensex is trading down by 128 points (down 0.3%), while the NSE Nifty is trading down by 35 points (down 0.3%). The BSE Mid Cap index is trading down by 0.2% and the BSE Small Cap index is trading down by 0.1%.

The rupee is trading at Rs 68.66 against the US$.

Shares of aviation companies are trading higher today amid reports on market share gain in the month of February. SpiceJet share price surged 14% in early trade today while Interglobe Aviation share price (Indigo) surged 2%.

Indigo's domestic market share in the month of February increased to 43.4%, from 42.5% in January while budget carrier SpiceJet's market share rose to 13.7% from 13.3% in the previous month.

Jet Airways share price also gained around 3% despite its market share declining to 10%from 11.9%.

Domestic air passenger traffic rose 5.6% in February, with the country's airlines carrying 11.4 million passengers in February.

Passenger load factor for SpiceJet rose to 94% in February from 90.9% in January, while Interglobe Aviation owned Indigo's load factor rose 88.4% against 86.4% in January. Load factor for cash-strapped Jet Airways Ltd rose to 89.4% from 86.1%.

Reports state that the passenger load factor in the month of February 2019 has shown increasing trend primarily due to airlines offering promotional fares resulting in increased demand.

In other news, Indigo is hiring more than 100 Boeing 737 commander level pilots, primarily those exiting Jet Airways, as the country's biggest airline looks to overcome a flying-crew shortage.

As per an article, it would take six months to train the Boeing pilots so that they could fly A320s, an aircraft type Indigo operates. In addition, the carrier has already hired about 130 expatriate pilots from all over the world.

Jet Airways has grounded more than 60% of its planes. It has delayed pilot salaries, and defaulted on loan payments, lease rentals and vendor payments. Its strategic partner Etihad Airways has refused to be part of a revival plan and aims to exit by selling its 24% stake in the carrier and 50.1% in the loyalty programme.

Etihad has formally asked State Bank of India (SBI) to purchase its stake in the airline. The Abu Dhabi-based company conveyed to SBI its decision to exit Jet in a meeting on Monday.

Reports also state that Etihad wants SBI to buy out its stake and take over its liabilities in the form of a guarantee for Jet's loan from HSBC Dubai.

The National Aviator's Guild - the body representing Jet's domestic pilots on Tuesday threatened to stop flying from April 1 if the resolution plan is delayed and salary dues are not cleared by the end of March. The body represents around 1,000 pilots of the airline.

According to an Economic Times report, the government is looking to explore all options for the debt-laden airline before initiating insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).

The National Investment and Infrastructure Fund (NIIF) has agreed to pump in up to Rs 19 billion.

Here's an excerpt from the article:

  • Let banks explore all possible options. Under the inter-creditor agreement (ICA) they have more room for seeking resolutions as compared with the restricted format under IBC.

    Besides (air) routes and slots, there are not many tangible assets that may lead to a substantial price discovery if a resolution is sought under the bankruptcy code.

The Insolvency and Bankruptcy Code (IBC) has been a success story and the government has maintained arm's length distance from the process being forward.

How this deal pans out going forward remains to be seen.

Moving on, in the latest developments from the IPO space, Embassy Office Parks REIT's IPO, which plans to raise around 47.5 billion in India's first such listing, was oversubscribed on its last day.

Reportedly, the issue was subscribed 2.57 times. The quota for institutional investors was subscribed 2.15 times and non-institutional 3.10 times.

In another news, state-owned MSTC's initial share sale, which was extended till March 20, was subscribed 1.46 times on Wednesday, the final day of bidding.

The IPO received bids for 2,58,29,100 shares against the total issue size of 1,76,70,400 shares.

The government has proposed to offload 25%, of total paid-up equity in the largest B2B e-commerce company in India. The issue by the Kolkata-headquartered firm will close today.

To know more about the company, you can read our IPO analysis of MSTC (requires subscription).

Speaking of PSU companies, it's election time and PSU stocks are back in vogue.

The last election saw a short-term outperformance of the PSU Index compared to the Sensex.

Will history repeat itself? Have a look at the chart below to see how PSUs have performed the overall markets in the long run:

PSU Stocks - Perpetual Value Traps?

Here's what Tanushree Banerjee, Co-head of research at Equitymaster, wrote about it in one of the recent edition of The 5 Minute WrapUp...

  • What we have seen from history, is that PSUs have underperformed the overall markets in the long run.

    Non-performing assets (NPA) in the banking space and rising crude oil prices impacting oil marketing companies have all taken a toll in recent years.

    On top of that, when the government is in desperate need of money, they turn to PSUs. This usually leaves minority shareholders shortchanged.

    Not all companies in the sector can be ignored. But most of them turn out to be value traps.

She believes, a better alternative is to look at quality companies which are not restricted by regulatory hurdles.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

Read the latest Market Commentary


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