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Negative Finish to the Week; FMCG & Realty Stocks Fall
Fri, 28 Apr Closing

Indian share markets retreated in today's trade from record highs hit earlier this week as investors booked profits ahead of a long weekend. The sentiments also remained weak on negative global cues.

At the closing bell, the BSE Sensex stood lower by 111 points, while the NSE Nifty finished down 38 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished up by 0.2% and 0.6% respectively. Losses were largely seen in FMCG stocks, realty stocks and IT stocks.

Ten Year Sensex PE

The BSE Sensex and NSE Nifty are at all-time highs. The BSE Sensex closed comfortably above the magic figure of 30,000 for the first time. The midcap and small-cap indices are trading at quite high valuations.

Here's what Tanushree wrote about valuations and returns:

  • The current valuation of the index - more than 22x - is rare. Over the past two decades, the NSE Nifty has traded above 22x only nine times. And when it does, buying even the biggest blue chips has come with a huge downside for long-term investors. On five out of the nine occasions, the index lost money over a two-year period. So the historical data suggests there is currently a 60% chance of losing money in bluechip stocks.

But it's better to forget the indices and use a bottom-up (a stock-specific) approach.

This is the StockSelect team's approach. They focus on the underlying business. Its earning power, the business model, growth opportunities, and valuations.

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Prism cement share price surged 5% to Rs 129.1 before closingup by 3.4% after the company said it has received Letter of Intent from Madhya Pradesh Government for allotment of cement grade limestone Mining Lease for 50 years in Villages Chulhi and Majhiyar, District Satna, Madhya Pradesh, with about 23.6 million tons of reserves, subject to completion of formalities.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.08%, while the Hang Seng & the Nikkei 225 fell 0.34% and 0.29% respectively. European markets are mixed today. The CAC 40 is up 0.19% while the DAX gains 0.08%. The FTSE 100 is off 0.27%.

The rupee was trading at Rs 64.21 against the US$ in the afternoon session. Oil prices were trading at US$ 49.27 at the time of writing.

The International Monetary Fund (IMF) in its report has said that the adoption of the landmark goods and services tax (GST) from July 1 will help to raise India's medium-term gross domestic product (GDP) growth to over 8% as it will create a single national market for enhancing the efficiency of the movement of goods and services across Indian states.

Talking on the reforms undertaken by the government, Tao Zhang, Deputy Managing Director of the IMF has stated that the government has made significant progress on important economic reforms that will support strong and sustainable growth in future.

Observing that India is the 'fastest growing emerging market economy' in a region that remains the strongest-growing in the world, Zhang has said that the country is going to continue to grow at a fast pace, with a projected 6.8% rate for FY17 and 7.2% in FY18. He further said that the currency exchange initiative led to a slowdown in economic activity. However, he clarified that there are initial signs of recovery as the currency exchange has been progressing well.

Highlighting some key factors, the deputy managing director has said that lower global oil prices have enhanced economic activity and helped lower inflation. In addition, he said that fiscal and monetary policies have also helped foster economic stability. He noted that labor market reforms should take priority as India persists with its strong reform efforts. He also observed that these would facilitate greater and better quality jobs, raise female labor force participation and enhance the impact of recent product market reforms.

In news from automobile sector, Maruti Suzuki share price surged 2.4% in today's trade after it was reported that the company has earmarked Rs 45 billion capital expenditure (capex) for the current financial year, as compared to Rs 35 billion capex for the previous financial year that ended on March 31.

As per the reports, the company will spend the said amount on various activities including replacement of machinery, R&D and marketing initiatives. On R&D alone, the company is planning to invest in the range of Rs 7-10 billion. Some portion of the capex could also go towards the acquisition of land for expansion of sales and service network.

The company's net profit rose 16% to Rs 17.09 billion for fourth quarter ended March 2017 driven by higher sales and the company's bid to cut costs.

The company's net sales grew 20% to Rs 180.05 billion for the quarter compared with the year-ago period. For the full year, the revenue growth was 18.5% and net profit increased by about 37% to Rs 73.37 billion.

Meanwhile, TVS Motors share price finished down by 1.5% on the BSE after the company reported a fall of 6.81% in its net profit at Rs 1.26 billion for the quarter ended March 31, 2017 as compared to Rs 1.36 billion for the same quarter in the previous year.

However, total income of the company increased marginally by 1.57% at Rs 31.39 billion for quarter under review as compared to Rs 30.90 billion for the quarter ended March 31, 2016.

Also, as per reports, the company has chalked out a capex of about Rs 5 billion for the current fiscal. The capex will be spent across its three manufacturing locations i.e. Hosur, Mysore and Pantnagar (Himachal). Depending on the industry growth and new product launches, the company will appropriately boost the production capacity.

The company was hoping to record twice the automobile industry growth during the current fiscal. Further, the company is expecting the scooter segment to sustain the growth momentum and is of the view that scooters will outgrow motorcycles for few more years.

Moving on to news from oil & gas stocks. According to a leading financial daily, Oil and Natural Gas Corporation (ONGC) has made 23 oil and gas discoveries in the fiscal year ended March 31, 2017, a 35% jump over 17 finds made in 2015-16 fiscal, as a record number of wells drilled helped it uncover new reserves.

Of the 23 new discoveries, 12 are new prospects that may have a potential trap which may contain hydrocarbons, while 11 are new pools -- a geological term for subsurface hydrocarbon accumulation. As many as 13 new discoveries were made in on land and 10 in offshore wells.

ONGC is India's largest government-run corporation and produces about 70% of India's crude oil and natural gas. The corporation is the biggest public sector commercial organization in India.

ONGC share price finished up by 3.8% in today's trade.

And here's a note from Profit Hunter:

Yesterday, the Indian stock market ended the April futures and option series. Let us see how the markets performed during the expiry.

The Nifty 50 Index traded on a positive note during the expiry. It rallied 90 points during the first few sessions of the expiry. The index then corrected 190 points to hit a low of 9,075 in the third week. But during the last week of the expiry, it rallied strongly to hit a new life high of 9,367. Finally, the Nifty ended the April series with 1.84% gains.

Nifty rollover for the expiry stood at 65% and the put call ratio (PCR) stood at 1.07. The highest calls stood at 9,500 strike (resistance) and highest put stood at 9,000 strike (support). The rollover data for the expiry were a bit discouraging. Find the full rollover note here.

As you can see in the chart below, 9,000 level acted as a strong support for the previous two expiries and it is expected to act as a strong support going forward as well.

Nifty Index near Life High
Nifty Index near Life High 

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Mar 19, 2018 (Close)