Sensex Ends 114 Points Higher; Healthcare and IT Stocks Witness Buying

Tue, 3 Jul Closing

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Indian share markets continued their momentum during closing hours and ended the day on a positive note. Gains were largely seen in the healthcare sector and IT sector.

At the closing bell, the BSE Sensex stood higher by 114 points (up 0.3%) and the NSE Nifty closed higher by 43 points (up 0.4%). The BSE Mid Cap index ended the day up by 0.7%, while the BSE Small Cap index ended the day up by 0.4%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng was down 1.43% and the Nikkei was trading down by 0.12%. The Shanghai Composite stood higher by 0.39%.

The rupee was trading at 68.66 to the US$ at the time of writing.

From the IT sector, Infosys share price was in focus today. Share of the company scaled their fresh all-time high of Rs 1,358 in today's trade. Gains were seen on the back of a weakness in rupee.

Note that the rupee has been witnessing selling pressure against the US dollar since the start of this calendar year.

What does the fall in rupee mean for the Indian economy?

A depreciation in rupee means importers buying goods and services at a higher rate that earlier. This doesn't bode well for a developing economy that relies heavily on imports.

Also, India imports most of its oil requirements. So, a fall in rupee leads to a consequent rise in the import bill. The depreciation of the rupee will also add to crude oil's rising cost.

On the corporate side, companies who have taken foreign loans from abroad will be impacted. The repayment obligations in terms of principal and interest will rise, leading to a dent in the cash flows and financials.

Further, companies who import a majority of their raw material requirements will get impacted provided they have not hedged their foreign currency exposure.

Looking at the brighter side, rupee depreciation brings a cheer on the exports front.

A depreciating rupee will provide a much-needed cushion to falling exports. However, a falling rupee will not be the only factor to boost exports. There are certain structural issues too which the government needs to address.

Ankit Shah has explained how the depreciation in rupee is linked to foreign investor outflows and forex reserves in one of his editions of Equitymaster Insider. You can read the entire article here (requires subscription).

Banking stocks were witnessing selling pressure today. Among the top losers in the BSE Bankex were Punjab National Bank share price, Bank of Baroda share price, and ICICI Bank share price.

These losses were seen a day after Finance Minister Piyush Goyal said that government had accepted the proposal by committee of bankers of setting up an asset management company (AMC) for the resolution of loans above Rs 5 bn.

In other news, as per a leading financial daily, stock exchange BSE is set to delist as many as 222 companies from tomorrow as trading in their shares has remained suspended for over six months.

The development comes at a time when authorities are clamping down on shell companies for being allegedly used as channels for illicit fund flows.

In the news from the IPO space, Flemingo Travel Retail has received SEBI's approval to raise Rs 26 bn through an initial share sale. The company is a global travel retailer with a leading position in Indian and Sri Lanka travel retail markets, where it operates core duty-free stores and the aggregate retail area of core duty-free stores.

With the above development, the total number of companies getting clearance to float IPO this year stands at 29 so far.

The stock market is gearing up for a burst of IPO activity, with at least 12 companies planning to raise more than Rs 170 bn over the next two months, after a quiet start to the June quarter.

Also, according to EY India IPO Readiness Survey Report, globally, Indian exchanges recorded the highest IPO activity as the country saw 90 IPO launches that raised US$ 3.9 billion in the first half of this year.

Meanwhile, the amount raised by SME IPOs in 2017 stood at Rs 17.9 bn. This is more than three times the amount raised in 2016. The number of SME IPOs launched also doubled from 66 to 132. This is evident from the chart below:

SME IPO Boom in 2017

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