Sensex Ends Volatile Day Flat; Pharma Stocks Top Losers

Thu, 19 Jul Closing

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After opening the day in green, share markets in India witnessed volatile trading activity throughout the day and ended the day flat. Sectoral indices ended the day mixed, with stocks in the and stocks in the leading the losses.

At the closing bell, the BSE Sensex stood lower by 22 points and the NSE Nifty closed down by 23 points. The BSE Mid Cap index ended the day down 0.6%, while the BSE Small Cap index ended the day down by 1%.

Asian stock markets finished in red. As of the most recent closing prices, the Hang Seng was down by 0.3% and the Shanghai Composite was down by 0.5%. The Nikkei 225 was down by 0.1%. Meanwhile, European markets were trading on a mixed note. The FTSE 100 was up by 0.1%, The DAX, was down by 0.5% while the CAC 40 was down by 0.5%.

The rupee was trading at Rs 68.98 against the US$ in the afternoon session. Oil prices were trading at US$ 72.15 at the time of writing.

In news from about the economy. The Indian rupee weakened past the 69-mark against the US dollar, tracking losses in its Asian peers after Chinese yuan fell to a one year low.

So far this year, the rupee has weakened 7.4%, while foreign investors have sold US$964.3 million and US$6.3 billion in equity and debt markets, respectively.

The rupee fell amid rising crude oil prices and a strengthening US dollar.

Following the Fed Chairman's testimony, the US dollar rose to the highest level in a year. In his testimony, Jerome Powell, the Fed Chair said he believed the US economy was on course for years more of steady growth, and played down the risks to the US economy of the escalating trade conflict.

Change in the Rupee and Sensex in the Past 10 Years

While, BSE mid and Small cap indices have seen a healthy correction, large caps have remained almost intact during the same period.

The recent weakness in the rupee versus the US dollar indicates further trouble for the market ahead. As seen from the below chart, when the Sensex corrected to its multi-year lows in March 2009, the rupee had also weakened by 21% in the past 9 months. Similarly, when Sensex hit an all-time high in January 2018, the rupee had been gradually strengthening over the past year.

Post January, the rupee has been on a constant decline versus the dollar.

Increase in US bond yields has made it attractive for foreign investors. This has resulted in capital outflows from the Indian market. Past history has shown that any further weakening of the rupee will adversely impact the market.

But for investors, is it a matter of concern? If you have a horizon of 10 or more years, it shouldn't. As we can see from the chart, despite the rupee weakening by over 60% in the past decade, Sensex has also been up in the same period.

Moving on to news from the IPO space. The initial public offering (IPO) of Women's apparel maker TCNS Clothing Company which opened for offer yesterday, was subscribed by 2 times on day 2 of the bidding process. The firm sells its products under W, Aurelia and Wishful brands.

As on 30 September 2017, TCNS sold its products through 418 exclusive brand outlets, 1,305 large format store outlets and 1,361 multi-brand outlets in different parts of the country. It also sold products through six exclusive brand outlets in Nepal, Mauritius and Sri Lanka.

To know our view on the IPO of TCNS Clothing, you can read our entire IPO analysis here (subscription required).

Further, HDFC Asset Management Company, the country's second largest mutual fund firm, has fixed a price band of Rs 1,095-1,100 per share for its initial public offering. The IPO is estimated to garner Rs 28 billion.

The initial share sale offer will be open for public subscription from July 25 to 27.

HDFC AMC operates as a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments.

Reportedly, the proposed IPO will put up to 25.4 million equity shares of the fund house on sale, of which 8.6 million shares will be put up by HDFC and up to 16.8 million shares by Standard Life.

HDFC AMC is selling a 4.1% stake in the IPO, while Standard Life will offload 8%.

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

Reportedly, the introduction of the new Indian accounting standards (IndAS) as one of the reasons why IPO-bound companies have not approached the market so far, this quarter.

All companies, including unlisted ones, having net worth of between Rs 2.5 billion and Rs 5 billion have to prepare their financial accounts for the year ended 31 March 2018 as per the IndAS accounting standards. Companies with net worth of Rs 5 billion or more had to implement the new standard a year earlier.

As per the reports, the pipeline in the June quarter will be very healthy. The market/IPO outlook. Companies that may launch their IPOs in the quarter include seafood exporters Devi Seafoods Ltd and Nekkanti Sea Foods Ltd. Both said they would decide on the timing of the launch after they get regulatory approval for their respective share sales.

With so many new IPOs hitting the market, it would be difficult to not get carried away.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

To know more, download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the IPO rush.

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

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