Of Depreciating Rupee, BSE Buyback, and Top Cues in Focus Today

Fri, 20 Jul Pre-Open

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Share markets in India closed on a flat note yesterday.

At the closing bell yesterday, 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%.

Top Stocks in Focus Today

From the banking space, Kotak Mahindra Bank share price will be in focus today as the bank on Thursday reported a 12% YoY growth in standalone net profit at Rs 10.2 billion for the June quarter on the back of better asset quality.

Bajaj Finserv share price will also be in focus today as the company posted 41.3% YoY growth in its consolidated net profit at Rs 8.2 billion for the June quarter.

JK Tyre & Industries share price will be in focus today as the company yesterday reported a consolidated net profit of Rs 642.4 million for the first quarter ended 30 June, mainly driven by robust sales. The company had posted a net loss of Rs 1172.1 million in the year-ago quarter.

BSE Concludes its Buyback Programme

BSE share price will also be in focus today as the exchange in a public notice said that it has repurchased over 20 lakh shares for nearly Rs 1.6 billion under its buyback programme.

As per the data, the company bought back an aggregate of 20,19,170 equity shares, utilising a total of Rs 1,659.9 million, which represents 99.99% of the maximum buyback size.

The above shares were bought back at an average price of Rs 822.12.

The development comes as in January, the board of BSE had approved plan to buy back shares worth Rs 1.6 billion within one year of its listing.

Speaking of buybacks, the number of buyback offers in 2017-18 were at an all-time high. Never, in the last two decades, Indian markets saw fifty-nine companies announcing buyback plans.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute WrapUp:

• The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

At Equitymaster, we believe, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

It's a matter of time before you get to use the cash for buying stocks, you've always wanted to, at attractive bargains.

Rupee Weakens Past the 69-Mark Against the US Dollar

In the news from currency markets, 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 fall in rupee is seen amid rising crude oil prices and a strengthening US dollar.

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).

From the IPO Space...

The initial public offering (IPO) of Women's apparel maker TCNS Clothing Company which opened for offer on Wednesday, 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%.

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

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