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Nifty Ends Flat After Hitting 10,000 Mark; Where Should You Invest Now?
Tue, 25 Jul Closing

Share markets in India ended the day on a flat note after the Nifty 50 hit the crucial 10,000 mark for the first time ever. At the closing bell, the BSE Sensex closed lower by 18 points, while, the NSE Nifty finished lower by 2 points. Meanwhile, the S&P BSE Midcap Index and the S&P BSE Small Cap Index ended up by 0.6% & 0.1% respectively.

Sectoral indices finished the day on a mixed note with stocks from the metal sector and the realty sector witnessing maximum buying interest. Capital goods stocks and automobile stocks led the losses.

The NSE index Nifty retreated from 10,000 mark and closed flat due to profit-booking by institutions and retail investors.

However, the BSE Sensex and NSE Nifty are at all-time highs. In euphoric times like these, investors find reasons to buy stocks - growth stories, stock re-ratings, margin expansion, new opportunities, etc.

Stocks in the NSE Nifty Index corner nearly 20% of the market capitalisation of all listed stocks in India. Naturally, its valuations are a good indicator of market sentiments.

So how can you invest to make the most of the bull run and yet protect your capital in uncertain times?

Here's what Tanushree, co-head of research 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 wait. You cannot buy the best blue chips by following index trends. Rather, you need to take a contrarian view on the best bluechip businesses.

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.

You can gain access to StockSelect here.

Overseas, Asian equity markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.02%, while the Shanghai Composite led the Nikkei 225 lower. They fell 0.21% and 0.10% respectively. European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.87% while France's CAC 40 is up 0.59% and Germany's DAX is up 0.58%.

The rupee was trading at Rs 64.36 against the US$ in the afternoon session. Oil prices were trading at US$ 46.83 at the time of writing.

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Idea Cellular share price surged 6.5% on back of heavy volumes after the Competition Commission of India (CCI) approved its merger with Vodafone India.

Post the transaction, Vodafone will own 45.1% stake in the merged entity while the Aditya Birla group, Idea's parent, will have 26% shareholding after paying Rs 38.7 billion cash for a 4.9% stake. The remaining 28.9% will be held by other shareholders.

Pharma stocks closed the day on a mixed note with Dishman Pharma and Cadila Healthcare Ltd leading the gains. As per an article in a leading financial daily, Glenmark Pharmaceuticals has received final approval from the US health regulator for generic version of Desonide cream, used to treat a variety of skin conditions.

The final approval was granted by the United States Food & Drug Administration (USFDA) for Desonide Cream, 0.05%, the generic version of Desonide Cream, 0.05% of Perrigo New York Inc.

According to IMS Health sales data for the 12 months to May 2017, Desonide Cream, 0.05%, achieved annual sales of approximately US$ 44.6 million.

Notably, the company's current portfolio consists of 120 products authorised for distribution in the US marketplace and 65 Abbreviated New Drug Applications (ANDA) pending approval with the USFDA.

Glenmark Pharma share price ended up by 1.5%.

Moving on to the news from the economy. In order to resolve the problem of stressed assets, Finance Minister Arun Jaitley has introduced a bill in the Lok Sabha to authorise the Reserve Bank of India (RBI) to direct banking companies.

The Banking Regulation (Amendment) Bill, 2017, seeks to amend the Banking Regulation Act, 1949 and replace the Banking Regulation (Amendment) Ordinance, 2017, which was promulgated in May 2017.

As per the Finance Minister, the stressed assets in the banking system have reached unacceptably high levels over Rs 8 trillion and hence, urgent measures are required for their speedy resolution.

Rising Bad Loans at Indian Banks

Under the ordinance, RBI has been given powers to initiate insolvency proceedings and right to issue directions for resolution, appoint or approve for appointment, authorities or committees, which would advise the banking companies to deal with the case of stressed assets.

Moving on the fast-track, the RBI had in June identified 12 large loan defaulters who account for 25% of the total bad loans in the banking sector.

Besides, action under the Insolvency and Bankruptcy Code has already begun in certain cases, including Essar Steel, Bhushan Steel and Bhushan Power & Steel, the reports noted.

And here's a note from Profit Hunter:

Telecom stocks are witnessing buying interest today. Idea Cellular (+6.5%), Tata Communications (+3.70%), and Reliance Communications (+2.80%) are among the top gainers.

Idea was the most actively traded telecom stock as the competition regulator approved the proposed merger between Vodafone India and Idea Cellular, a key step in the creation of India's largest telecom company by subscribers.

Idea stock bottomed out near 70 in January and rallied sharply to hit a high of Rs 123 in March. It corrected 38% from this high before resuming its up move.

Today, the stock rallied 6.5% with heavy volumes indicating buying interest.

But now the stock is trading at its strong resistance level of Rs 100. We mentioned in an earlier note that this level has been an important resistance several times in the past.

It will be interesting to see if the stock finds resistance here or if it will break above it. If it does, 110 is the next resistance level to watch.

Idea Cellular Surged 6.5% for the Day
Idea Cellular Surged 6.5% for the Day 

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Feb 23, 2018 (Close)