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Markets Under Pressure After a Historic Week for the Nifty, US tech stocks fall & Top Cues in Action Today
Mon, 31 Jul Pre-Open

Share markets in India closed lower at the end of last week after corporate earnings of various companies. Pharma companies were the biggest losers on the Nifty led by Dr. Reddys, Lupin and Sun Pharma.

It ended a historical week for Nifty which closed above the 10000 mark for the first time ever on Wednesday last week.

Global Markets Muted as US Tech Stocks Fall

US Tech stocks witnessed profit booking despite better than expected results from social media giant Facebook. Tech sector has been the outperformer in the US markets in 2017. It has risen by 23% this year.

In the European market, Credit Suisse Group AG also reported better than expected earnings last week. Adjusted pretax profits stood at Swiss Franc 684 million as compared to Swiss Franc 290 million a year ago.

Pharma Stocks Continue Slide Downwards in the Domestic Market

Pharma stocks pulled domestic markets down last week. Dr. Reddy's share price slumped over 5% after it posted 53.2% year-on-year fall in consolidated net profit at Rs 0.6 billion for the quarter ended 30 June 2017 against Rs 1.3 billion in the corresponding quarter last year.

Another Pharma giant Lupin will come out with its results this week. Lupin share price was down last week after reports that the US health regulator began inspection of Unit 1 of its Pithampur facility last week. The facility's Unit 2 and 3 was inspected earlier this year and was issued 6 and 5 observations respectively.

Biocon came out with a disappointing set of results last week. Revenues were down by 4% year on year. Net profit was down by 51%. The management attributed this decline to a combination of a stronger rupee and GST implementation.

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Top Cues in Action Today

Blue Dart Express will be in focus today after Goldman Sachs maintained a bearish stance post weak set of results. With the logistics industry adapting to GST, near term pricing pressures are bound to continue.

ITC will be in focus today after the company came out with its Q1 FY18 results last week. ITC reported a rise of 7.37% in its net profit at Rs 25.6 billion for the quarter ended June 30, 2017, as compared to Rs 23.84 billion for the same quarter in the previous year.

Total income of the company increased by 4.41% at Rs 142.77 billion for Q1FY18 as compared Rs 136.73 billion for the corresponding quarter previous year.

As per an article in The Economic Times, ITC plans to soon foray into fruits, vegetables and other perishable products with investment underway to create climate-controlled infrastructure for an efficient supply-chain. Reportedly, annual consumer spend on the brands from the new FMCG businesses are now stands at nearly Rs 140 billion.

Cochin Shipyard IPO opens tomorrow, 1st August. In terms of dock capacity, it is India's largest public sector shipyard. It is seen as a play on the defence sector in India.

Security and Intelligence Services (SIS) IPO opens today. The company has priced its Rs 7.8 billion IPO in Rs 805-815 range. The initial public offer (IPO) comprises fresh issue of shares worth Rs 3.6 billion and an offer for sale of up to 51,20,619 shares by the existing shareholders.

We, at Equitymaster, have always recommended IPOs cautiously. Here's Rahul Shah, co-head of research at Equitymaster, explaining our rationale behind the approach:

  • 'We know what a dirty game the IPO business is. We've seen it over and over again: It's a game where the odds are stacked against investors. So for us, the equation is simple. We'd rather face criticism in the short run than see our subscribers lose money over the longer term. We weren't afraid to do this during the hot IPO days of 2007, and we're not afraid to do it today.'

The Bottomline: You need to evaluate each IPO on its merits by considering its fundamentals, and most importantly, the valuations. And this is particularly important when the hype surrounding IPOs is at its peak.

We have reviewed each of them and have released their recommendation notes. You can check the same on their IPO page.

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