Sensex Ends 155 Points Lower; Metal and Healthcare Stocks Witness Selling

Fri, 10 Aug Closing

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Indian share markets continued to trade in the red during the closing hours of the trading session and ended the day on a negative note. Losses were largely seen in the metal sector and healthcare sector.

At the closing bell, the BSE Sensex stood lower by 155 points (down 0.4%) and the NSE Nifty closed lower by 41 points (down 0.4%). Both - the BSE Mid Cap index and the BSE Small Cap index - ended their day down by 0.8%.

Asian stock markets finished on a negative note as of the most recent closing prices. The Hang Seng stood down by 0.85% and the Nikkei was trading down by 1.35%.

European markets were also trading on a negative note. The FTSE 100 was down by 0.72%. The DAX, was down by 1.55% while the CAC 40 was down by 1.1%.

The rupee was trading at 68.86 to the US$ at the time of writing.

In the news from currency markets, as per a leading financial daily, the Reserve Bank of India (RBI) likely intervened in the foreign exchange market to support the Indian rupee today.

The fall in the rupee was seen after most emerging market currencies fell amid global tensions.

The Indian rupee fell to a low of 69.03 against the US dollar today - it's lowest since July 24.

Note that the rupee has been witnessing selling pressure against the US dollar since the start of this calendar year. This is evident from the chart below, which shows the quantum of US dollars a 100-rupee note can buy and how this rate has been declining over the past few months:

Indian Rupee in a Steep Decline

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).

In the news from initial public offering (IPO) space, the IPO of CreditAccess Grameen was subscribed around 1.3 times so far during the last day of its bidding process.

The issue size of this IPO is about 26.8 million shares, which includes 11.8 million shares issued by the promoter CreditAccess Asia N.V. and a fresh offer of shares of up to Rs 6.3 billion.

The price brand for the IPO is in the range of Rs 418 to Rs 422 per share. This makes the CreditAccess Grameen IPO issue size between Rs 11.2 billion and Rs 11.3 billion.

CreditAccess Grameen, a leading microfinance institution in India, is focused on providing micro-loans, especially to the women customers in rural India. The lending products of the company address the financial needs of the customers throughout their lifecycle. This includes income generation, family welfare, home improvements, and loans for emergencies.

The customer segment they mainly focus on is women with an annual household income of Rs 160,000 or less in urban areas and Rs 100,000 or less in rural areas. The company provides loans primarily under the joint liability group (JLG) model.

To know more about the company, you can read our IPO analysis of CreditAccess Grameen Ltd (requires subscription).

Speaking of IPOs, the stock market is gearing up for a burst of IPO activity over the coming days.

So how should one approach to IPOs? We believe 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 how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

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

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