Of Depreciating Rupee; IPO Buzz and Top Cues in Focus Today

Fri, 17 Aug Pre-Open

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Indian share markets ended lower yesterday with banking stocks and metal stocks leading the losses.

At the closing bell, the BSE Sensex ended down by 188 points (0.5%) while the NSE Nifty ended down by 50 points (0.4%). The BSE Mid cap index ended the day down by 0.6%, while the BSE Small cap index ended the day lower by 0.1%.

Top Stocks in Focus Today

In news from the pharma sector. Sun Pharma share price will be in focus today as the company has received approval for CEQUA (cyclosporine ophthalmic solution) 0.09%, from the US Food and Drug Administration (USFDA). CEQUA is indicated to increase tear production in patients with keratoconjunctivitis sicca (dry eye).

From the automobiles sector, market participants will be tracking TVS Motors share price. The company has launched two new products for the Philippines market- TVS Dazz and TVS King. Both products are developed to meet Euro 3 standards. To know more about the company, you can access to TVS Motors Q1FY19 result analysis on our website.

Andhra Bank has increased the marginal cost of funds based lending rate (MCLR) by 0.15% to up to 8.70% for various tenors. The stock will hog limelight today.

Amara Raja Batteries' board has approved a proposal to set up a green field automotive battery plant with an investment of Rs 7 billion.

Rupee Hits New Low

The rupee fell 43 paise against the US dollar yesterday to trade at a lifetime low of 70.32. After the fall in rupee, Union Minister Arun Jaitley stated that the country has comfortable foreign exchange reserves to deal with any undue volatility in the foreign exchange market.

He added that the developments in the currency market were being monitored closely to address any situation that might arise in the context of the unsettled international environment.

The Minister also said recent developments relating to Turkey have generated global risk aversion towards emerging market currencies and the strengthening of the 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.

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...

In the news from the IPO space, Mazgon Dock Shipbuilders has received markets regulator's go ahead to float an initial public offering.

Mazagon, which is the lead shipyard of India, will see sale of over 22.4 million equity shares by the government. The IPO is part of the government's target to gather Rs 800 billion through stake sales in state-owned companies in 2018-19.

With so many IPOs set to hit the markets, we at Equitymaster 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.

Global Stock Market Drivers

Asian shares pulled away from one-year lows on Thursday, after Beijing said it will hold trade talks with Washington this month, although Turkey's currency crisis and fears of an economic slowdown in China kept most markets in the red.

US equity futures climbed with European stocks and the dollar fell on renewed hopes for an easing of global-trade tensions. The yuan jumped and Treasuries dipped.

Here are some key events coming up this week:

• Earnings are still to come from companies including Maersk and Carlsberg.
• Brexit talks between the EU and the UK resume in Brussels today.

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

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