Flat Finish to the Week; Cadila Healthcare Rallies 7%

Thu, 24 Aug Closing

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Indian share markets finished marginally higher for the week in a thin trade amid buying in pharma stocks, software stocks and capital good stocks. At the closing bell, the BSE Sensex closed higher by 28 points and the NSE Nifty finished up 5 points. The S&P BSE Mid Cap finished up by 0.8% while & S&P BSE Small Cap too finished up by 0.4%. FMCG stocks, realty stocks and oil & gas stocks finished in red.

IT stocks were among the top gainers with Infosys share price finishing up by 2% after a group of institutional investors asked the company to bring former CEO Nandan Nilekani back on to its board to settle the feud with the founders.

Cadila Healthcare share price surged 7% in today's trade after the drugmaker announced that Zydus Cadila received final approval from the USFDA to market candesartan cilexetil tablets used for the treatment of hypertension. The company will manufacture the drug at its formulation manufacturing facility in Moraiya in Ahmedabad. It has more than 140 approvals and has so far filed over 300 abbreviated new drug applications since it commenced filings in 2003-04.

Asian stock markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.43%, while the Shanghai Composite & the Nikkei 225 fell 0.49% and 0.42% respectively.

The rupee was trading at Rs 64.07 against the US$ in the afternoon session. Oil prices were trading at US$ 48.17 at the time of writing.

In news from the economic sector, in a bid to improve the health of public sector banks (PSBs), the government has decided to set up an alternative mechanism to oversee the proposals for consolidation of state owned banks.

The decision would facilitate consolidation among the Nationalised Banks to create strong and competitive banks. The move aims at meeting the credit needs of the growing Indian economy and building capacity in the PSB space to raise resources without dependence on the state exchequer.

The Cabinet has given its in-principle nod to the constitution of the mechanism which will clear proposals of banks for mergers and amalgamation. As per the framework, mergers decisions should originate from the banks and these should be based on commercial decisions. The alternative mechanism will comprise of senior ministers of the government.

PSB banks finished the day on a firm note with Vijaya bank share price and Allahabad Bank share price leading the gains.

In another development, so after dwindling to single-digits in the past three years, bank credit growth slowed down to a multi-decade low of 4.4% in FY17. This has curtailed net interest income which is the core source of income for banks. Net interest income is the interest income earned after adjusting for interest expense made in the form of cost of funds and deposits.

Slow Credit Growth Impairs Core Income Driver for Banks

As per RBI data, the incremental credit-deposit ratio crossed 100 in July 2017 for the first time since 2011. At the same time, the incremental investment-deposit ratio has been on a steady decline. This shows that as huge deposits garnered by public sector banks post notebandi are stabilising, lending is slowly gaining traction.

For the same reason, public sector banks like State Bank of India, Bank of Baroda and Punjab National Bank recently cut savings rate by 0.5% as they shift focus towards lending.

In news from FMCG sector, Britannia Industries is re-launching its flagship brand 'Treat' in the premium cream biscuit. The company will be investing Rs 500 million on Treat in the next nine to 12 months.

The total investment for premium creams category would be Rs 1 billion over the next nine to 12 months. The company is aiming to increase its market share in the cream biscuits category from 35% to 50% in the next two years.

Britannia share price finished the day down by 1.3% on the BSE.

Moving on to news from automobile sector. TVS Motors share price finished up by 1.6% on the BSE after the company proposed to set up Rs 11 billion two-wheeler plant in Karnataka. The company is planning to set up its two-wheeler plant at Bytahalli, Kadakola, in Mysuru. The proposal will be cleared shortly by the State High Level Clearance Committee (SHLCC). The plant will provide create employment for 800 people.

In another news, as per an article in The Economic Times, Tata Power is planning to sell its non-core assets even as it continues to explore viable options to resolve issues pertaining to the financially crippled 4,000-mw Coastal Gujarat Power at Mundra. The company intends to bring down its gross debt to Rs 490 billion.

The gross debt to equity ratio currently stands at 3.3:1. It can be noted the company had made a proposal some time back to sell the 51 per cent stake in the plant to Gujarat Urja Vikas Nigam for a notional Re 1, to rescue itself from the debt-laden, loss-making business but the state government rejected the proposal.

In another news, the company is planning to raise up to Rs 70 billion via non-convertible debentures (NCDs)/ bonds on a private placement basis for one year.

Tata Power share price finished the day up by 0.6% on the BSE.

And here's a note from Profit Hunter:

The Nifty 50 Index traded on a positive note during the week. On Monday, it opened the session gap up but slipped immediately to end the session 83 points down. The index then traded in a narrow range until the final hour of Wednesday trading session when it witnessed buying interest. The index traded with a positive bias on the final day of the week as well and ended the weekly session up 0.20%.

As mentioned in an earlier note, the channel's support line and the 50-day exponential moving average (EMA) are acting as a strong support for the index.

So if the index continues to sustain above the channel's support line and 50 EMA, we would see higher levels. But on the flipside, if it breaks below the channel's support line and 50 EMA, the bulls will need to be cautious.

Nifty Ends Marginally Higher

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