Sensex Opens Weak; Metal & Capital Goods' Stocks Lose the Most

Mon, 14 Jan 09:30 am

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Asian stock markets camped near 1.5-month highs today as market participants kept a wary eye on looming Chinese trade data on increasing signs of slowdown. Shares in Hong Kong are lower today as the Hang Seng falls 1.7%. The Shanghai Composite is trading down by 0.6%. Meanwhile, Wall Street dipped slightly on Friday, as energy shares declined and investors looked ahead to earnings season, which kicks off next week with Citigroup, JPMorgan and other big banks.

Back home, India share markets opened on a weak note. The BSE Sensex is trading down by 177 points while the NSE Nifty is trading down by 57 points. The BSE Mid Cap index opened down by 0.6% while BSE Small Cap index opened down by 0.3%.

Barring IT stocks & healthcare stocks, all sectoral indices have opened the day in red with metal stocks and capital goods stocks witnessing maximum selling pressure.

The rupee is currently trading at Rs 70.53 against the US$.

IT stocks opened the day on a mixed note with Moser Baer India & HCL Infosys leading the losers. Infosys on Friday reported 29.6% drop in consolidated net profit at Rs 36.1 billion for December quarter.

The IT firm had posted Rs 51.3 billion profit in the corresponding quarter last year.

Net sales for the quarter jumped 20.3% YoY to Rs 214 billion. On a sequential basis, sales grew 3.8% in rupee terms. Sales were up 2.7% QoQ in constant currency terms.

Further, the company revised its FY19 revenue guidance in constant currency (CC) terms to 8.5-9%. The guidance for operating margin (OPM) is retained at 22-24%.

Consolidated attrition declined to 19.9% in Q3FY19 over 22.2% in the previous quarter.

The company also announced a share buyback under open market route of Rs 82.6 billion at a maximum price of Rs 800 per share. It also announced a special dividend of Rs 4 per share.

Note that, Infosys had completed its maiden buyback of Rs 130 billion in December 2017, comprising 113-million equity shares at a price of Rs 1,150 per share.

Speaking of buybacks, the number of buybacks offers in 2017-18 were at an all-time high. Never, in the last two decades, had Indian markets seen fifty-nine companies announcing buyback plans.

But what is truly surprising is that unlike in the past, the buybacks this time seem skewed in favour of short-term investors rather than long term ones.

Who Benefits from Such Buybacks?

Tanushree Banerjee, Co-head of Research at Equitymaster recently wrote about it in The 5 Minute WrapUp:

• "Look at the history of buybacks since 2002. Logically promoters should offer to buyback shares at a premium when the stock is undervalued. And this logic held true until recently. The number of buybacks peaked when market valuations were low. And in times of peak valuations (like 2007 and 2011), promoters refrained from doing so.
  
  But not this time. The trend of rising buybacks in the last two years, resembles the sentiment of a momentum investor. The appetite to buy shares kept rising with the rising markets. And the latest buybacks of stocks like TCS and MOIL, came at a time, when neither the broader index (Sensex) nor the stocks themselves, are undervalued."

At Equitymaster, we believe, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

It's a matter of time before you get to use the cash for buying stocks, you've always wanted to, at attractive bargains.

To know more about the company, you can access to Infosys' latest result analysis and Infosys 2017-18 Annual Report analysis on our website.

Infosys share price opened the day up by 2.5%.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Cadila Healthcare has received final approval from the USFDA to market Betamethasone Dipropionate Cream and Amlodipine & Atorvastatin Tablets.

Reportedly, the company will manufacture drugs at its formulations manufacturing facility in SEZ, Ahmedabad.

Betamethasone Dipropionate Cream is a strong corticosteroid and is used to treat a variety of skin conditions.

Further, the company will market Amlodipine and Atorvastatin Tablets USP (US RLD-Caduet) in the strengths of 2.5 mg/10 mg, 2.5 mg/20 mg, 2.5 mg/40 mg, 5 mg/10 mg, 5 mg/20 mg, 5 mg/40 mg, 5 mg/80 mg, 10 mg/10 mg, 10 mg/20 mg, 10 mg/40 mg, and 10 mg/80 mg.

To know more about the company, you can access to Cadila Healthcare's latest result analysis and Cadila Healthcare's stock analysis on our website.

Cadila Healthcare share price opened the day up by 0.6%.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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