Indian Indices Rangebound, SIP Inflows Rise 45%, and Top Stocks in Action

Wed, 18 Oct Pre-Open

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The Dow Jones Industrial Average briefly broke above the 23,000-point mark for the first time on Tuesday, driven by strong earnings from UnitedHealth and Johnson & Johnson, but finished the session just below that milestone. The US markets were up 0.5% during the week.

UK's FTSE was flat following comments by Bank of England policymakers which were taken as dovish by market participants. On the data front, Britain's inflation rate soared to a fresh five-and-a-half-year high in September. The consumer prices index rose 3% last month, up from 2.9% in August.

Back in Asia, markets were steady during the week as investors in the region looked to China's Party Congress for signs on future policy direction in the world's second-largest economy. The stock market in China was down by 0.3% during the week. Whereas, the benchmark Nikkei 225 index was up by 1% during the week after posting gains for the 12th straight session on Wednesday.

Oil prices rose during the week, lifted by a fall in US crude inventories and concerns that tensions in the Middle East could disrupt supplies.

Key World Markets During the Week

Back home, the Indian indices closed marginally higher ahead of the festive season. The BSE Sensex was up by 0.5% for the week. Midcap and Smallcap stocks outperformed the frontline indices to gain 0.9% and 1.4%, respectively.

Indian share markets are closed on Thursday and Friday, but will open for a one-hour special trading session on Thursday evening to mark Diwali, the Indian festival of lights.

Majority of the sectoral indices ended the week on a positive note. Stocks from telecom and oil & gas sector gained the most.

BSE Indices During the Week

Now let us discuss some key economic and industry developments during the week gone by

In news from the economy, days after the International Monetary Fund (IMF) pared India's GDP growth projection for the year 2017 and 2018, its Managing Director Christine Lagarde has expressed confidence that the series of reforms like demonetisation and Goods and Services Tax (GST) regime have put country's economy on a very solid track in the mid-term.

Describing these structural reforms as 'monumental effort', she said that it is hardly surprising that there is a little bit of a short-term slowdown as a result, but for the medium term, they see a very solid track ahead for the Indian economy. IMF chief further indicated that metrics of inflation, fiscal deficit and structural reforms would deliver jobs. She also said that they hope that the combination of fiscal because the deficit has been reduced, inflation has been down significantly, and the structural reforms will actually deliver the jobs that the Indian population, particularly the young Indian people expect in the future.

Last week, the IMF in its latest flagship World Economic Outlook has lowered India's Gross Domestic Product (GDP) growth forecast for 2017 by 0.5 percentage points to 6.7%, primarily because of the lingering impact of demonetisation as well as the disruption caused by the GST regime. It has also trimmed the growth projection for 2018 to 7.4% from 7.7% forecasted earlier in April and June.

In the other news, according to data released by the Central Statistics Office (CSO), retail inflation as measured by the Wholesale Price Index (WPI) eased to 2.6% in September, as compared to a sharp rise of 3.2% in August 2017. Wholesale inflation rate, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

The index portrays new series of WPI data released by the government earlier this fiscal, with 2011-12 as the base year, replacing existing the base year of 2004-05. Food articles turned out to be major drivers as the data showed that prices of food articles tapered by 2% in September, as against 5.8% on a yearly basis. Vegetable inflation stood at 15.5%, as compared to an astronomical 44.9% in August. Fuel and power segment, too cooled slightly to 9%, from 9.9% in August.

In the news from the GST space, the GST Council is considering pruning of the number of items in 28% tax bracket. This comes as Revenue Secretary Hasmukh Adhia said that the number of goods in the highest 28% GST slab would be brought down. He also added that a committee of officers will calculate the revenue impact before going in for further reduction in tax rates.

Speaking of Goods and Services Tax (GST), the tax regime completed 100 days since its rollout last week. Till date, nine million enterprises are registered under the GST network. Of which, 2.6 million are new GST assesses and 6.4 million taxpayers are from the past regime. The new additions signify an increase of 40% to the previous tax base. The tax collections too have largely been met. Against the target set by government for Rs 910 billion, the tax revenue collected for August was Rs 906 billion.

While the tax seems to benefit the organized players in a big way, it is the unorganized segment who has taken a big hit. First, it was demonetization and now it is the implementation of GST. This hit is well reflected in the gross domestic product numbers. GDP growth has slumped to 5.7% in the June quarter from a high of 7.9% clocked in the June quarter of 2016. To boost the economic scenario, the government recently came out with certain relaxations under the goods and service tax (GST).

Movers and shakers during the week

Top Gainers During the Week (BSE Group A)
Company	13-Oct-17	13-Oct-17	Change	52-wk High/Low
63 MOONS TECHNOLOGY	100.5	138	37.5%	126/54
IDEA CELLULAR	73	88	21.2%	124/66
BHARTI AIRTEL	384	463	20.5%	469/284
JAIPRAKASH POWER	7	8	13.6%	9/4
TORRENT POWER LTD	215	243	12.8%	244/160
Top Losers During the Week (BSE Group A)
AXIS BANK	514	466	-9.4%	547/425
VIDEOCON INDUSTRIES	17	16	-8.7%	110/15
DENA BANK	30.6	28.3	-7.5%	50/30
UNITECH	6	6	-7.5%	10/4
FUTURE ENTERPRISES	52.9	49.5	-6.5%	62.14

Source: Equitymaster.com

Some of the key corporate developments in the week gone by

In the news from the banking sector, Axis Bank share price plunged more than 8% on Wednesday as the bank warned of more pressure on the asset quality side in the remaining quarter of the fiscal saying the second half will continue to be challenging. Axis Bank posted a 38% rise in September quarter net profit at Rs 4.32 billion on low base effect.

The bank had a net profit of Rs 3.19 billion in the year-ago period. The bank, which already has highest bad loans among the top three private sector lenders, saw fresh slippages to the tune of Rs 89.36 billion, including Rs 48.67 billion in "divergence" found by the Reserve Bank on its FY17 provisions treatment.

In the news from the pharma sector, Glenmark Pharmaceuticals Inc., USA (Glenmark) has been granted final approval by the United States Food & Drug Administration (USFDA) for Aprepitant Capsules USP.

According to IMS Health sales data for the 12-month period ending August 2017, the Emend Capsules, 40 mg, 80 mg, and 125 mg market achieved annual sales of approximately US$64.9 million.

Glenmark's current portfolio consists of 127 products authorized for distribution in the US marketplace and 60 ANDA's pending approval with the USFDA. In addition to these internal filings, Glenmark continues to identify and explore external development partnerships to supplement and accelerate the growth of its existing pipeline and portfolio.

Aurobindo Pharma announced that it that it received final approval from the US Food and Drug Administration (USFDA), to manufacture Esomeprazole Magnesium capsules. Esomeprazole Magnesium capsules are used in the treatment of frequent heartburn, and are a generic version of AstraZeneca's Nexium 24HR capsules. The company said that the product will be launched immediately.

The company added that the approved drug achieved annual sales of US$ 300 million.

This is the 127th Abbreviated New Drug Application (ANDA), including 23 tentative approvals, to be approved out of Unit VII formulation facility in Hyderabad, used for manufacturing oral products.

Aurobindo now has a total of 335 ANDA approvals (296 final approvals including 16 from Aurolife Pharma LLC and 39 tentative approvals) from USFDA.

In the news from the telecom sector, Bharti Airtel and Millicom International Cellular S.A. (Millicom), through their respective subsidiaries, have concluded the deal to combine their operations in Ghana. Under the joint agreement, Airtel and Millicom will have equal ownership (50:50) and governance rights in the combined entity, which will have revenues of approximately US$300 million.

Both Airtel and Millicom will have Board representations and Management positions in the merged entity. The Ghana National Communications Authority granted approval for the merger proposal earlier this month. The merged entity will become Ghana's second largest mobile operator with close to 10 million subscribers. The combined networks of the two companies will cover more than 80% of Ghana's population. It will also have one of the largest sales and distribution network to enhance customer convenience.

In the news from IPO space, Godrej Agrovet has made a stellar debut today after successfully concluding the initial public offer (IPO) last week. The scrip of the company got listed at Rs 621 on Indian bourses today, a premium of 35% to its issue price of Rs 460. The Rs 11.6 billion IPO was a huge hit and was oversubscribed over 95 times. The final issue price was fixed at Rs 460 per share, at the higher end of the price band. The portion meant for qualified institutional buyers (QIBs) was oversubscribed 151 times, non-institutional investors 236 times and retail investors 7.7 times.

To know more about the company, you can read our IPO note on Godrej Agrovet Ltd (requires subscription).

Also, if you want to know more about IPOs and whether they are right for you, you can download the free special report - How to Get Rich with IPOs.

Moving on to the news from the cement sector. ACC Ltd's quarterly profit more than doubled, beating street's expectations, helped by strong cement sales volume growth. Profit rose to Rs 1.8 billion (US$28.0 million) in the third quarter ended 30 September, from Rs 0.9 billion a year earlier. Further, cement sales volume rose about 18% to 5.96 million tonnes in the quarter. Reportedly, sales volume growth was aided by capacity stabilization of the Jamul plant in Chhattisgarh and the Sindri plant in Jharkhand.

Speaking of the cement companies in India, if one were to go by the numbers as reported by Business Standard, the valuations of the Indian cement companies are obscenely expensive.

Here's what Tanushree Banerjee, Co-head of Research has to say about the sector:

• "There is no denying the performance of the cement companies have shown improvement off late. However, the current valuations certainly warrant a caution. For readers who are looking forward to commit their money in cement stocks should factor in realistic growth expectations.
  
  One would do better to look into long term growth for every cement company. And then judge whether the valuations are reasonable enough. If not, then it is best to stay away from the sector."

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And here's an update from our friends at Daily Profit Hunter...

The Nifty 50 Index traded on a positive note during the week. On Monday, it opened the session 40 points gap up and continued to trade higher to close the session well. The steady momentum continued as the index hit a new lifetime high during the week. The index witnessed some profit booking on the final day of the week, but ended its weekly session 0.43% up.

We mentioned last week that the index broke above the 9,700 - 10,150 range, which indicates that the bulls party might continue for some more time. But now we have observed one interesting thing on the charts.

Nifty - Bank Nifty Diverges

The above is the chart of Nifty index and the Bank Nifty index. As you can see, the Nifty made a new high during the week, but Bank Nifty failed to do so. We call this a price divergence. Usually, markets are said to be healthy when both nifty and bank nifty confirm each other. But currently, Bank Nifty does not confirm the Nifty's price action.

Does this indicate a sign of a market top? Or, is it just a matter of time before Bank Nifty will confirm Nifty's movement? It is an interesting setup, let's keep a close watch on it.

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Read the latest Market Commentary

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Indian Share Market Update: Top Gainers and Losers