Indian Indices Open Marginally Higher; Healthcare Stocks Witness Buying

Wed, 13 Nov 09:30 am

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Asian share markets are trading on a negative note today as Japanese and Hong Kong shares show losses. The Nikkei 225 is down 0.79% while the Hang Seng is down 1.73%. The Shanghai Composite is trading down by 0.15%.

Back home, India share markets opened marginally higher. The BSE Sensex is trading up by 31 points while the NSE Nifty is trading up by 13 points.

The BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index has opened down by 0.1%.

Except telecom stocks, all sectoral indices have opened the day on a positive note with healthcare stocks and metal stocks witnessing maximum buying interest.

The rupee is currently trading at 71.81 against the US$.

Speaking of Indian share markets, what has the trend been of Sensex's price to earnings (PE) ratio in recent years?

It would be interesting to see how the valuation of the index has moved over the last five years.

The chart below maps the price to earnings ratio of the Sensex from October 2014 to now...

Here's what Ankit Shah wrote about this in one of the editions of The 5 Minute WrapUp...

• It is worth noting that the Sensex has gained 44% over the last five years, compounding at an annual rate of 7.6% (excluding dividends).
  
  Not quite impressive.
  
  During the same period, the Sensex price to earnings ratio has mostly been in a rising trend, except some intermittent declines.
  
  Between October 2014 and now, the gain in the Sensex price to earnings ratio is 42%. That means that the gains in the index have mostly come from expansion in the valuation multiple, and just meagerly from increases in earnings.

So, before taking the current Sensex bullishness for granted, do weigh in the fact that the Sensex is quite expensively priced.

Also, amid the mood swings of Mr. Market witnessed lately, Tanushree Banerjee in the video below talks about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times.

Tune in to find out more...

Market participants will be tracking IRCTC share price, BHEL share price, Cadila Healthcare share price, and NALCO share price today as these companies will be announcing their September quarter results today.

In the news related to Indian share markets, data from the NSE suggested foreign portfolio investors (FPIs) were net buyers of Indian equities on Monday. FPIs bought domestic stocks to the tune of Rs 6.6 billion on Monday.

Domestic institutional investors (DIIs), on the other hand, were net sellers to the tune of Rs 2.4 billion.

In the news from the macroeconomic space, President's rule was imposed in Maharashtra as attempts to form a government failed.

This was seen as no party was able to achieve a majority even 19 days after the assembly election results were declared.

President Ram Nath Kovind signed the proclamation approving the Union Cabinet's recommendation to impose President's rule and keep the legislative assembly under suspended animation yesterday evening.

Maharashtra governor Bhagat Singh Koshyari had recommended President's rule in the state well before Tuesday's 8.30 pm deadline given to the Nationalist Congress Party, which sought more time to explore government formation.

In the news from the banking sector, Yes Bank share price will be in focus today as Sunil Munjal, chairman of Hero Corporate Services Ltd, and Hemendra Kothari, veteran investment banker and founder of DSP Group, have held separate talks with the cash-starved private sector lender to purchase stakes of 5-10% each.

As per a leading financial daily, the two businessmen have expressed their intention to invest following discussions over the past fortnight. If both investments proceed, the bank could receive a total sum of up to Rs 35 billion.

Besides Munjal and Kothari, US-based private equity giant Carlyle Group has also evinced interest to invest up to US$ 400 million in Yes Bank through a fresh equity issuance.

RBI approval is mandatory for any stake purchase of 5% or more in a bank.

Note that Yes Bank is in need of money to stay compliant with RBI's capital adequacy norms and create enough buffers to provision against bad loans in the coming quarters.

As of the September quarter, Yes Bank's tier I capital adequacy ratio stood at 11.5% against the regulatory requirement of 8.875%.

Its common equity tier 1 capital stood at 8.7%, marginally above the regulatory requirement of 7.375%.

The bank has met at least half-a-dozen large private equity firms and about a dozen foreign family offices since August.

How the above investment talks advance remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

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

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