Sensex Finishes on a Firm Note; Tech Mahindra Gains 3.3%

Tue, 21 Nov Closing

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Indian share markets continued to trade well above the dotted line in the afternoon session and finished in green for fourth consecutive day. At the closing bell, the BSE Sensex closed higher by 119 points and the NSE Nifty finished higher by 28 points. The S&P BSE Mid Cap finished up by 0.1% while S&P BSE Small Cap finished up by 0.4%. Gains were largely seen in energy sector, consumer durables sector and pharma sector.

Asian stock markets finished broadly higher today with shares in Hong Kong leading the region. The Hang Seng is up 1.91% while Japan's Nikkei 225 is up 0.70% and China's Shanghai Composite is up 0.53%. European markets are mixed. The DAX is higher by 0.06%, while France's CAC 40 is off 0.06%. Shares in London are unchanged with the FTSE 100.

Rupee was trading at Rs 65.04 against the US$ in the afternoon session. Oil prices were trading at US$ 56.84 at the time of writing.

In news from software sector, Tech Mahindra share price finished up by 3.3% on the BSE after it was reported that the company expects to outgrow Nasscom's industry growth projection and may touch US$ 5 billion mark in revenues during the current fiscal. The company's revenues during the last fiscal were US$ 4.35 billion, up 7.8% YoY.

The company is getting aggressive on new age technologies and has trained 11,000 employees on automation technologies. The company is also geared up to re-skill about 50,000 employees for the present and future requirements.

As per the company's managing director, the company opened up new markets in Latin America and Europe while there is not much business from the Middle Eastern market as situation there is "uncertain".

In the said quarter, Tech Mahindra added 21 active clients, taking its overall active client base to 885. The company added 7 clients under US$10 million category, 8 in US$5 million band and 13 in US$1 million band.

In another development, Wipro is all set to open Rs 110 billion share buyback scheme on November 29 for Rs 320 a unit, at 8.6% premium over current price.

The company will buyback over 343.7 million fully paid-up equity shares of face value Rs 2 each of the firm, representing up to 7.06% of the total paid-up equity share capital, from all the fully paid-up equity shareholders/ beneficial owners of the shares as on the record date of September 15, 2017, on a proportionate basis.

The company will process the buyback through a tender offer route, at a price of Rs 320 per equity share for an aggregate amount of up to Rs 110 billion.

Wipro share price finished the day down by 0.2% on the BSE.

Moving on to news from airline stocks. Jet Airways share price plunged 8.4% after the company announced plans to cut down expenditure.

The company plans to to cut costs (excluding fuel) by up to 15%, increase ancilliary revenue by Rs 2.5 billion and increase capacity at a CAGR of 10% over three years. The airline would look to reduce maintenance expense from January 2019 as well as bring down the cost of sales and distribution.

The focus of the company in the last two-and-a-half years to three years has been to reduce the cost and whatever cash flow is being generated from the business is going towards the debt reduction. The company's net debt currently stands at Rs 80 billion.

India's aviation industry is on a high-growth trajectory. India's domestic air passenger traffic has almost doubled in the past six years. This is on the back of strong economic growth and emergence of low-fare airlines. Indian carriers have now set their sights on International traffic. Indian carriers have been slowly increasing their market share. It is important to note that foreign carriers still dominate international traffic to and from India.

Market Share of Indian Domestic Airlines - 2017 (%)

The aviation industry has been on a high the past year. Warren Buffett invested upwards of US$2 billion a piece into the four largest US airline stocks - American Airlines Group Inc, Delta Air Lines Inc, Southwest Airlines Co, and United Continental Holdings Inc. When crude prices crashed, the lower cost of air turbine fuel suddenly changed the economics of the aviation business.

Despite recent positives, the airlines industry back home is plagued by cutthroat competition and rock-bottom fares. As a result, Indigo has been the only profitable airline in India in the recent past.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Dr. Reddy's Laboratories has received the Establishment Inspection Report (EIR) from the US Food & Drug Administration (USFDA) for its Formulations Manufacturing Facility at Vishakhapatnam.

Reportedly, the USFDA explained that the inspection has not closed, and the site's status remains unchanged, but that USFDA released the EIR in order to be transparent about its regulatory process.

The company is planning to request a re-inspection in 2018 after further discussion on scheduling with USFDA, the reports noted.

Reacting to the news, Dr. Reddy's share price finished up by 5.2% in the morning trade.

And here's a note from Profit Hunter:

Dr Reddy's Laboratory soared 10% intraday after the company received the Establishment Inspection Report (EIR) from the US Food & Drug Administration (USFDA) for its formulations manufacturing facility at Vishakhapatnam.

Last time we reviewed this stock, it had bounced back from an important support level and a centurion mark of 2,000 with strong volumes. This showed the stock's immense resilience. As a result, it rallied strongly to a high of 2,527 in less than a month.

It then consolidated for two months in a 200 points range. But today, it rallied sharply with heavy volumes to end the session 5% higher.

Does this indicate that the stock has now resumed its up move or will it continue to trade in a range? Let's wait and watch...

Dr Reddy's Soared 10% Intraday

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