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Sensex Ends 428 Points Higher; Metal and IT Stocks Witness Buying
Fri, 13 Dec Closing | Monish Vora, TM Team

Indian share markets witnessed positive trading activity throughout the day and ended on a strong note.

Gains were largely seen in the metal sector, IT sector and automobile sector.

At the closing bell, the BSE Sensex stood higher by 428 points (up 1.1%) and the NSE Nifty closed higher by 115 points (up 1%).

The BSE Mid Cap index ended the day up by 0.9%, while the BSE Small Cap index ended up by 0.8%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 2.6% and the Nikkei was up 2.5%. The Shanghai Composite stood higher by 1.8%.

The rupee was trading at 70.77 to the US$ at the time of writing.

Speaking of the Indian stock markets, how expensive is the Sensex? What has the trend been 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.

How Pricey Is the Sensex 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.

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

Meanwhile, smallcap analyst Richa Agarwal talks about the ongoing economic slowdown, an upcoming rebound in the small cap space, and her number 1 stock pick for 2020 in the video below.

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In news from the aviation sector, domestic air passenger traffic for November grew at the fastest pace in 2019. Indian airlines carried 12.95 million people in November, up 11.2% year-on-year.

According to the data from the Directorate General of Civil Aviation (DGCA), this was the fastest growth recorded since December 2018.

Domestic passenger traffic growth in November was led by SpiceJet, which carried 2 million passengers in the month, a jump of 43% year-on-year, while India's largest airline IndiGo carried 6 million passengers, up 21%.

Watch Now: 3 Little-known Stocks We are Super Bullish On

GoAir's passenger traffic increased 39.5% to 1.4 million, while that of Air India increased by 10% to 1.5 million.

SpiceJet's passenger load factor rose 3%, while Vistara, Air Asia and Air India recorded higher passenger load factors at 84%, 87% and 83%, respectively.

Passenger load factor of the six major carriers stood between 83% and 92.8% in November as against 76-90% in October.

Air passenger volumes increased as the combined capacity of airlines rebounded recently following the closure of Jet Airways in April.

Reports state that growth is seen due to low airfares. Lower airfares have been due to the seat capacity additions as well as stable oil prices.

The weakness in airfares reflects slowdown in the economy, similar to what has been seen in various other sectors.

How this trend pans out in the coming months remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Moving on to news from the IT sector, US-based Schall Law Firm has said it will file a class action lawsuit against Infosys to recover losses suffered by investors in the wake of allegations of "unethical practices" at the Indian IT major.

The firm asked investors who had purchased the company's securities between July 7, 2018 and October 20, 2019, inclusive (class period), to contact the firm before December 23, 2019.

Replying on the above matter, Infosys in a regulatory filing today said that "the company is aware of several media stories referencing an additional securities class action lawsuit against Infosys. The company is not aware of any additional complaints, other than the initial complaint, which was disclosed on 24 October 2019."

Earlier in October, an anonymous employees' group from the company had accused the management, mainly chief executive officer Salil Parekh and chief financial officer Nilanjan Roy of alleged unethical accounting practices to shore up revenue and profit, and lapses in corporate governance.

In response to the allegations, chairman Nandan Nilekani had said the company will take necessary steps if investigation into whistleblower complaints substantiates claims of corporate mis governance.

How the above developments pan out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

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!

Read the latest Market Commentary


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