Sensex Nears All Time High; Metal & Auto Stocks Rise

Tue, 19 Dec Closing

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Indian share markets continued to witness buying momentum in today's session as well as it moved closer to an all-time high helped by the Bharatiya Janata Party's electoral success in Gujarat and Himachal Pradesh. The sentiment also remained upbeat on bets that US tax reforms Bill will go through supported the uptrend.

At the closing bell, the BSE Sensex closed higher by 235 points and the NSE Nifty finished higher by 74 points. The S&P BSE Mid Cap finished up by 1.4% while S&P BSE Small Cap finished up by 1.5%. Gains were largely seen in metal sector, consumer durables sector and auto sector.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.88% and the Hang Seng rose 0.70%. The Nikkei 225 lost 0.15%. European markets are mixed today. The FTSE 100 is up 0.24% while the DAX gains 0.02%. The CAC 40 is off 0.07%.

Rupee was trading at Rs 64.12 against the US$ in the afternoon session. Oil prices were trading at US$ 57.45 at the time of writing.

Auto stocks rallied in today's trade with Maruti Suzuki share price and Force motors share price surging above 5%. Meanwhile, Tata motors share price, Ashok Leyland share price and Hero Motocorp share price too rallied in today's trade with each stock surging above 3%.

The contribution of the top three players in the auto market has gone up from 65.6% in 2012-13 to 72% in 2016-17 and 74% in the first seven months of 2017-18, according to Society of Indian Automobile Manufacturers (SIAM) data.

Top-of-the-pile Maruti saw its volumes increase by 27.2% between FY13 and FY17. Its market share rose from 39.5% to 47.4% in the period, further rising to 50.2% in FY18 (April-October).

Telecom stocks finished the day on a strong note with Reliance Communications share price and MTNL share price leading the gains.

Bharti Airtel share price finished the day on an encouraging note (up 2.5%) after it was reported that the company through its subsidiaries has entered into a definitive agreement with Millicom International Cellular S.A. (Millicom) under which Airtel Rwanda will acquire 100% equity interest in Tigo Rwanda.

The acquisition will consolidate the Rwandan telecom market and position Airtel as a strong number 2 operator in Rwanda. The consideration for the transaction is based on approximately 6x EBITDA multiple, payable over two years.

The existing customers of Tigo Rwanda will join Airtel's global network, which currently serves over 370 million customers across 17 countries.

Power stocks finished the day on a firm note with JSW energy share price and NTPC share price leading the gains.

As per a leading financial daily, the global credit rating agency, Moody's Investors Service and its Indian arm ICRA in a joint report have kept a stable outlook for the Indian power sector over the next 12-18 months, reflecting their expectation of stable industry conditions and government policy initiatives.

The report added that this will likely lead to improvements in the financial position of state-owned electricity distribution companies.

Moody's also said that the government's debt restructuring of the financially weak distribution utilities under the Ujwal Discom Assurance Yojana (UDAY) will gradually improve the financial conditions of state-owned discoms, thereby alleviating off-taker risk, which is a key negative factor for the credit quality of power generators.

The report stated that India (rated Baa2 stable by Moody's) will see a change in its energy mix towards renewable, as the country adds more capacity and moves towards its commitments under the Paris Agreement on climate change.

In news from pharma sector, Dr. Reddy's Laboratories' US subsidiary has reached a settlement with the US Government, in a case that is more than six years old, involving packaging for five blister-packed prescription products. In a joint filing by the parties, Dr. Reddy's and the US Department of Justice agreed to the settlement of the action without any settlement of any issue of fact or law.

Dr. Reddy's has taken this investigation seriously, cooperating with the Government over the past six years.

The safety of patients and consumers is of paramount importance to Dr. Reddy's, and the company firmly disagrees with the Government's allegations. However, in order to avoid any unnecessary costs and the distractions of prolonged litigation, the company has chosen to settle the matter for US$5 million.

Dr Reddy's share price finished the day up by 0.2% on the BSE.

In another development, Biocon share price surged 4.6% in today's trade after it was reported that the company would invest in the healthcare centres of Uttar Pradesh and encourage entrepreneurs in the biotech space, especially the startups, to work in the state.

UP has increased the limit of start-up corpus fund from Rs 1 billion to Rs 10 billion. Exemptions have been provided in electricity bills, reimbursement of provident fund.

In news from the economy, highlighting major achievements of the government for 2017-18 year (FY18), the Finance Ministry in its year-end review report has said that overall fundamentals of the economy remained strong in the current financial year, on the back of firm macroeconomic indicators, improvement in World Bank's ease of doing business ranking and sovereign rating upgrade by Moody's.

The report also highlighted various reforms measures taken by the government to sustain growth of the country including Goods and Services Tax (GST), demonetization and recapitalization of public sector banks.

As per the review report, manufacturing, electricity, gas, water supply & other utility services trade, hotels, transport & communication and services related to broadcasting sectors registered growth of over 6.0% in Q2 of 2017-18 over Q2 of 2016-17. The Finance Ministry also stated that enhancing the quality of life remained primary goal for Government when it put into implementation the recommendations of the 7th Central Pay Commission to benefit more than 48 Lakh Central Government Employees.

Economy on Path to Recovery

Amidst a protracted slowdown, India had some reason to cheer after the economic growth measured by the Gross Domestic Product (GDP) rebounded in the September 2017 quarter. The GDP had slid to a three-year low of 5.7% in the June 2017 quarter.

But a sharp revival of 7% in the manufacturing sector pushed up the overall GDP growth to 6.3% in the September 2017 quarter. Gross value Added (GVA) that excludes product taxes and subsidies recovered from 5.6% in June 2017 quarter to 6.1% in September 2017 quarter. However, both agriculture and services continued to remain on a slow wicket.

And here's a note from Profit Hunter:

The auto stocks are on a roll today. The Nifty Auto index is up 4% with all its constituents trading in the green. Maruti Suzuki is among the top gainers on the index - up 6%.

Maruti Suzuki has been the market's darling ever since the broader indices bottomed out in February 2016. After a low of 3,200 in March 2016, the stock traded in a smooth uptrend without any major correction expect for the demonetisation fall. The Nifty index rallied nearly 50% from the February 2016 level, while Maruti soared more than 200% from this low.

Today, the stock is up 6% with strong volumes, with a new life-time high of 9,858. The RSI indicator, which measures the strength of the trend, is trading in the extreme overbought territory - above 89 level. The highest level in the stock's trading history.

So, will the stock now cool off given its overbought condition or will it continue with the upside momentum? Let's wait and watch...

Maruti Suzuki at its Life-time High

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