Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  


Sensex Rises 300 Points; Bharti Airtel & Coal India Top Gainers
Mon, 11 Mar 12:30 pm

Share markets in India are presently trading on a positive note. Barring IT sector, all sectoral indices are trading in green with stocks in the telecom sector, automobiles sector and oil & gas sector witnessing maximum buying interest.

The BSE Sensex is trading up by 306 points (up 0.8%), while the NSE Nifty is trading up by 109 points (up 1%). The BSE Mid Cap index is trading up by 1.5% and the BSE Small Cap index is trading up by 1.3%.

Speaking of share markets in general, what are the factors that drive stock prices higher?

As per research analyst, Ankit Shah, one of the key factors is earnings growth. When a company delivers robust growth in earnings, the stock price is destined to rise higher.

Another factor that drives stock prices higher is the expectation of higher future earnings. Stock prices rise ahead of earnings, resulting in an expansion of the valuation multiple. In the NSE 500 price-to-earnings multiple chart he presented on Friday, it was apparent that most of the gains over the last five years have come from expansion in valuations in anticipation of higher future earnings.

A third factor that plays a key role in driving stock prices higher is liquidity conditions. If money keeps pouring into the stock markets, stock prices are likely to trend higher.

The key driver of the bull run in 2017 was a flood of domestic liquidity into the Indian stock markets.

Have a look at the chart below which shows the inflow of domestic money into equity mutual funds.

Inflows into Equity Mutual Funds at 25-Month Low

As you can see, the net monthly inflows kept rising through 2016 and surged to unprecedented highs in 2017. But the inflows slowed in 2018. After October 2018, the inflows into equity mutual funds have been dropping every consecutive month. In fact, in February 2019, the net inflows into equities, including those linked to savings scheme funds, declined to Rs 5,122 crore. That's a 17% drop from January 2019, and a steep 69% plunge from a year ago.

So, do you think there are good times ahead for Indian stock markets? We will keep you updated on the developments.

Meanwhile, look out for the stocks that will rise fast when the tide of the market turns up.

In the news from the currency space, the Indian rupee extended its early gains and is currently trading at 69.89 per US$.

The domestic currency went on to hit a fresh two-month high against US dollar, tracking gains of its Asian peers and ahead of key consumer price inflation (CPI) data.

The dollar came under pressure after disappointing non-farm payrolls number that showed the US economy added 20,000 jobs in February compared to 311,000 jobs in the previous month. Pressure was also seen after Federal Reserve Chairman Jerome Powell said the central bank was in no hurry to change interest rates.

In the last few sessions, rupee rose primarily on the back of fund inflows. According to reports, the rupee has declined 0.2% against the US dollar so far this year, while foreign investors have bought $2.97 billion in equity and sold $1.59 billion in debt market.

Moving on to the news from the aviation space, Jet Airways share price is witnessing buying interest today after reports stated that the company has received fresh loans of Rs 20.5 billion from Punjab National Bank (PNB).

As per an article in The Economic Times, the airline raised foreign currency term loans worth Rs 11 billion and a non-fund-based credit facility of Rs 9.5 billion from PNB. Jet Airways will use the credit facility for its working capital needs.

Here's an excerpt from the article:

  • If the loan proceeds are used to pay dues to lessors and pare the company's debt, then this may improve Jet Airways' credit rating.

    The loan has been raised in dollars at a stronger rupee as compared to the value of rupee now. So, there is a cost arbitrage, which could help the company to repay larger amounts of rupee loans.

Furthermore, the board of directors of Etihad Airways, which owns 24% stake in the company, will meet today to discuss a revival plan for the cash-strapped airline. Sources said Etihad will consider fund infusion into Jet under bank-led provisional resolution plan and the final decision will be taken later today.

Last week, the debt-laden airline was forced to ground four more aircraft due to non-payment of lease rental. With this, a total of 25 aircraft have been grounded in less than a month for unpaid dues, including the newly introduced Boeing 737 Max, Boeing 737 NG and Airbus A330 planes.

The airline has been compelled to cancel nearly 200 domestic flights every day, approximately a third of the daily schedule of 600 flights.

Jet Airways had tried to lease or sell some of its owned aircraft to raise money that could help pare its over Rs 80 billion debt. But the plans, including a wet leasing deal with TruJet for its ATRs, got stuck.

As per an article in a leading financial daily, aircraft lessors have been supportive of the company's efforts in this regard. The company is also making all efforts to minimize disruption to its network due to the above and is proactively informing and re-accommodating its affected guests.

In another news, aviation regulator, Directorate General of Civil Aviation (DGCA) will seek information from Boeing as well as Jet Airways and SpiceJet operating Boeing 737 MAX aircraft in the wake of plane crash in Ethiopia.

Jet Airways share price and SpiceJet share price are presently trading up by 3.1% and 0.8%, respectively.

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


Equitymaster requests your view! Post a comment on "Sensex Rises 300 Points; Bharti Airtel & Coal India Top Gainers". Click here!