Sensex Ends Day Flat; PSU Stocks Top Losers
Closing

After opening the day flat, share markets in India witnessed volatile trading activity throughout the day and ended the day on a dull note. Losses were seen across most sectors with stocks in the auto sector and stocks in the consumer durables sector, leading the losses. While stocks in the IT sector gained the most.

At the closing bell, the BSE Sensex stood lower by 10 points (down 0.1%) and the NSE Nifty closed down by 5 points (down 0.1%). The BSE Mid Cap index ended the day down by 0.4%, while the BSE Small Cap index ended the day flat.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was up by 0.2% and the Shanghai Composite was up by 0.2%. The Nikkei 225 was down by 0.3%. European markets were trading on a negative note. The FTSE 100 was down by 0.1%. The DAX too, was down by 0.6% while the CAC 40 was down by 0.2%.

The rupee was trading at Rs 63.63 against the US$ in the afternoon session. Oil prices were trading at US$ 63.4 at the time of writing.

In news from global financial markets. The Bank of Japan (BOJ) trimmed the amount of its government bond purchases, triggering speculation that the Japanese central bank may wind back its monetary stimulus this year.

BOJ Governor Haruhiko Kuroda has repeatedly dismissed the chance of withdrawing stimulus any time soon, even as some policymakers have recently expressed concerns over the perceived demerits of monetary easing, especially the hit on financial institutions' profit margins.

That has led to speculation that the central bank may have to consider raising its yield targets or slow purchases of risky assets later in 2018 and bringing Japan in line with a host of developed nations which have started to tighten policy, partly thanks to a synchronized uptick in global growth.

Minutes of the Japan central bank's last policy meeting released late in December showed that a majority of policymakers agreed that central bank must persistently purse powerful monetary easing. But additional stimulus measures were unnecessary for now.

The BOJ kept its policy steady as preferred by most of its policymakers at the two-day meeting that ended on 31 October 2017.

A majority of the members were of view that extreme monetary easing only to achieve price goal could prevent monetary accommodation from producing intended policy effects. So taking additional monetary easing now would have more demerits than merits.

The minutes also noted that the effects and costs of buying risky assets like exchange traded funds (ETFs) must be looked from every angle even if the move had yet to distort market functions at this point.

The BOJ is lagging behind the US Fed and ECB in exiting the ultra-easy policy. But sooner or later, Japan will have to withdraw the easy money policy.

Just Released: Multibagger Stocks Guide
(2018 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

Moving on to news from the IPO space. Apollo Micro Systems' IPO which launched today was already oversubscribed by 1.35 times on the first day. The offer will be open till 12th January and the company intends to raise Rs 1.5 billion from its public offering.

Over last two decades, Apollo Micro Systems has developed an established brand name, acceptance and recall value in the defence ESDM sector. It is an electronic, electro-mechanical, engineering designs, manufacturing and supplies company and designs, develops and sells high-performance, mission and time critical solutions to Defence, Space and Home Land Security for Ministry of Defence, government controlled public sector undertakings and private sectors.

The price band of the IPO is finalised at Rs 270 to Rs 275 per share.

Should you subscribe to its IPO? We have analyzed this IPO and have released our analysis on the company. You can access it here (subscription required).

IPOs Underperform Broad Market Indices

2017 will undoubtedly be considered as the year of IPOs. The IPO activity is headed for a record. They have garnered more than Rs 650 billion, surpassing the previous record of Rs 375 billion in 2010. This year, the demand has exceeded expectations.

What if one had invested in all the IPOs? How have the IPOs performed in 2017? And, have they outperformed the indices?

According to an article in Business Standard, an investor who bet on the 33 IPOs of 2017 (on a weighted average basis) has seen the value of investment rise by 17%. However, compared to broad market indices, the underperformance is a bitter disappointment.

The above chart clearly shows the underperformance of IPOs.

Interestingly, if you take the Avenue Supermarts (D-mart) and HDFC Life out of the equation from the IPOs above, the gains drop to a meager 6%. Compared to this, the Sensex has gained 27%, while the small-cap index surged more than 50%.

What is the reason for this underperformance?

One of the key reasons IPOs have touched the altitude is due to a surge in the Indian equity market backed by liquidity and increasing investor demand for financial assets. Private equity investors and promoters took advantage of the absurd demand and came out with sky-rocket valuations. This is what we call a valuation bubble in the IPO market.

During such times, it is imperative to be critically selective when investing in IPOs. Carefully analyse each company for its own merits and don't give in to the hype surrounding the public offering.

That's Ankit Shah's approach at Equitymaster Insider. He keeps an eagle-eye on the developments in the IPO space and updates his readers on the big-ticket IPOs.

Ankit and his team of researchers constantly reference this handbook on investing in IPOs. You can download a copy for yourself. It is free. Just click here.

And here's a note from Profit Hunter:

The Container Corporation of India (CONCOR) is among the most active stocks in the market today - up 7%. Let's have a look at its chart.

The stock bottomed out at 840 level in February 2016. It bounced up to 1,220 in August 2016, but slipped again to 840 level; where it had found support from February 2016 low.

It rebounded strongly from the 840 level to form a double bottom pattern. The stock broke out of this pattern in August 2017 to peak at 1,413, its 52-week high.

It then traded between the range of 1,260 - 1,410 for about four months. Today, the stock broke out of this range, on the upside with healthy volumes, to touch a new 52-week high of 1,499.

Stocks usually tend to outperform after they achieve a new 52-week high. To know more read here (subscription required). Now the stock is only a few percentage away from its life-time high of 1,558.

Can we soon see a new life-time high in the stock? Let's see how the price action turns out in the sessions to come.

CONCOR at a New 52-week High
CONCOR at a New 52-week High 

Sensex Trades in Red; Capital Goods Stocks Top Losers
01:30 pm

After opening the day on a positive note, Indian share markets witnessed selling pressure and are currently trading in red. Sectoral indices are trading mixed, with stocks in the capital goods sector and stocks in the consumer durables sector witnessing maximum selling pressure.

The BSE Sensex is trading down 83 points (down 0.2%) and the NSE Nifty is trading down 30 points (down 0.3%). Meanwhile, the BSE Mid Cap index is trading down by 0.5%, while the BSE Small Cap index is trading down by 0.3%. The rupee is trading at 63.75 to the US$.

In news about the economy. The world bank has pegged India to regain the 'fastest growing major economy' tag in 2018.

After losing the top spot to China in 2017, India is set to bounce back to being the fastest growing major economy, with the World Bank estimating GDP growth at 7.3% in 2018 and to 7.5% for the next two years.

India, despite initial setbacks from demonetization and Goods and Services Tax (GST), is estimated to have grown at 6.7% in 2017, according to the 2018 Global Economics Prospect released by the World Bank.

According to the report, India's future is looking good on several fronts. Strong private consumption and services are expected to continue to support economic activity. Private investment is expected to revive as the corporate sector adjusts to the GST, which over the medium term is expected to benefit economic activity.

Just Released: Multibagger Stocks Guide
(2018 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

Moreover, the recent recapitalization package for public sector banks announced by the government is expected to help resolve banking sector balance sheets, and spurring private investment.

The report added that, on the productivity side, India has enormous potential with respect to secondary education completion rate. All in all, improved labor market reforms, education and health reforms as well as relaxing investment bottleneck will help improve India's prospects.

GDP growth will also ease the earnings pressure on Indian corporates, with the market cap to GDP ratio hovering close to 100%.

Market Cap to GDP Ratio Close to 100%

The market capitalization to GDP ratio. Is one of Buffett's favourite indicators of broader market value. The market cap of all the listed companies in the country divided by the gross domestic product (GDP) of the country gives us this ratio.

The idea behind this ratio is simple. Stock prices are derived from expected earnings for corporates and GDP represents revenue of the country. This gives investors an estimate of whether the two are moving in tandem. A ratio above 100% shows overvaluation and one below 50% shows that the market may be undervalued.

Even this ratio is showing valuations reaching its peak levels. India's market cap to GDP ratio reached 95%. This ratio was more than 100% after the 2007 bull run. Stock prices had seen a significant meltdown after that amid the global financial crisis.

2018 will, therefore, be critical for Indian companies to justify their valuations with earnings growth. Investors must remain cognizant about valuations and ensure they take some profits off the table whenever the opportunity is ripe for the picking.

Moving on to news from stocks in the automobile sector. State-run Energy Efficiency Services (EESL) is trying to rope in more states and make a pan-India roll out of 9,500 electric vehicles this year, as the first 500 cars are ready to be delivered in Delhi next week.

EESL gave out a contract in September 2017 to Tata Motors Ltd and Mahindra and Mahindra Ltd for 10,000 cars in total, kicking off India's electric vehicle procurement programme.

These vehicles will be used to replace petrol and diesel cars used by the government and its agencies, which have around half-a-million cars, of which about a third are leased.

The first batch of 500 electric sedans is ready to be delivered to the Central government around January 15 and the supporting charging infrastructure is in place.

EESL is looking to approach more states for the second phase of the electric vehicles, the order for which should arrive by the second half of this year.

Currently, electric vehicle sales are low in India, rising 37.5% to 22,000 units in the year ended 31 March 2016 from 16,000 in 2014-15. Only 2,000 of these were cars and other four-wheelers, according to automobile lobby group Society of Indian Automobile Manufacturers (Siam).

The government wants to see 6 million electric and hybrid vehicles on Indian roads by 2020 under the National Electric Mobility Mission Plan 2020.

The government is targeting to have all cars propelled by electric engine by 2030. The target is more daunting than in many advanced countries.

According to the industry, the 2030 target would require eight to ten times the global stock of such vehicles. India would need to sell more than 10 million electric cars in 2030, compared to 5,000 electric vehicles India had on the road in 2016.

Another issue is the price of the lithium ion battery, which constitutes 30% to 40% of the cost of the car. For this plan to succeed, the price of the battery needs to come down.

The auto industry is already facing regulatory headwinds. The shift from BS-IV emission norms to BS-VI has been two years ahead of schedule without an intermediate stage. The government, if it is serious about such ambitious targets, should offer the necessary infrastructure support and do its bit for a smooth transition.


Sensex Trades Marginally Lower; Consumer Durable Stocks Witness Selling
11:30 am

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a negative note with stocks in the consumer durables sector and capital goods sector witnessing maximum selling pressure.

The BSE Sensex is trading down 107 points (down 0.3%) and the NSE Nifty is trading down 41 points (down 0.4%). The BSE Mid Cap index is trading down by 0.6%, while the BSE Small Cap index is trading down by 0.5%. The rupee is trading at 63.82 to the US dollar.

In the news from commodity markets, crude oil is witnessing buying interest today. Prices are seen hitting their highest levels since 2014 on the back of ongoing production cuts led by OPEC.

Note that crude oil prices have been on a rising trend this year. However, this is not good news from India's perspective.

As we wrote in a recent edition of The 5 Minute WrapUp...

  • Fiscal revenues are at risk. Particularly if the government is forced to consider a cut in fuel excise duties due to a rally in oil prices. In recent times, a sharp jump in excise collections has helped indirect tax collections. Any risk to revenues and subsequent threat to the fiscal deficit target at 3.2% of GDP would require tighter spending cuts.

    Secondly, the impact on inflation needs to be monitored. This narrowing the central bank's scope for further rate cuts.

    Lastly, low crude prices were a positive growth impetus through higher discretionary incomes for households and lower input costs for manufacturers and farmers. Part of this benefit is likely to be eroded as retail fuel costs rise. As for corporations, expansion in gross margins caused by falling commodity prices is also likely to wane, pressurising profitability.

You can read the entire article here.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency, and commodity markets.

Just Released: Multibagger Stocks Guide
(2018 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

In the news from the IPO space, Apollo Micro Systems is going to launch its IPO today. The offer will be open till 12th January and the company intends to raise Rs 1.5 billion from its public offering.

The price band of the IPO is finalised at Rs 270 to Rs 275 per share.

Over last two decades, Apollo Micro Systems has developed an established brand name, acceptance and recall value in the defence ESDM sector. It is an electronic, electro-mechanical, engineering designs, manufacturing and supplies company and designs, develops and sells high-performance, mission and time critical solutions to Defence, Space and Home Land Security for Ministry of Defence, government controlled public sector undertakings and private sectors.

Healthy growth in revenues, high return on equity, and strong R&D capabilities are some key factors that stand out for Apollo Micro Systems Ltd. The company's IPO comes at a time when ESDM markets are seeing double digit growth. Also, India is now seen as a favorable destination for ESDM markets. Apollo Micro Systems is well placed to benefit from these factors, among others.

Should you subscribe to its IPO? We have analyzed this IPO and have released our analysis on the company. You can access it here (subscription required).

Speaking of IPOs, the demand for IPO's has reached sky-high levels. Avenue Supermarts was seen as the first company last year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies, among others.

IPO Subscription Times (2017)

This euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

To know more, you can download our FREE report - How to Get Rich with IPOs. This guide will show you how to safely profit from the ongoing IPO rush.


Sensex Opens Flat; Healthcare & Energy Stocks Gain
09:30 am

Majority of Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.23% while the Hang Seng is up 0.17%. The Nikkei 225 is trading down by 0.22%. Wall Street's major indices extended the New Year rally to close at record levels on Tuesday on investor optimism ahead of quarterly earnings reports and hopes for easing tensions with North Korea.

Back home, India share markets opened the day on a flattish note. The BSE Sensex is trading higher by 23 points while the NSE Nifty is trading higher by 1 point. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.2%.

Sectoral indices have opened the day on a mixed with healthcare stocks and energy stocks witnessing maximum buying interest. While, consumer durables sector and capital goods sector opened the day in red. The rupee is trading at 63.47 to the US$.

Bank stocks have opened the day on a mixed note with Karur Vysya Bank and Dhanlaxmi Bank being the most active stocks in this space. As per an article in a leading financial daily, Axis Bank is looking to acquire a life insurance business. The bank's executive committee had approved the move in the December quarter.

Among possible targets are IDBI Federal Life Insurance and Tata AIA, the reports noted.

With a strong retail franchise and bancassurance experience with partner Max Life Insurance, in which it has a 4.99% stake, Axis Bank is well placed to explore insurance opportunities.

One shall note that, Axis Bank raised about Rs 117 billion from Bain Capital through a sale of shares and warrants in November last year.

Just Released: Multibagger Stocks Guide
(2018 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

Reportedly, Axis Bank's decision was triggered by Max's promoters seeking to exit life insurance through a merger with HDFC Life Insurance, although this move later collapsed. However, after Axis Bank bid for IDBI Federal Life Insurance, preliminary talks did take place with Max.

Axis Bank share price opened the day down by 0.3%.

In another development, the Telecom Commission on Tuesday accepted recommendations by the industry regulator to ease current spectrum holding caps, smoothening the way for consolidation triggered by Reliance Jio Infocomm Ltd's September 2016 launch.

Reportedly, the commission approved raising the overall spectrum cap per operator in a telecom circle, or zone, to 35% from the current limit of 25%.

It suggested scrapping the current intra-band cap on operators that limited them to hold only up to 50% spectrum in a single band in a circle.

Further, the commission also accepted the Telecom Regulatory Authority of India's suggestion to set a cap of 50% on the combined spectrum holding in the sub-l GHz bands (700MHz, 800MHz and 900MHz bands) in a circle.

Under current provisions, an operator can hold up to 25% of the total spectrum assigned across all bands in a circle and 50% of total spectrum within a given band in a circle. The country is divided into 23 telecom circles.

As per the reports, beneficiaries of the move will include Mukesh Ambani's Reliance Jio, Anil Ambani's Reliance Communications Vodafone and Idea Cellular.

Further, the move will let Jio buy Reliance Communications' remaining spectrum in the 850 Mhz band. R-Com has already sold a significant part of its airwaves last month to Jio but needs to sell more to settle its massive Rs 450-billion debt. The increase in overall spectrum cap will facilitate mergers and acquisitions in the sector.

While an increase in spectrum caps is good news, it will also mean that telcos may stay clear of any spectrum auctions in the future, the reports noted.

One shall note that, the whole telecom business has been an underwhelming story so far. While the telecom subscriber base has increased from 300 million in 2008 to 1.2 billion in 2017, investors have little to cheer.

The BSE Sensex has gone up 3.25 times in nine years, but the BSE Telecom Index has not moved an inch from its levels of 2008.

Telecom Sector: A decade of Underperformance


Telecom companies are straddled with high debt, intense competition, and lack of pricing power. High spectrum costs and regulatory issues have hampered the sector.

While consumers have benefited from low costs and new players fighting for their share, investors have suffered.

Going forward, whether the situation will change in the future will be the key thing to watch out for.


Indian Indices Continue Rally, CRISIL Maintains GDP Outlook, and Top Stocks in Action
Pre-Open

On Tuesday, share markets in India opened in flat and ended on a positive note.

The BSE Sensex closed higher by 90 points to end at 34,443, at all -time high levels. While the broader NSE Nifty ended the day higher by 13 points to close at 10,637.

Among BSE sectoral indices, realty index rose the most by 2.9%, followed by consumer durables stocks at 0.8%. Coal India and Yes Bank were among the top gainers.

Top Stocks in Action Today

Coal India share price is likely to be in focus today after reports that the company has raised prices of thermal coal by an average 9%. Reportedly, the decision was taken at a board meeting held on Monday while revised prices would be effective from today. It will make power generation costlier by a similar percentage. Cost of cement and fertiliser production is also expected to rise as a result.

Tata Motors share price is among the stocks to watch today as the company reported record Jaguar Land Rover global sales in 2017 Jaguar Land Rover's sales rose 7% to a record 621,109 vehicles in 2017 but Britain's biggest carmaker said it faced tough conditions in its home market due to weakening consumer confidence and a planned diesel tax rise on new cars.

The company has embarked on a major turnaround plan since being bought by the Tata group in 2008. This includes investment in new models and expansion of production with the aim of building around 1 million vehicles a year by the turn of the decade.

CRISIL Maintains GDP Projection

Rating agency, CRISIL in its latest report has maintained its projection of India's economic growth in 2018-19 to 7.6% on the low base.

The rating agency attributed the continuing slowdown to the after-effects of the demonetisation exercise, the Goods and Services Tax (GST) implementation and weakness in agriculture.

The CRISIL note comes days after the Central Statistics Office (CSO) came out with its First Advance Estimates of National Income, 2017-18, in which it stated that Indian economy is expected to grow at a four-year low of 6.5% in the current fiscal year 2017-18, as against 7.1% in the fiscal year 2016-17.

The rating agency has stated that given the low base and the expected waning of the GST impacts going ahead, they retain their forecast of 7.6% real GDP growth in fiscal 2019, with private consumption leading the recovery.

It noted that private consumption is expected to grow 6.3% in FY18, as against 8.7% a year before, and will remain the largest contributor to the country's GDP at 55.7%.

Further, it said that in FY19 as well, growth will continue to be consumption-led as inflation will be under control and interest rates are expected to be soft. It also said that increase in government employees' salaries with the implementation of the seventh pay panel recommendations will also help. It added that the government's focus on spending towards agriculture and rural themes will also be of help.

According to the report, the government's ambitious Rs 2.11 trillion recapitalisation plan over two years will ensure that the state-run banks are well positioned to support the growth. It also observed that support to growth will also come from the external sector where the global recovery should help exports, which had faced some headwinds after the GST implementation.

IPO Buzz

Apollo Micro Systems is going to launch its IPO today. The offer will be open from 10th January till 12th January and the company intends to raise Rs 1.5 billion from its public offering.

The price band of the IPO is finalised at Rs 270 to Rs 275 per share.

Apollo Micro Systems Ltd is Hyderabad based company engaged in the business of electronic, electro-mechanical, engineering designs, manufacturing and supply. The company designs, develops and sells high-performance, mission and time critical solutions to Defense, Space and Home Land Security for Ministry of Defense, government controlled public sector undertakings and private sectors.

The company offers custom built COTS (commercially off-the shelf) solutions based on specific requirements to defense and space customers.

We have analyzed this IPO and have released our analysis on the company. You can access it here. (Subscription required)

Global Markets Rally on Upbeat Economic Data

European markets were higher on Tuesday morning, as investors reacted to better-than-expected economic data.

Germany's industrial production and exports were both stronger-than-anticipated in November, showing continued rising growth in Europe's largest economy.

In commodities, oil prices rose to their highest level since May 2015 on Tuesday amid ongoing OPEC-led production cuts and weaker-than-anticipated U.S. crude inventories.