Strong Start to the Week; HDFC Hits All Time High
Closing

Indian share markets continued to witness buying momentum in the afternoon session and closed on record highs. At the closing bell, the BSE Sensex closed higher by 251 points and the NSE Nifty finished higher by 60 points. The S&P BSE Mid Cap finished down by 0.1% while S&P BSE Small Cap finished up by 0.3%. Gains were largely seen in consumer durables stocks, bank stocks and power stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.26%, while the Shanghai Composite & the Hang Seng fell 0.54% and 0.08% respectively. European markets are lower today with shares in Germany off the most. The DAX is down 0.30% while France's CAC 40 is off 0.25% and London's FTSE 100 is lower by 0.05%.

Rupee was trading at Rs 63.41 against the US$ in the afternoon session. Oil prices were trading at US$ 64.22 at the time of writing.

Vedanta's oil and gas vertical Cairn India is planning to invest Rs 370 billion to ramp up crude production at its Barmer oil fields in Rajasthan.

The investment will be made over the next few years, which will enhance the production of crude oil.

The programme will help the company in achieving the production target of 5 lakh barrels oil per day (BOPD) from the Barmer oil fields.

Vedanta share price finished the day down by 0.4% on the BSE.

In news about the economy. According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Wholesale Price Index (WPI) decelerated to 3.58% in December, a marginal drop from of 3.9% in November 2017.

Wholesale inflation rate, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

The index portrays new series of WPI data released by the government earlier this fiscal, with 2011-12 as the base year, replacing existing the base year of 2004-05.

Food articles turned out to be major drivers as the data showed that inflation of wholesale food articles fell to 4.7% in October, as against a 6% rise in the previous month. However, fuel inflation was up by 9.1% as compared to a rise of 8.8% in November.

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Data released by the Central Statistics Office (CSO) last week showed inflation measured by the Consumer Price Index (CPI) accelerated to a 17-month high at 5.2% in December from 4.8% a month ago.

This is the final set of data that finance minister will have before him as he sits down to finalize the Union budget for 2018-19, to be presented on 1 February.

Moving on to news from engineering sector. As per an article in The Economic Times, Larsen & Toubro (L&T) today said its construction arm has won contracts worth Rs 13.1 billion in various business segments.

Its Water & Effluent Treatment Business has won orders worth Rs 6.31 billion including a contract from Bihar Urban Infrastructure Development Corporation Ltd to lay a new sewerage network and construct pumping stations at Saidpur.

The Buildings & Factories Business has won an order worth Rs 3.4 billion. Besides, its Power Transmission & Distribution Business has bagged orders worth Rs 3.39 billion.

L&T share price finished the day down by 0.1% on the BSE.

Moving on to news from finance sector. HDFC share price surged 6.2% in today's trade and crossed Rs 3 trillion market capitalisation mark for the first time.

The company plans to raise up to Rs. 130 billion via QIP and preference shares. On January 13, HDFC said its board has approved raising up to Rs. 130 billion primarily to maintain its holding in its banking arm and enter segments like stressed assets and health insurance.

HDFC's fund-raising is mainly aimed at investing in a preferential share issue by HDFC Bank, which will help the mortgage lender maintain its about 21% stake in the bank.

Last month, HDFC secured board approval to raise as much as Rs 130 billion. It said it may need capital for health insurance and acquisition of stressed assets in the real estate sector.

The preferential share sale announced on Saturday comprises 3.9% of the company's enhanced share capital after the issue.

A GIC affiliate will buy about 30.1 million shares, while the administrator of the pension plan for Canada's Ontario municipal employees is buying 10 million shares. The KKR affiliate will buy about 9.3 million shares.

Pharma stocks finished the day in red with Orchid Pharma share price and Cadila Healthcare share price leading the losses.

The BSE healthcare index was the worst performing sector in 2017. In fact, the sector has underperformed over the past three years.

While 2018 earnings of pharma companies are expected to be better considering the low earnings base in 2017, certain challenges still remain.

The valuations of the top five companies by market capitalization on BSE healthcare tell a different story though. Average Price to Earnings Ratio of the top five companies stands at 36. Considering the headwinds these companies are facing, it certainly seems rich.

Valuations of Top Pharma Companies Still High

An improved earnings performance in 2017 will certainly get these valuations to reasonable levels, provided the share price remains the same. But, the headwinds for the sector still exists.

Quicker ANDA approvals has intensified competition amongst generic players. Also, the recent warning letter to Lupin shows the regulatory overhang hasn't been completely resolved yet.

2018 looks likely to be another challenging year for the sector. The uncertainties make it important to be stock specific in the sector.

And here's a note from Profit Hunter:

Housing Development Finance Corporation (HDFC) Ltd is among today's top gainers in the Nifty 50 Index - up 6%. Let's have a look at its chart.

The stock bottomed around 1,200 in January this year and traded in a strong uptrend tracking the rising channel line. In July, the stock resisted from the channel's resistance after hitting a life-time high of 1,800. It then consolidated for more than a month to trade near the channel's support line. It broke down of the channel in September and traded in a range of 1,650 - 1,800.

Today, the stock broke above the range and soared 6% with heavy volumes. It hit a new life-time high of 1,886.

Does this indicate that the stock has now resumed its uptrend? Let's wait and watch.

HDFC Ltd Surged 6% for the Day
HDFC Ltd Surged 6% for the Day 

Indian Indices at All Time Highs; WPI Drops in December
01:30 pm

After opening the day in green, share markets in India have continued the momentum and are presently trading near all-time high levels. Sectoral indices are trading on a mixed note, with stocks in the banking sector and stocks in the metal sector leading the gains.

The BSE Sensex is up by 250 points (up 0.7%) and the NSE Nifty is trading up by 60 points (up 0.6%). Meanwhile, the BSE Mid Cap index is trading down by 0.1%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 63.46 to the US$.

In news about the economy. According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Wholesale Price Index (WPI) decelerated to 3.58% in December, a marginal drop from of 3.9% in November 2017.

Wholesale inflation rate, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

The index portrays new series of WPI data released by the government earlier this fiscal, with 2011-12 as the base year, replacing existing the base year of 2004-05.

WPI Inflation Decreases in December

Food articles turned out to be major drivers as the data showed that inflation of wholesale food articles fell to 4.7% in October, as against a 6% rise in the previous month. However, fuel inflation was up by 9.1% as compared to a rise of 8.8% in November.

Data released by the Central Statistics Office (CSO) last week showed inflation measured by the Consumer Price Index (CPI) accelerated to a 17-month high at 5.2% in December from 4.8% a month ago.

This is the final set of data that finance minister will have before him as he sits down to finalize the Union budget for 2018-19, to be presented on 1 February.

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The latest, RBI Monetary Policy Committee (MPC) forecasted that retail inflation will hover around 4.2-4.6% between October-March this year, higher than the previous projection of 4-4.5%.

The RBI retained its neutral policy stance, citing uncertainty on the future trajectory of inflation because of several uncertainties, flagging possible return of inflationary pressures. However, it also kept the door ajar for a future rate cut if incoming data were conducive. While the government has been eyeing a sharp cut in interest rates, RBI has maintained its cautious stance.

Moving on to news from stocks in banking and finance sector. HDFC share price is in focus today after the NBFC (non-banking financial corporation) announced its fundraising plan.

HDFC was among the top movers on the indices today after the company's board approved fund raising worth over Rs 113 billion by issuing equity shares at Rs 1,726.05 per share.

The NBFC plans to issue shares to investors including global private equity firms GIC Singapore, KKR and Premji Invest.

HDFC's committee of directors approved the issuance of equity shares on a preferential basis.

Further, its board said it will further issue such number of equity shares through Qualified Institutional Payment (QIP) to raise up to Rs 18.9 billion.

This would take the total fund raising to over Rs 130 billion.

This will be the first equity raising by the country's largest pure-play mortgage lender in over a decade.

At the time of writing, HDFC share price was trading up by 2%.


Indian Indices Continue Momentum; Banking Sector Up 1.1%
11:30 am

Stock markets in India are presently trading on a positive note. All sectoral indices are trading on a positive note with stocks in the banking sector and metal sector witnessing maximum buying interest.

The BSE Sensex is trading up 306 points (up 0.9%) and the NSE Nifty is trading up 80 points (up 0.8%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up by 0.6%. The rupee is trading at 63.41 to the US dollar.

Market participants are tracking IDFC Bank share price and Capital First share price. The two companies have announced their merger to form a combined entity.

The boards of directors of IDFC Bank and Capital First at their respective meetings approved a merger of Capital First with IDFC Bank. As per the agreement, IDFC Bank will issue 139 shares for every 10 shares of Capital First. V Vaidyanathan, currently the Chairman and MD of Capital First, will succeed Rajiv Lall as MD and CEO of the combined entity.

Following the merger, the combined entity will have assets under management (AUM) of Rs 880 billion, branch network of 194 and customer base of over 5 million.

At the time of writing, Capital First share price was trading up by 4.7%, while IDFC Bank share price was trading down by 1.6%.

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In other news, as per a leading financial daily, the World Economic Forum (WEF) has ranked India at 30th position on a global manufacturing index. This is below China's 5th place but above other BRICS peers, Brazil, Russia and South Africa.

As per the rankings, Japan has been found to have the best structure of production and is followed by South Korea, Germany, Switzerland, China, Czech Republic, the US, Sweden, Austria and Ireland in the top 10.

The reports stated that the 25 leading countries are in the best position to gain as production systems stand on the brink of exponential change.

India has been placed in the 'Legacy' group along with Hungary, Mexico, Philippines, Russia, and Thailand, among others. The countries under this group are ones which have strong current base, but are at risk for future.

Note that while India has jumped 30 places to 100 in the World Bank's Ease of Doing Business rankings, there isn't much to cheer about the manufacturing activity.

The Nikkei manufacturing index recorded a low of 50.3 in October 2017 as compared to 51.2 in the previous two months, as can be seen from the chart below. Also, new export orders were at their lowest level since September 2013.

Slowdown in Manufacturing Activity Post GST

Long-term planning for the manufacturing base could be one of the factors that can aid the manufacturing activity in coming years. It would be interesting to track the developments in this space and see how things pan out in the coming period.


Sensex Opens 180 Points Up; ICICI Bank & HDFC Top Gainers
09:30 am

Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.15% while the Hang Seng is up 0.75%. The Nikkei 225 is trading up by 0.23%. Wall Street continued its rally on Friday with record closing highs as the fourth-quarter earnings season kicked off with solid results from banks and robust retail sales drove investor optimism about economic growth.

Back home, India share markets opened the day on a strong note led by gains in ICICI Bank, HDFC, Reliance Industries and ITC. The BSE Sensex is trading higher by 183 points while the NSE Nifty is trading higher by 47 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.4% & 0.7% respectively.

Barring IT stocks, all sectoral indices have opened the day in green with metal stocks and bank stocks witnessing maximum buying interest. The rupee is trading at 63.53 to the US$.

Telecom stocks have opened the day on a mixed note with Tata Teleservices and Himachal Futuristic being the most active stocks in this space. As per an article in a leading financial daily, Idea Cellular Ltd and Vodafone Group Plc's Indian unit are likely to start operating as a single unit from April this year.

Post completion of the merger process, the two companies will create the world's second largest and India's largest telecom operator, surpassing Bharti Airtel Ltd.

Reportedly, it will have almost 400 million customers with 35% customer share and 41% revenue market share. It will have a revenue of Rs 816 billion and an operating profit of Rs 244 billion.

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On Friday, the National Company Law Tribunal (NCLT) approved the proposed merger between Vodafone India Ltd and Idea Cellular.

The two companies now require only the Department of Telecommunications's (DoT) approval to proceed with the merger.

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.

Idea Cellular share price opened the day down by 1.2%.

Moving on to the news from information technology sector. Infosys share price opened on an encouraging note after the company reported net profit of Rs 51.3 billion in the quarter ended December 2017, up 38.3%, compared to Rs 37.1 billion during the same period last year.

Revenue of the company rose by 3% to Rs 177.9 billion keeping FY18 revenue growth forecast at 5.5-6.5%.

Infosys stated that during the December 2017 quarter, it had signed an Advance Pricing Agreement with the US administration that had led to reversal of income tax expense provision of Rs 14.3 billion.

Consequently, profit for the period increased and therefore led to an increase in Basic earnings per equity share by RS 6.3 for quarter ended 31 December 2017.

One shall note that, this is the first quarterly results since Salil Parekh took charge as the new CEO and MD at Infosys on 2 January.

Mr. Parekh's appointment came after the abrupt resignation of Vishal Sikka, who had quit in August following public spat with co-founders led by N R Narayana Murthy.

The founders had alleged corporate governance lapses and questioned the US$200 million Panaya acquisition under previous management and also flagged the high severance pay to former employees.

Under Mr. Parekh, Infosys is now attempting to bring the focus back on growth and business, the reports noted.

On a sequential basis, the company's net profit rose 37.6%, while revenues were up 1.3% in rupee terms.

In US dollar terms, Infosys' net profit grew to US$796 million in the said quarter, while revenues were at US$2.7 billion from the year-ago period.


Strong Global Markets; IIP Growth; Infosys' Strong Q3 Performance, IDFC Merger & Other Top Cues to Sway the Market Today
Pre-Open

Indian share markets continued to surge in the previous session and closed at record highs amid gains in international markets, continuous foreign fund inflows and positive corporate earnings outlook.

At the closing bell last week, the BSE Sensex stood higher by 89 points (up 0.3%) and the NSE Nifty closed higher by 30 points (up 0.3%). The BSE Mid Cap index ended the day down by 0.2%, while the BSE Small Cap index ended the day up by 0.1%.

November IIP Growth Rises

As per an article in The Livemint, Industrial production growth zoomed to a 17-month high of 8.4% in November 2017 on the back of robust performance of manufacturing and capital goods sectors. The factory output, measured in terms of Index of Industrial Production (IIP), grew 5.1% in November 2016, as per data released today by the Central Statistics Office (CSO).

This is the final set of data that finance minister Arun Jaitley will have before him as he sits down to finalize the budget for 2018-19, to be presented on 1 February.

CSO on 5 January projected economic growth to decelerate to 6.5% in 2017-18 from 7.1% last year. Growth will accelerate to 7% in the second half of the year (October-March) from 6% in the first half (April-September), CSO said.

Top Stocks to Watch Out

IDFC Bank share price is expected to be in limelight today after it was reported that the bank and nonbanking financial company (NBFC) Capital First are likely to announce a merger creating a larger institution with about Rs 1.4 trillion of assets and nearly 6.4 million customers. The union could also act as a springboard for IDFC Bank looking to quickly grow its assets.

Infosys share price finished the previous session up by 0.3% and is expected to see some momentum today as well after the company reported a whopping 37.6% growth in Q3 profit, with retaining full year revenue guidance. The profit for the quarter, which was largely driven by tax reversal, stood at Rs 51.29 billion against Rs 37.26 billion in previous quarter.

In news from automobile sector, Bajaj Auto is seeking to increase its market share from about 17-18% to around 24-25% this year strengthening its portfolio of motorcycles with several new launches. Having introduced two new models under the Discover range of motorcycles, Bajaj Auto plans to add two new Avenger Cruiser motorcycles shortly and follow this up with several other launches during the year.

Indusind Bank share price is expected to be in limelight today after the bank reported a 24.73% jump in its December quarter net profit on the back of higher net interest income and other income. As a percentage of total loans, gross NPAs stood at 1.16% as compared to 1.08% in the previous quarter.

Telecom stocks are expected to witness some action today. As per an article in The Economic Times, Bharti Airtel tied up with e-commerce platform Amazon India to offer one-year subscription of Amazon Prime free of cost to its postpaid subscribers. Meanwhile, the National Company Law Tribunal has approved the proposed merger between Vodafone India Ltd and Idea Cellular Ltd to create India's largest mobile wireless company and now require only the Department of Telecommunication's approval to proceed with the merger.

Tata Steel share price could see some momentum today after The Economic Times reported that the company is set to launch a US$1-billion bond issue as part of a mega financing exercise to streamline its international balance sheet before its European joint venture with Thyssenkrupp kicks off.

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IPO Segment

Newgen Software Technologies Limited, a software products company, will be launching its initial public offering (IPO) which is scheduled to open on Tuesday, January 16, 2018 and close on Thursday, January 18, 2018, with a price band of Rs 240 to Rs 245 per equity share of face value of Rs 10 each of the Company.

The IPO comprises of Fresh Issue of up to Rs 950 million by the Company and an offer for sale by the Selling Shareholders. The Offer for Sale consists of up to 13,453,932 equity shares. The minimum Bid lot is 61 Equity Shares and in multiples of 61 Equity Shares thereafter.

The net proceeds of the fresh issue will be utilised towards -purchase and furnishing of office premises near Noida and general corporate purposes.

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 2017 IPO rush.

However, The market 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.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space. For every Reliance Power - like issue, there have been issues like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders. A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it.

Bitcoin Hits a Rough Patch

Bitcoin prices has fallen double digits over the last week amid a slew of bad news, and one strategist said this loss of momentum could prove negative for the cryptocurrency in the near term.

The cryptocurrency market has remained under pressure this week, as prices of digital currencies, including bitcoin (BTC) and ripple, tumbled nearly 20% between January 5 and 12 amid talks that South Korea was mulling a trading ban on digital currencies.

Some analysts feel such an action by Seoul may push other nations to consider similar moves. A Wall Street consultancy also predicted a major crash in the cryptocurrency market this year.

Meanwhile, as per the media reports, Mukesh Ambani's telecom venture Reliance Jio may launch its own cryptocurrency, JioCoin, shortly. Reportedly, the mandate of a 50-member team is working on blockchain technology, which is being helmed by Ambani's elder son Akash.

Global Markets on Strong Footing

Most Asian stock markets resumed their positive start to the year yesterday with Hong Kong extending its record run to 14 days while the euro held gains after the previous day's jump.

Markets were once again provided a strong lead from Wall Street where all three main indexes advanced to new all-time highs, with energy firms riding a surge in oil prices. Confidence across world markets is booming on the back of a healthy economic outlook and optimism about corporate profits heading into the latest earnings season.

Meanwhile, European stocks ended in positive territory on Friday, as investors digested new earnings, data and a political breakthrough in Germany. US stocks continued to soar making their best start to the year since 2003.

Oil Prices Rise

Crude oil prices rose last week, ending the week at the highest level in more than three years.

Prices have surged due to a weak US dollar, falling oil inventories, and OPEC's supply quota deal with Russia. Political upheaval in Iran also helped oil's rally.

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.