Will Low Inflation Encourage RBI to Cut Rates?
Podcast

In a week full of macroeconomic developments, anxiety over third quarter results and trade war concerns, we take a look at the key topics that swayed the markets this week.

Indian stock markets traded flat-to-positive this week. Market participants were cautious ahead of the quarterly results. And global concerns over US-China trade tensions capped gains.

We talk about the recently released macroeconomic data. India's retail inflation and wholesale inflation fell to multi-month lows in December amid signs of weakening economic recovery. With the fall in inflation numbers, top business groups urged the RBI to cut its benchmark interest rate.

So, will this request fall on deaf ears, or would the newly appointed Governor pay the request some heed?

Meanwhile, India's trade deficit also narrowed in December.

Then, we also talk about Jet Airways woes and what lies ahead of the airline company.

At the end of this podcast episode, we will talk about free online summit to be held this month. It will help you know how to amass life-changing wealth from India's rise to the pinnacle it last occupied nearly 2,000 years ago!

Tune in!


Sensex Ends Marginally Higher; Oil & Gas Stocks Witness Buying
Closing

Share markets in India ended their trading session marginally higher. Sectoral indices ended on a mixed note with stocks in the energy sector trading in the green and stocks from the telecom sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood higher by 13 points (up 0.03%) and the NSE Nifty stood flat. The BSE Mid Cap index ended the day down 0.8%, while the BSE Small Cap index ended the day down by 0.7%.

The rupee was trading at 71.14 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.5% and the Nikkei 225 was up by 1.3%.

Stocks from the auto sector were trading on a negative note today with Bharat Forge and TVS Motors witnessing most of the selling pressure.

Speaking of the auto sector, note that one out of every three household in India is a buyer of their products. They own some of the cult brands in Indian automobile space.

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India is Set to Regain Its Lost Riches

REBIRTH OF INDIA India was the world's richest country nearly 2,000 years ago. In fact, we were referred to as the "Sone Ki Chidiya."

If you are like us who believe that India has the potential to be once again the "Sone Ki Chidiya" to the world again…and regain its status as one among the greatest countries on earth…

Then, I encourage you to join other true Indians in the first-ever mega summit "REBIRTH OF INDIA" for FREE.

This is our LARGEST EVER FREE PUBLIC SUMMIT available for EVERY INDIAN CITIZEN.

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------------------------------

They have formidable R&D teams. They have been through several economic cycles over decades. Few have even visited near-bankruptcy in the past and come out successful.

Yet, some of the biggest passenger car, commercial vehicle, and two-wheeler companies in India have seen a huge dent in valuations in recent times. This is evident in the chart below:

Bluechip Auto Are Stocks Way Off Their Valuation Peaks

Tanushree Banerjee, Co-head of Research at Equitymaster believes, this could be the opportunity long term investors were waiting for.

In the news from pharma space, Aurobindo Pharma share price was in focus today as the company said it had acquired seven marketed oncology injectable products from Spectrum Pharmaceuticals for about US$ 300 million.

This includes an upfront cash payment of up to US$ 160 million and up to US$ 140 million in milestones.

In the news from airlines space, Jet Airways share price is in focus today as promoter Naresh Goyal has countered partner Etihad Airways' proposal to increase stake in the airline with an offer to invest Rs 7 billion.

As per the news, he has also proposed to pledge his entire shareholding with lenders while seeking to maintain at least a 25% stake. This is done so to resist pressure to reduce his holding and step aside.

Note that Etihad Airways is seeking a hard bargain, given the imminent risk of the grounding of aircraft by lessors, thereby triggering a rapid cessation of operations.

As per the news, a report suggested that Etihad Airways CEO Tony Douglas has communicated to the lead lender that it will not pay more than Rs 150 a share for infusing funds and sought a complete exit by Naresh Goyal and his family from any management or even advisory role in the Indian carrier.

Etihad has offered to invest in the domestic airline at discounted rate of Rs 150 per share. Along with this, Etihad has also agreed to infuse US$ 35 million from Jet Privilege, where it owns majority shares but after the due diligence is completed.

Etihad Chief Executive Tony Douglas has written to State Bank of India on the restructuring plan for the airline.

As per an article in The Economic Times, Etihad has sought exemptions from the markets regulator from making an open offer and preferential pricing guidelines.

Here's an excerpt from the article:

  • In addition, Etihad is also demanding that Mr. Goyal's future role as "Chairman Emeritus" should be "well defined," stressing that no board seat should be given for Mr. Goyal himself and no rights for him or his family and affiliates to act or represent the airline.

Shares of the company rallied around 18% in Monday's trading session on reports that the company is close to finalizing a resolution plan.

Last Friday, reports stated that the Tata-Jet Airways deal is back on the table.

The cash-strapped airline which had its credit rating cut to default this month is weighing a resumption of stake sale talks with Tata Group as the carrier is poised to run out of cash.

The creditors are open to lending US$ 500 million to Jet Airways if Goyal and Etihad inject a similar amount into the company. A decision will be made once a forensic examination being conducted into the airline's book is completed.

Jet's woes have worsened with higher oil prices and intense competition in 2018.

This would be the second time that the West Asian airline has come to the debt-laden carrier's rescue.

To know more about the company, you can access to Jet Airways' latest result analysis and Jet Airways' 2017-18 Annual Report Analysis on our website.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.


Sensex Trades Marginally Lower; Telecom & Healthcare Stocks Drag
12:30 pm

Share markets in India are presently trading on a negative note. Barring energy sector, all sectoral indices are trading in red with stocks in the telecom sector, FMCG sector and healthcare sector witnessing maximum selling pressure.

The BSE Sensex is trading down by 81 points (down 0.2%), while the NSE Nifty is trading down by 26 points (down 0.2%). The BSE Mid Cap index is trading down by 0.4% and the BSE Small Cap index is trading down by 0.5%.

The rupee is trading at Rs 71.14 against the US$.

Market participants are tracking Wipro, NIIT Technologies, L&T Infotech, Dhanlaxmi Bank as they announce their December ended quarter results today.

In the latest development from the results corner, Hindustan Unilever share price has posted 9% growth in its net profit at Rs 14.4 billion as compared to Rs 13.3 billion in the same period last year.

Revenues came in at Rs 93.6 billion in Q3FY19, witnessing a growth of 12.4% against Rs 83.2 billion in Q3FY18.

To know more about the company you can read HUL Q3FY19 Result Analysis and HUL Annual Report Analysis on our website.

You can also read our recently released Q3FY19 results: Zee Entertainment's latest result analysis, Reliance Industries, Federal Bank, Infosys, TCS, Trident.

In the news from the commodity space, oil prices edged higher today after a report from the Organization of the Petroleum Exporting Countries (OPEC) showed its production fell sharply last month, easing fears about prolonged oversupply.

--- Advertisement ---
India is Set to Regain Its Lost Riches

REBIRTH OF INDIA India was the world's richest country nearly 2,000 years ago. In fact, we were referred to as the "Sone Ki Chidiya."

If you are like us who believe that India has the potential to be once again the "Sone Ki Chidiya" to the world again…and regain its status as one among the greatest countries on earth…

Then, I encourage you to join other true Indians in the first-ever mega summit "REBIRTH OF INDIA" for FREE.

This is our LARGEST EVER FREE PUBLIC SUMMIT available for EVERY INDIAN CITIZEN.

Don't Miss it!

Click Here to Claim Your FREE Pass for this MEGA Summit…
------------------------------

Looking at oil supplies, 2019 crude prices have been supported by supply cuts from a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russia.

OPEC oil supply fell by 460,000 barrels per day (bpd) between November and December, to 32.7 million bpd, as top exporter Saudi Arabia made an early start to a supply-limiting accord, while Iran and Libya posted involuntary declines.

It would be interesting to see how this pans out. Meanwhile, we will keep you updated on all the developments from this space.

Moving on to the news from the pharma space, Sun Pharma share price is witnessing selling pressure today on reports that new whistleblower documents had been sent to the markets regulator.

According to a news report by a financial news website, huge transactions of over Rs 58 billion allegedly took place between Aditya Medisales and private companies of Sun Pharma's promoters between 2014 and 2017.

This is as per a new 172-page complaint (with documents) sent by the whistleblower on Sun Pharma to the markets regulator.

Shares of the company fell as much as 12% today on back of the above news.

Last month, a note by Macquarie, an Australian brokerage firm went viral which raised concerns among the investing community.

The note raised questions about inadequate disclosures regarding the role of promoter Dilip Shanghvi's brother-in-law Sudhir Valia, Sun Pharma's past links with banned traders Ketan Parekh and Dharmesh Doshi, related party transactions involving promoter Shanghvi and guarantees given to real estate firm Suraksha Realty.

In November, a whistleblower had approached markets regulator with a document alleging various irregularities by the company, its promoter Shanghvi and others.

The whistleblower made allegations in a 150-page letter sent to the markets regulator, which had earlier banned Doshi and Parekh following the 2001 scam.

According to the news in a leading financial daily, the irregularities involved two or three major rounds of foreign currency convertible bonds (FCCBs) issues by Sun Pharma during 2002-2007, which was managed by Jermyn Capital LLC.

The markets regulator reportedly is planning to reopen the investigation into the insider trading case against the company and its promoters which was settled through consent mechanism.

Speaking of pharma sector, note that the BSE Healthcare Index has been on a roller coaster ride in the past few years. The period from 2012 to 2015 saw the index go up more than three times.

And since then it has been a painful ride downwards, as can be seen from the chart below:

The Roller Coaster Ride of the BSE Healthcare Index

As we wrote in one of our editions of The 5 Minute WrapUp...

  • Pre-2015, pharma companies enjoyed a fairytale ride in the US market. Low labor costs, good chemistry skills, along with efficiency, ensured Indian companies could copy innovator drugs to make generic drugs at a fast pace.

    The generic business had lucrative margins for all major pharma players. But the party did not last long. In the quest to supply drugs quickly, they compromised on quality at their manufacturing facilities.

    No wonder, the US regulatory authority (USFDA) took strict action. Sun Pharma received a warning letter for its Halol manufacturing facility in 2015. It was like a bolt out of the blue. Since then, the downward spiral began and has continued till date.

We believe that pharma companies that invest in creating a pipeline of complex generics or building competencies in alternative dosage forms are better equipped to tackle the changing dynamics in the US generics market as well as in the overall industry.

To know more on what moved the Indian stock markets today, you can check out the most recent share market updates here.


Sensex Opens Flat; Sun Pharma Falls Over 9.2%
09:30 am

Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.6% while the Hang Seng is up 1%. The Nikkei 225 is trading up by 1.3%. US stocks advanced on Thursday as a published report that the United States was considering lifting tariffs on Chinese imports lifted investor sentiment.

Back home, India share markets opened on a flattish note with a positive bias. The BSE Sensex is trading up by 69 points while the NSE Nifty is trading up by 15 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.2% & 0.1% respectively.

Sectoral indices have opened the day on a mixed note with oil & gas stocks and bank stocks witnessing maximum buying interest. While, healthcare stocks and IT stocks have opened the day in red.

The rupee is currently trading at Rs 71.02 against the US$.

In the news from the economy. As per India Ratings and Research (Ind-Ra), Indian economy is likely to grow a tad higher at 7.5% in 2019-20 on account of steady improvement in major sectors.

According to the Central Statistics Office (CSO), the economy may clock a growth rate of 7.2% in the current financial year, up from 6.7% in the previous year.

After demonetisation and the GST implementation, the India Ratings had expected 2018-19 to be a year of quick recovery and, indeed, the recovery has been sharp with GDP growth coming in at 7.2%.

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India is Set to Regain Its Lost Riches

REBIRTH OF INDIA India was the world's richest country nearly 2,000 years ago. In fact, we were referred to as the "Sone Ki Chidiya."

If you are like us who believe that India has the potential to be once again the "Sone Ki Chidiya" to the world again…and regain its status as one among the greatest countries on earth…

Then, I encourage you to join other true Indians in the first-ever mega summit "REBIRTH OF INDIA" for FREE.

This is our LARGEST EVER FREE PUBLIC SUMMIT available for EVERY INDIAN CITIZEN.

Don't Miss it!

Click Here to Claim Your FREE Pass for this MEGA Summit…
------------------------------

It further said GDP growth would have been even better but for the global headwinds caused by an abrupt rise in crude oil prices and strengthening of the US dollar, among other factors.

Over the past few years, private final consumption expenditure and government final consumption expenditure have been the primary growth drivers of Indian economic growth.

Ind-Ra said it believes that investments are slowly but steadily gaining traction, with gross fixed capital formation growing 12.2% in the current fiscal and projected to clock 10.3% in the next year.

But the flip side of this development is that it is primarily driven by the government capex (capital expenditure), as incremental private corporate capex has yet to revive.

It further said that due to the slowdown in private corporate and household capex, GDP growth has failed to accelerate and sustain itself close to or in excess of 8%.

Speaking of GDP growth, have a look at the latest data projecting the nominal GDP of countries by the year 2030.

India in the Pecking Order of Strongest Economies in Another Decade

As you can see in the chart, China would be by far the strongest economy in another decade. In fact, its GDP could be more than double of America's.

But that India will be a close second.

With GDP crossing 40 trillion dollars, the Indian economy will be at least a third bigger than the US.

No doubt the 40 trillion-dollar GDP will not come without some hiccups.

But once you know the stocks that could gain the most in the coming decade, you too be saying - 'Buy Indian. I am'.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Aurobindo Pharma has agreed to acquire a portfolio of seven branded oncology injectable products from Spectrum Pharmaceuticals Inc.

Reportedly, the acquisition involves an upfront payment of US$160 million in cash, plus up to US$140 million on achieving regulatory and sales-based milestones. The acquisition also gives Aurobindo a branded commercial infrastructure in the US.

Acrotech Biopharma LLC, a wholly-owned subsidiary of Aurobindo Pharma USA Inc. will acquire the assets on a debt free and cash free basis.

The acquisition will help Aurobindo enter the branded oncology market with a range of products that are well recognized by the oncology community. Aurobindo Group will also acquire a well-established and experienced branded commercial infrastructure to continue commercializing these brands, the reports noted.

Spectrum, as part of its strategic shift to focus on novel oncology drug development and commercialization of its two late-stage pipeline products, carved out its commercial business inclusive of seven marketed oncology injectable products, intellectual property and commercial infrastructure for sale.

Aurobindo Pharma share price opened the day up by 0.5%.

To know more about the company, you can access to Aurobindo Pharma's Q2FY19 result analysis and Aurobindo Pharma FY18 annual report analysis on our website.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.


Global Stock Market Drivers; HUL, Reliance Industries Q3FY19 Results and Top Stocks in Action Today
Pre-Open

On Thursday, the Indian share markets were trading in a narrow range in afternoon trade amid weakness in public sector banks (PSU) and pharmaceuticals stocks.

At the closing bell, the Sensex ended up 53 points at 36375, while Nifty was up 15 points at 10,905.

HCL Tech and Axis Bank were the top gainers on the Sensex, while top losers were Sun Pharma and Yes Bank.

The rupee moved in a range of 71.09-71.37 against the US dollar. The domestic unit had settled at 71.24 against the greenback on Wednesday.

Top Stocks in Focus

L&T share price will be in focus today as Larsen & Toubro (L&T) Hydrocarbon Engineering has bagged two projects from the world's largest oil company Saudi Aramco.

Federal Bank reported a 28% rise in its year-on-year net profit for the December quarter at Rs 33.4 billion from Rs 2.6 billion last year.

Bharat Heavy Electricals Limited will set up a network of Solar-based Electric Vehicle Chargers (SEVC) on the Delhi-Chandigarh Highway. The project is covered under the Faster Adoption and Manufacturing of Electric Vehicles in India of the Department of Heavy Industry (DHI).

Zydus Cadila has received the final approval from the US Food and Drug Administration (USFDA) to market Acetazolamide ER Capsules. It will be manufactured at the group's formulations manufacturing facility at Moraiya, Ahmedabad. Cadila Healthcare will be in focus.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

--- Advertisement ---
India is Set to Regain Its Lost Riches

REBIRTH OF INDIA India was the world's richest country nearly 2,000 years ago. In fact, we were referred to as the "Sone Ki Chidiya."

If you are like us who believe that India has the potential to be once again the "Sone Ki Chidiya" to the world again…and regain its status as one among the greatest countries on earth…

Then, I encourage you to join other true Indians in the first-ever mega summit "REBIRTH OF INDIA" for FREE.

This is our LARGEST EVER FREE PUBLIC SUMMIT available for EVERY INDIAN CITIZEN.

Don't Miss it!

Click Here to Claim Your FREE Pass for this MEGA Summit…
------------------------------

Results Corner

L&T Infotech, Dhanlaxmi Bank, Kajaria Ceramics, Wipro, MPS, Atul, HUL, Reliance Industries are among a few companies that will report its Q3FY19 results today.

Global Stock Market Drivers

On Thursday, US equity futures and European shares fell after a mixed session in Asia as concerns about rising tension between America and China offset signs of a better-than-expected start to the earnings season.

Further, emerging market currencies and shares declined. Shares in Hong Kong tumbled, with some companies dropping more than 75%.

The dollar was steady, and Treasuries edged higher.

Here are some key events coming up:

  • Earnings season rolls on with Morgan Stanley and Netflix posting results.
  • Data on US jobless claims and industrial production are due.
  • Eurozone inflation is scheduled today

Oil Prices Slide

Oil prices dipped on Thursday as US crude production quickly approached an unprecedented 12 million barrels per day (bpd) just as worries about weakening demand emerge.

US West Texas Intermediate (WTI) crude futures were at US$52 per barrel, down 0.6%, from their last settlement.

International Brent crude oil futures were down 0.6%, at US$60.98 per barrel.

American crude oil production reached a record 11.9 million bpd in the week ending January 11, the Energy Information Administration (EIA) said on Wednesday, up from 11.7 million bpd last week, which was already the highest national output in the world.

Note that, US output has soared by 2.4 million bpd since January 2018, stoking fears of a supply glut.

From the IPO Space...

As per an article in a leading financial daily, after a three-month drought in the Indian primary market, several companies, including cables and consumer electronic goods maker Polycab Wires Pvt. Ltd and hotel operator Chalet Hotels Ltd, are gearing up for their public offers.

Besides, Polycab and Chalet Hotels, Harsha Engineers Ltd, Dodla Dairy Ltd and Indiamart Intermesh Ltd are also looking to launch IPOs.

The Indian equity markets witnessed extreme ups and downs during the three months owing to the liquidity crisis in the NBFC space, macroeconomic headwinds, such as a depreciating rupee and high crude price, and concerns over state election results.

With so many IPOs set to hit the markets, we at Equitymaster believe 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.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.