Sensex, Nifty at Record Close Yet Again; IT & Realty Stocks Rally
Closing

Indian share markets extended rally in the final hour of the trade, hitting fresh record highs while the Bank nifty touched 27,000 level for the first time. At the closing bell, the BSE Sensex finished higher by 286 points. While, the NSE Nifty finished higher by 72 points. Meanwhile, the S&P BSE Midcap Index and S&P BSE Small Cap Index ended up by 0.7% & 0.8% respectively.

Barring metal stocks and PSU stocks, all the sectoral indices ended the day in green with information technology stocks and realty stocks leading the pack of gainers.

Overseas, Asian stock markets finished higher today with shares in Hong Kong leading the region. The Hang Seng is up 0.43% while China's Shanghai Composite is up 0.39% and Japan's Nikkei 225 is up 0.03%. European markets are mixed to lower. Shares in France are off as the CAC 40 drops 0.23%. The DAX is down 0.11% while the FTSE 100 in London is unchanged.

The rupee was trading at Rs 63.89 against the US$ in the afternoon session.

Indian shares have been on a record-setting run, bolstered by a string of positive corporate results and recent government measures, including a cut in the goods and services tax for certain sectors.

2017. What a year this has been for equity investors. The BSE Sensex is trading close to 34,000 mark. The Nifty is trading above 10,500 levels.

India was among the three emerging markets, which gained more than 35% in dollar terms. The other two are Hungary and South Korea.

India Outperforms Emerging Market Peers in 2017

The BSE Sensex earned a 35.1% return in the dollar terms and 28% in the local currency in 2017. However, this wasn't enough to beat the midcap and smallcap indices. The midcap and smallcap indices saw a sharp increase of 47% and 58% respectively in 2017.

With this, the market cap to GDP ratio is close to 100%, indicating market at its peak. So, how will 2018 turn out? Here's what Tanushree Banerjee, Co-head of Research thinks:

  • "In 2018, the market would be more volatile and under pressure. Investors should brace themselves for the increasing volatility. Although, earnings are likely to recover, profit margins could get squeezed as companies face rising input cost pressures. Rising oil prices may prompt the government to abandon fiscal prudence at a time when GST collections have been lower than expected.

    2018 will, therefore, be critical for Indian companies to justify their valuations with earnings growth. If the earnings growth does not materialize, correction could be on the cards."

ONGC share price jumped as much as 3.3% to their highest in nearly a year after the explorer said it would buy a majority stake in HPCL for US$5.8 billion.

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Meanwhile, Reliance industries share prices gained as much as 4.4% after the company posted a record net profit in the third quarter after its telecoms business, Jio, turned in a profit for the first time.

Engineering stocks ended the day on a mixed note with BHEL & GE Power India leading the gainers. <BHEL share price> surged 7.2% on the reports that the company will be setting up a 660 MW coal-based thermal power project with supercritical parameters in Maharashtra.

Reportedly, the Rs 28 billion-project will be built as an expansion project (unit 6) of Maharashtra state power generation company (MAHAGENCO)'s Bhusawal thermal power station (TPS) in Maharashtra's Jalgaon.

The 1,420 MW Bhusawal TPS is presently equipped with two sets each of 210 MW and 500 MW ratings. All these sets have been supplied and commissioned by BHEL.

The key equipment for the contract will be manufactured at BHEL's Trichy, Haridwar, Bhopal, Ranipet, Hyderabad, Jhansi, Thirumayam and Bengaluru plants while the company's power sector- western region shall be responsible for civil works and erection and commissioning of the equipment, the reports noted.

Notably, BHEL has a long-standing partnership with MAHAGENCO and has a significant share of 81% in the coal-based power stations installed in the state by the utility.

The company has secured orders for 50 supercritical Steam Generators (SG) and 43 supercritical Steam Turbine Generators (STG) - the highest in the country by any power equipment manufacturer. Of these, 15 SGs and 13 STGs have already achieved capacity addition.

Moving on to the news from steel sector. In order to boost the steel sector, the steel ministry has sought waiver of the import duty on coking coal.

Ahead of the Union Budget 2018-19, the steel ministry in its recommendations to the finance ministry has suggested bringing down the import duty on coking coal to 0% from 2.5%.

Further, the ministry also suggested bringing down the import duty on steel scrap to nil. India has to heavily depend on import of coking coal, as the domestic quality has higher ash content, which is unsuitable for the steel industry with present technology.

To bring down the imports of coking coal, the steel ministry had earlier said that it was in discussion with the coal ministry for investment in washeries.

According to the Coal Minister Piyush Goyal, during April-September of the ongoing fiscal, 22.6 million tonne (MT) (provisional) of coking coal was imported. He added that while 41.6 MT coking coal was imported in 2015-16, the import was 43.5 MT.

Meanwhile, India's annual steel production crossed 100 million tonne (MT) mark last year. The country's total steel production in the year 2016 was around 95 MT.

Between 1 January 2017 and 31 December 2017, the country crossed 100 MT-mark and produced 101 MT steel.

And here's a note from Profit Hunter:

Today, the Nifty 50 Index is up 72 points. TCS (+5.31%) is the major contributor to this rally and the top gainer in the index.

The last time we reviewed the stock, TCS had broken out of the falling trendline (red line). It was trading very close to its life high, which worked as a good resistance point. As a result, the stock dropped nearly 10% to touch a low of 2,494.

But as mentioned in earlier note, this could only be a hiccup in its uptrend movement. So it resumed the uptrend and hit a new life-time a few days back. The volumes during this uptrend was also strong indicating buying interest.

But the recent rally has been quite steep. The stock rallied nearly 25% in just one month.

So will the stock continue its steep rally or will it correct for some time before resuming it up move. Let's wait and watch...

TCS at a New Life-time High
TCS at a New Life-time High


Sensex Trades in Green; IT Stocks Top Gainers
01:30 pm

After opening the day marginally higher, share markets in India continued the momentum and are presently trading in green. Sectoral indices are trading on a mixed note, with stocks in the IT sector and stocks in the energy sector witnessing maximum buying interest. While stocks in the metals sector are leading the losses.

The BSE Sensex is trading up by 180 points (up 0.5%) and the NSE Nifty is trading up by 40 points (up 0.4%). Meanwhile, 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 63.77 to the US$.

In news from stocks in the oil and gas sector. ONGC share price and HPCL share price are in focus today amid news about the mode of acquisition of HPCL by ONGC.

Oil & Natural Gas Corporation will use a mix of debt, cash reserves and proceeds from a planned sale of stakes in IndianOil and GAIL to fund its acquisition of HPCL.

ONGC needs to pay Rs 369 billion for the government's 51.11% stake in HPCL by January-end. The deal would make state-run ONGC the third largest refiner in India, after Indian Oil and Reliance Industries, and give it control over nearly a fourth of filling stations.

ONGC's 13.77% stake in IndianOil and 4.86% in GAIL can fetch about Rs 300 billion at current market prices. In addition, ONGC has about Rs 500 billion of sanctioned loans at favourable terms

For funding the deal, the company's order of priority is cash reserve, sale of stakes in IndianOil and GAIL, followed by debt, according to news reports.The deal is also likely to help the government achieve its divestment target. At current valuations, this deal would fetch the government more than Rs 300 billion, surpassing its strategic sale target for the year.

Centre Gets Cracking on Disinvestment


After three years of underachieving its disinvestment targets, the government is back with a bang. This time, it wants to focus on strategic stake sales of non-public sector units (PSUs) and areas where disinvestment has so far been poor. FY15-16 saw no disinvestment through this route.

For FY18, the total budgeted disinvestment target has been set at Rs 725 billion. Of this, Rs 465 billion is expected to come from minority stake sales, buybacks, mergers, public listings, and the CPSE ETFs. Rs 150 billion is likely to come from strategic sales. And the balance Rs 110 billion from listing of state-owned general insurance companies.

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At the time of writing, ONGC share price was trading up by 3.5%, while HPCL share price was trading down by 3.5%.

Moving on to news from stocks in the IPO segment. Apollo Microsystems in focus today as it debuted on the bourses with over 74% gains on its listing price.

The company's Rs 1.5 billion IPO saw huge oversubscription of 248 times between January 10 and January 12.

The company, which caters primarily to the defence and aerospace sectors, had set an issue price for its initial public offer at Rs 275 per share

At the time of writing, Apollo Micro Systems share price was trading around 450 levels. Up 65% from its IPO price.

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 had analyzed this IPO and released our analysis on the company. You can access it here.


Sensex Trades on a Positive Note; Apollo Micro Systems IPO Lists at 74% Premium
11:30 am

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the energy sector and IT sector witnessing maximum buying interest.

The BSE Sensex is trading up 97 points (up 0.3%) and the NSE Nifty is trading up 11 points (up 0.1%). The BSE Mid Cap index is trading down by 0.1%, while the BSE Small Cap index is trading up by 0.4%. The rupee is trading at 63.88 to the US dollar.

In the news from the IPO space, Apollo Micro Systems made a stellar debut on bourses today. The scrip of the company, which recently concluded its IPO subscription offer, got listed at Rs 478, a premium of around 74% over its issue price of Rs 275.

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.

To know more about the company, you can read our IPO analysis of Apollo Micro Systems Ltd (subscription required).

At the time of writing, Apollo Micro Systems share price was trading at Rs 442.

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.

In the news from the commodity space, crude oil is witnessing buying interest today. Prices rose after comments from Saudi Arabia stated that co-operation between oil producers who are currently withholding supplies would continue beyond 2018.

As per a leading financial daily, Saudi Arabia, the world's top oil exporter and de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said that major oil producers were in agreement they should continue cooperating on production after their deal on supply cuts expires this year.

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

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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.


Sensex Opens Marginally Higher; ONGC Rallies 6.3%
09:30 am

Asian stock markets traded on a mixed note in morning trade as market participants kept an eye on political developments in the U.S. after a government shutdown began last week. The Nikkei 225 is down 0.15% while the Hang Seng and the Shanghai Composite are trading up 0.1% respectively.

Meanwhile, Indian share markets have opened the day on a positive note. BSE Sensex is trading higher by 77 points and NSE Nifty is trading higher by 6 points. S&P BSE Mid Cap is trading down by 0.1% and S&P BSE Small Cap is trading up by 0.2%.

Gains are largely seen in energy stocks and PSU stocks. Metal stocks and software stocks witness majority of the selling pressure. The rupee is trading at Rs 63.71 against the US$.

The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it's relatively high.

FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India's GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.

The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.

Reliance Industries Ltd (RIL) share price surged 2% in opening trade after the company reported a 25% increase in quarterly profit, beating analysts' estimates, as its telecom unit swung to a profit and the petrochemical business posted strong gains.

ITC share price opened the trading day down by 0.3%. The company closed the third quarter with a 16.8% rise in its net profit at Rs 30.9 billion on the back of a 16% rise in revenue from its 'FMCG-Others' segment. Profit in the hotels segment too rose.

Wipro share price opened down by 1.7% after the the company posted December quarter earnings that missed Street estimates. The company reported profit at Rs 19.3 billion, down 8.4% when compared to Rs 21.1 billion in the same period last year.

Axis bank share price and Asian Paints share price opened in red ahead of the Q3 results to be declared later during the day.

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In news from energy sector, as per an article in The Economic Times, Oil & Natural Gas Corporation (ONGC) will use a mix of debt, cash reserves and proceeds from a planned sale of stakes in Indian Oil and GAIL to fund its acquisition of Hindustan Petroleum Corporation (HPCL).

The deal would make state-run ONGC the third largest refiner in India, after Indian Oil and Reliance Industries, and give it control over nearly a fourth of filling stations. Through this acquisition, ONGC will become India's first vertically integrated 'oil major' company, having presence across the entire value chain.

ONGC has agreed to acquire the government's entire 51.11% stake in Hindustan Petroleum for about Rs 370 billion in an all-cash deal that would close by month-end.

The share sale will help government exceed its divestment target of Rs 725 billion in 2017-18 - a first for the government ever. The government has already raised Rs 543.37 billion so far this year.

ONGC share price opened the trading day up by 6.3% on the BSE.

Moving on to news from automobile sector. As per an article in The Livemint, Maruti Suzuki India plans to introduce around four new products in the next 12 to 18 months to build further on five years of successive double-digit sales growth.

The company expects to close the ongoing fiscal with double digit sales growth. Its sales in the domestic market during the April-December period grew by 15.5% at 12,26,418 units as against 10,61,873 units in the year-ago period.

The company is expected to launch all-new version of its popular hatchback Swift at the upcoming Auto Expo.

As per company's senior executive director, the company has been able to sustain its growth momentum in the last few years despite challenges of two consecutive droughts in many parts of India that had an impact on rural markets.

Maruti Suzuki share price opened the trading day down by 0.2%.


Market at Record Highs; Strong ITC & RIL Performance & Other Top Cues to Sway the Market Today
Pre-Open

Indian share markets extended gains in the afternoon session after the government decided to cut tax rates on certain products and services. At the closing bell last week, the BSE Sensex finished higher by 251 points. While, the NSE Nifty finished higher by 78 points. Meanwhile, the S&P BSE Midcap Index and S&P BSE Small Cap Index ended up by 0.9%.

All the sectoral indices ended the day in green with bank stocks, realty stocks and PSU stocks leading the pack of gainers.

Results Corner

ITC share price finished the previous trading session up by 0.4% on the BSE. The company's fiscal third-quarter profit rose 16.8% from a year earlier, boosted by a one-time reversal of a provision of Rs 4.12 billion.

Wipro share price is expected to see some momentum today after the company posted December quarter earnings that missed Street estimates. The company reported profit at Rs 19.3 billion, down 12.%.

HDFC Bank share price finished the previous trading session up by 1% after the bank reported a record high quarterly profit, as an increase in interest and fee incomes as well as a steady non-performing loan ratio boosted the bottom line. Net profit for the lender rose 20% to Rs 46.4 billion (US$728.4 million) for the third quarter ended 31 December from Rs 38.7 billion a year ago.

Reliance Industries share price is expected to be in limelight today after the company reported a 25% increase in quarterly profit, beating analysts' estimates, as its telecom unit swung to a profit and the petrochemical business posted strong gains.

Top Stocks to Watch Out

Dilip Buildcon share price is expected to be in limelight today after it was reported that the company has bagged a road project worth Rs 3.6 billion in Karnataka from Ircon International Ltd.

In news from mining sector, the Coal Ministry has restarted the process of allocating mines. The Ministry allocated 11 coal blocks to subsidiaries of Coal India Ltd. After the allocation of these blocks, all of Coal India's subsidiaries will be producing 100 million plus tonnes of coal.

Meanwhile, as per an article in The Economic Times, Tata Steel said its rights issue worth Rs 128 billion will open on February 14 and close on February 28. The issue will comprise up to 155.3 million fully paid up ordinary share not exceeding Rs 80 billion and 77.6 million fully paid up ordinary share not exceeding Rs 48 billion.

Bharti Airtel share price finished the previous trading session up by 0.7% on the BSE and is expected to see some momentum today as well after it was reported that the company will transfer its 25% stake in DTH arm Bharti Telemedia to wholly owned subsidiary Nettle Infrastructure Investments. Airtel in December signed agreement to sell 20% stake in Bharti Telemedia to private equity firm Warburg Pincus for about US$350 million (around Rs 23.1 billion).

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IPO Segment

The initial public offering of Amber Enterprises, the manufacturer of air-conditioners, was subscribed 165.31 times on Friday, the last day of bidding.

The IPO to raise Rs 6 billion received bids for over 814.5 million shares. Till Thursday, the IPO was subscribed 3.61 times. The company had raised Rs 1.79 billion from anchor investors on Tuesday. The price band has been fixed at Rs 855-859 a share.

Meanwhile, as per an article in The Livemint, integrated oilfield services company John Energy Ltd, backed by India's best-known stock market investor Rakesh Jhunjhunwala, is looking to go public and will soon file its draft IPO papers. The IPO could see the company raise around Rs 3 billion, through a mix of primary and secondary share sale.

After such stellar response to IPOs in 2017, all focus and attention will shift to the major IPOs in the upcoming new year 2018 which includes IPOs of HDFC Asset Management Company, NSE and IRCTC to name a few.

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 Stays Above US$16,000

Bitcoin had a lackluster week, with dramatic drops midweek that made some question the hype cryptocurrencies had generated in the latter months of 2017. And then it started to recover, reminding us how erratic cryptocurrencies are. Bitcoin prices rose 5% to trade near US$ 12,000.

Meanwhile, India has sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than US$3.5 billion worth of transactions have been conducted over a 17-month period.

Also, as per an article in The Economic Times, top lenders including State Bank of India, Axis Bank, HDFC Bank, ICICI Bank and Yes Bank have suspended some accounts of major Bitcoin exchanges in India, suspecting dubious transactions.

Global Markets Stay Strong

Falling oil prices and a possible U.S. government shutdown didn't seem to phase North American markets Friday, as the Toronto stock index and Wall Street capped off the week on a positive note.

European and Asian markets too finished the previous session on a strong note.

Oil Prices Rise

Oil prices ended down on Friday and broke a four-week winning streak after a rally that had taken benchmarks to three-year highs, as investors sold positions on re-emerging U.S. production concerns.

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.