Sensex Ends 241 Points Lower; Telecom & Realty Stocks Witness Selling
Closing

Indian share markets witnessed most of the selling pressure during closing hours and ended their trading session lower. Barring metal sector, healthcare sector and energy sector, all sectoral indices ended on a negative note with telecom stocks, realty stocks, and IT stocks losing the most.

At the closing bell, the BSE Sensex stood lower by 241 points (down 0.7%) and the NSE Nifty closed down by 57 points (down 0.5%). The BSE Mid Cap index ended the day down 0.1% and the BSE Small Cap index ended the day down by 0.4%.

The rupee was trading at 70.74 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up 0.1% and the Shanghai Composite was up by 0.7%. The Nikkei 225 was up 2.6%.

Market participants were tracking Sun Pharma share price, Bata India share price, Coal India share price, and Oil India share price as these companies announced their December quarter results today.

You can also read our recently released Q3FY19 results: Reliance Industries, Infosys, TCS, Trident, HDFC bank, Maruti Suzuki, Tata Motors, Tata Steel, Aurobindo Pharma, MRF, Gillette.

In the latest development from the results corner, Hindalco share price was in focus today as the company reported 47% YoY rise in its net profit.

The company reported consolidated profit at Rs 7.1 billion for the December ended quarter. The company had reported Rs 4.8 billion profit in the same quarter last year.

Revenues rose 8.1% to Rs 119.4 billion as against 110.4 billion in the corresponding quarter previous year.

The earnings before interest, tax, depreciation, and amortization (EBITDA) was reported at Rs 19.3 billion, a growth of 4% YoY.

The above figures included numbers from its Utkal Alumina unit.

In another news, CARE Ratings share price also reported its Q3FY19 results today.

The company reported a fall of 23.8% in its net profit at Rs 284.1 million for the quarter ended December 31, 2018 as compared to Rs 372.8 million for the same quarter in the previous year.

Total income of the company decreased by 7.4% at Rs 736.2 million for Q3FY19 as compared Rs 794.7 million for the corresponding quarter previous year.

CARE ratings share price ended the day down by 2.6%.

Moving on to the news from the banking sector, Punjab national bank (PNB) share price witnessed buying interest today on reports that the company is planning to sell its 22% stake in PNB Housing Finance to General Atlantic Partners (GA) and Varde Partners for around Rs 35 billion.

As per an article in The Economic Times, PNB revived its plans to cash out of the venture in December after the initial plan of a 66% sale by PNB and private equity investor Carlyle was dropped in the wake of liquidity pressure following the default by Infrastructure Leasing & Financial Services (IL&FS) in September-October.

Here's an excerpt from the article:

  • GA, an existing investor, is likely to pick up another 12% in the mortgage firm, thereby taking its stake to around 22%. Varde is expected to pick up a 10% stake. Binding bids were submitted last Friday, and a formal announcement is expected later this week.

    Chrys Capital and Carlyle Group the latter already has a 32.6% stake through Quality Investment Holdings - were the other two contenders but chose not to bid. A consortium of Blackstone and GIC, tipped to be the strongest contender, opted out last week following Blackstone's decision to buy Aadhar Housing Finance from the cash-strapped DHFL.

PNB holds 32.8% stake in its housing finance arm and has decided to hold 10.7% stake and sell the remaining shares to two buyers instead of selling the entire block to one suitor.

PNB Housing Finance, founded in 1988, has assets worth Rs 622.5 billion under management as on March 31, 2018.

PNB share price ended the day up by 0.5%.

To know more about the company, you can read PNB latest result analysis on our website.

Speaking of interesting development in the banking sector, Tanushree Banerjee, Co-head of Research at Equitymaster believes that financial inclusion will be an important element in driving the growth for India.

On 28th August 2014, the Indian Prime Minister launched an ambitious financial inclusion programme called the Pradhan Mantri Jan-Dhan Yojana (PMJDY).

The aim of this programme was to bring 7.5 crore low-income households under the banking net. So far, the programme has already got around 34 crore accounts.

Have a look at the chart below that shows the increase in Jandhan accounts over the years:

Financial Inclusion Will Be a Big Growth Driver

Here's what she wrote in today's edition of The 5 Minute WrapUp...

  • Financial inclusion is an important element of economic growth because it enables individuals and businesses to access financial products that meet their needs.

    As mentioned earlier, the reform that the Prime Minister Modi introduced - the opening of Jandhan accounts - was a big positive for India.

    The opening of these accounts helped increase the number of savings and current accounts in the country.

    And this trend is not done. It will play out in the coming years too.

More importantly, the Jandhan data shows, the balance in Jandhan accounts is set to touch Rs 90,000 crores!

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


Sensex Trades Flat; Infosys & Hero MotoCorp Top Losers
12:30 pm

Share markets in India are presently trading on a flat note. Sectoral indices are trading mixed with stocks in the power sector, metal sector and energy sector witnessing buying interest while telecom stocks and IT stocks are witnessing selling pressure.

The BSE Sensex is trading down by 42 points (down 0.1%), while the NSE Nifty is trading down by 11 points (down 0.1%). The BSE Mid Cap index is trading up by 0.1% and the BSE Small Cap index is trading down by 0.5.

The rupee is trading at Rs 70.87 against the US$.

The rupee gained 7 paise against the US$ on account of selling in American currency by banks and exporters.

Market participants are tracking Sun Pharma share price, Bata India share price, Coal India share price, and Oil India share price as these companies are set to announce their December quarter results later today.

You can also read our recently released Q3FY19 results: Reliance Industries, Infosys, TCS, Trident, HDFC bank, Maruti Suzuki, Tata Motors, Tata Steel, Aurobindo Pharma, MRF, Gillette.

In the news from the pharma sector, Dr Reddy's share price is in focus today after the company announced the launch of Tadalafil Tablets USP, a therapeutic equivalent generic version of Adcirca (tadalafil) Tablets in the US market, approved by the USFDA.

Tadalafil is used to treat high blood pressure in the lungs (pulmonary hypertension). It works by relaxing and widening the blood vessels in the lungs that allows the blood to flow more easily.

Dr. Reddy's share price is presently trading up by 0.3%.

To know more about the company, you can read Dr Reddy's latest Result Analysis on our website.

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.

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.

Moving on to the news from the aviation space, shares of aviation companies are witnessing selling pressure today on the back of higher crude oil prices.

Jet Airways share price, SpiceJet share price, and Indigo share price fell around 2%-4%.

Oil prices rose amid OPEC-led supply cuts and US sanctions against Iran and Venezuela.

Reportedly, markets are tightening amid voluntary production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and because of US sanctions on Venezuela and Iran.

Yesterday, SpiceJet reported a net profit of Rs 551 million for the quarter ending 31 December 2018, defying the current market conditions, where other airlines are losing money.

The airline said that passenger yields increased by 8% that partially helped offset record high cost due to an increase of 34% in crude oil prices and 11% depreciation of the Indian Rupee against the US dollar.

However, the airline's profit during the quarter fell by 77% over the same period last fiscal, when the airline had registered profits of Rs 2,400 million.

During the quarter, total income stood at Rs 25.3 billion as against Rs 21 billion in the same quarter last year. For the same comparative period, expenses were Rs 24.8 billion as against Rs 18.6 billion.

Note that, domestic airlines have been struggling to make profit because of a rise in operating costs and a weak rupee.

The new year began on a positive note for domestic airlines as state oil marketing companies (OMCs) slashed aviation turbine fuel (ATF) prices by 14.7%.

This is the second consecutive drop in jet fuel price and the sharpest cut since November 2008.

The surge in crude oil prices led to the domestic airlines posting a loss of 23.4 billion in the September quarter.

Reports state that in the first half of FY19, the listed airlines together lost around Rs 0.2 billion per day collectively registering a loss of Rs 36.4 billion.

However, crude oil prices surged more than 18% last month, its best January performance on record.

Speaking of crude oil, almost every time, a rise or fall in the stock markets is invariably linked to crude oil prices. Have a look at the chart below:

Are Stock Market Returns Really Linked to Crude Oil Prices?

Here's what Girish Shetty wrote about it on one of the recent editions of The 5 Minute WrapUp...

  • In the short-term: Yes.

    But in the long run, as we can see, Sensex returns have been independent of crude oil prices or even positively co-related!

    Crude oil prices doubled from US$ 41 in December 2008 to US$84 in April 2010. In the same time, Sensex also doubled from 8,800 levels to 17,600 levels.

    So, please don't fret unnecessarily about crude oil.

    Check if your business has a moat that helps it pass on input price increases to its customers. In the long run, they will survive and also gain market share from those that can't pass on prices. Short term pessimism due to rising crude oil prices provides a buying opportunity in these stocks.

As per him, focusing on quality stocks rather than crude oil will matter more in the long run.


Sensex Opens Flat; IT & Telecom Stocks Drag
09:30 am

Asian share markets are trading on a flat note today as investors are looking forward to a new round of Sino-US trade talks as the world's two largest economies try to resolve a tariff dispute that has put a dent on global growth and corporate earnings.

Back home, India share markets have opened the day on a flat note. The BSE Sensex is trading down by 9 points while the NSE Nifty is trading down by 3 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.5% & 0.1% respectively.

Sectoral indices opened on a mixed note with stocks in the IT sector and telecom sector witnessing selling pressure while power stocks, energy stocks and healthcare stocks are witnessing buying interest.

The rupee is currently trading at Rs 71.04 against the US$.

Speaking of Indian stock markets, note that the current scenario in the Indian stock market looks very similar to 2013.

Back then, mid and small cap stocks witnessed a similar correction while the Sensex stayed put. This is evident in the chart below:

Is It 2013 All Over Again?

Here's what Tanushree Banerjee wrote about this in the latest edition of The 5 Minute WrapUp...

  • 2018-19 has also followed a similar pattern.

    Long term-capital gains tax was introduced in last year's budget. We've seen corporate governance issues leading to auditor exits and finally the IL&FS impact.

    Also, with elections around the corner, the volatility will probably get worse.

    If you're looking at stocks from a short-term perspective, there is a good chance this volatile market will hurt you.

    But if you're picking stocks, thinking long-term, the potential for India is huge.

The investor who catches these above trends early, will create life-changing wealth for himself.

PSU Bank stocks opened the day on a mixed note with IDBI bank share price & Corporation bank share price leading the gainers. In a positive surprise, bad loans of public sector banks (PSBs) fell by Rs 311.7 billion to Rs 8,644.3 billion in the first nine months of the current fiscal as against Rs 8,956 billion to end of March 2018.

Reportedly, the bad loans fell to Rs 8,756.2 billion as on June 2018 and further to Rs 8,644.3 billion in December 2018, further underlying that presently the government is not considering any proposal for privatisation of PSBs.

As per the Minister of State for Finance, the fall in Non-Performing Assets (NPAs) also came on the back of the government's 4Rs strategy of recognition, resolution, recapitalisation and reforms. Besides, Asset Quality Review (AQR) initiated in 2015 for clean and fully provisioned bank balance-sheets revealed high incidence of NPAs.

The Minister of State for Finance said that primarily as a result of transparent recognition of stressed assets as NPAs, gross NPAs of PSBs as per RBI data on global operations, increased from Rs 2,272.6 billion as on 31 March 2014, to Rs 2,790.2 billion on 31 March 2015, Rs 5,399.7 billion on 31 March 2016 and Rs 6,847.3 billion as on 31 March 2017.

However, with various steps taken by the government including the initiation of transparent recognition in 2015-16 till December 2018, PSBs have successfully recovered an amount of Rs 3,334.9 billion.

PSBs have had a difficult year, to put it mildly.

While their bad loans struggle has been going on since a decade, there are other issues that have recently cropped up adding to their pile of misery. Bureaucracy and a lack of autonomy have ensured the sub-optimal profitability and asset quality of these state-run banks.

That's the reason we, at Equitymaster have been wary of PSU banks since 2014. This was well before the market had caught a whiff of the NPA problem.

Moving on to the news from aviation space. SpiceJet reported a net profit of Rs 551 million for the quarter ending 31 December 2018, defying the current market conditions, where other airlines are losing money.

The airline said that passenger yields increased by 8% that partially helped offset record high cost due to an increase of 34% in crude oil prices and 11% depreciation of the Indian Rupee against the US dollar.

However, the airline's profit during the quarter fell by 77% over the same period last fiscal, when the airline had registered profits of Rs 2,400 million.

During the quarter, total income stood at Rs 25.3 billion as against Rs 21 billion in the same quarter last year. For the same comparative period, expenses were Rs 24.8 billion as against Rs 18.6 billion.

Despite the huge cost escalation in ATF and exchange rate, SpiceJet has done well owing to good revenue performance, tight control on other costs. With a strong improvement in the macro cost environment and the increasing induction of the fuel-efficient MAX aircraft, the outlook looks stronger than it has over the past year, the company stated.

SpiceJet share price opened the day down by 1.9%.


Indian Indices Continue Downtrend, Foreign Investors Back in Action and Other Top Stocks in Focus Today
Pre-Open

On Monday, share markets in India opened on a negative note and ended the day in red after a volatile day of trading.

The BSE Sensex closed lower by 151 points to end the day at 36,395. While the broader NSE Nifty ended the day down by 55 points to end at 10,889.

Among BSE sectoral indices, pharma stocks fell the most by 1.9%, followed by energy stocks at 1.5%. ONGC and Mahindra & Mahindra. were among the top losers.

Top Stocks in Action Today

Glenmark Pharma share price is likely to be in focus as the company's subsidiary, Glenmark Pharmaceuticals Inc., USA (Glenmark) has been granted final approval by the United States Food & Drug Administration (USFDA) for Sevelamer Hydrochloride Tablets, 400 mg and 800 mg.

According to sales data for the 12-month period ending December 2018, the Renagel Tablets, 400 mg and 800 mg market achieved annual sales of approximately $102.1 million.

Lupin share price will be in focus today on as the company said it got two observations from US drug regulator for its crucial Goa manufacturing site, which is under warning letter.

The inspection was carried out between 28 January to 8 February 2019. At the end of every inspection, the USFDA issues its observations on any deviations from current good manufacturing practices (cGMP) on Form 483.

Lupin's Goa site, along with Unit 2 manufacturing plant in Pithampur, Indore are under USFDA's warning letter since November 2017.

Foreign Investors Back in Action

In the latest development, Foreign investors have infused close to Rs 53 billion in the Indian equity markets in the last six trading sessions, mainly on expectations of higher economic growth.

This comes following a pullout of Rs 52.6 billion by foreign portfolio investors (FPIs) in January.

Prior to that, they had put in Rs 58.8 billion in the stock markets during November-December 2018.

According to data available with depositories, FPIs put in a net amount of Rs 52.7 billion in equities during February 1-8. However, they pulled out a net sum of Rs 28 billion from the debt market during the period under review.

Indian equities have had a tough time in the past one year. With elections around the corner, volatility in the markets has been on a constant rise.

Till date in FY18-19, foreign investors have pulled out around Rs 515 billion from the Indian equity market.

In the past, such panic would have meant the domestic investor would have followed suit.

That hasn't happened this time.

Domestic investors have shown surprising resiliency to the market's volatility.

The month-wise SIP in FY18-19 has seen a constant rise.

Also, close to 1 million new SIP accounts have been added during FY18-19 according to AMFI.

The days of knee-jerk panic withdrawals by individual investors are slowly but surely reducing.

If they ride out this volatility, they will see the benefit of the cycle turning in their favor.

That will mark a significant change in the mindset of the retail investor for the long term.