Slow Economy? There's Still Good Money to Be Made in the Markets
Podcast

Indian stock markets mostly remained in the negative zone during the week except for Wednesday.

Asian stock markets were under pressure amid concerns over the coronavirus outbreak that has slowed production and weakened demand in China.

Back home, I'm sure you've heard about Moody's cutting India's GDP growth forecast.

Amid all this gloom, we at Equitymaster believe in taking advantage of the negativity in the stock market and buy the best stocks that are poised to ride India's economic recovery.

But how to pick the best stocks and what are the opportunities to look out for in such times?

Tune in to find out?

Now you can also listen to our podcasts on Spotify. Here's the link: Indian Stock Market WrapUp


Sensex Ends 152 Points Lower; Energy and IT Stocks Witness Selling
Closing

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India share markets witnessed selling pressure during closing hours and ended their day marginally lower.

At the closing bell, the BSE Sensex stood lower by 152 points (down 0.4%) and the NSE Nifty stood down by 45 points (down 0.4%).

The BSE Mid Cap index ended the day down 0.4%, while the BSE Small Cap index stood down by 0.5%.

Stocks in the energy sector and IT sector witnessed huge selling pressure, while metal stocks and telecom stocks were trading in the green.

The rupee was trading at 71.64 against the US$.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.17% and the Shanghai Composite was up by 1.84%. The Nikkei 225 was up 0.34%.

European markets were also trading on a mixed note. The FTSE 100 was up by 0.04%. The DAX was trading down by 0.10%, while the CAC 40 stood down 0.15%.

Speaking of Indian stock markets, in his latest video, Rahul Shah shares a proven strategy that can give big returns in quick time.

Tune in to find out more about this market beating strategy...

In news from the automobile sector, automobile dealers' body FADA said passenger vehicle (PV) retail sales in January declined 4.61% YoY to 2,90,879 units. The fall here was seen on the back of tepid response by end customers.

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According to Federation of Automobile Dealers Associations (FADA), which collected vehicle registration data from 1,223 out of the 1,432 regional transport offices (RTOs), PV sales stood at 3,04,929 units in January 2019.

Two-wheeler sales declined 8.82% to 12,67,366 units last month as compared with 13,89,951 units in January 2019.

Commercial vehicle sales declined 6.89% to 82,187 units as compared to 88,271 units in January 2019.

Three-wheeler sales, however, rose 9.17% to 63,514 units last month as compared with 58,178 units in January 2019.

Total sales across categories declined 7.17% to 17,50,116 units last month as against 18,85,253 units in the year-ago month.

FADA President Ashish Harsharaj Kale said that overall weak economic sentiment continues and even the Budget 2020, although an inclusive budget with growth drivers for the mid to long term, did not have any direct measures nor any immediate growth enabling initiatives for the auto sector.

On sales outlook, Kale said with continued weak consumer sentiment and the overall economic situation as well as the upcoming transition to BS-VI regime, the near-term demand situation will continue to be dynamic.

Note that India's automobile industry is bracing itself for a unique challenge in the first quarter of 2020 when the transition of BS-IV to BS-VI emission norms has to be made at the stroke of midnight on 31 March 2020.

No BS-IV vehicle could be sold from 1 April 2020, which means automakers would have to reduce their inventory on BS-IV models to zero by then.

The exercise is likely to see companies show extra caution in dispatching cars to dealers in the next few months, which may cause a continuation of the decline in wholesale numbers.

However, despite the slowdown in the auto sector, the sales volume of electric vehicles (EVs) are growing at a robust pace.

Sale of Electric Vehicles in India Projected to Go Up 10x in the Next Two Decades

Electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

The recently announced government incentives will give a further boost to EV sales.

The coming one year will be a real test for India's auto companies.

It will also tell us if this slowdown is temporary or if there has been a structural change in the sector.

In our view, companies in the sector adapting their business models to the rapidly changing environment will survive and thrive.

We will keep you updated on all the trends shaping up in this space. Stay tuned.

Also, speaking of auto sector, Tanushree Banerjee is counting on two listed automobile companies from the Indian market. The Rebirth of India stocks she has identified, are set to leave their mark on the global EV revolution.

These stocks may not have the 4x vertical ride like Tesla within a few months.

But for patient investors, these are the stocks which will soar like Tesla, more gradually.

As per Tanushree, now is the right time to buy these stocks to profit from the Rebirth of India. You can read about them here.

In other news, rating agency ICRA has revised cut and polished diamond industry outlook from stable to negative. The same is done in view of the ongoing lockdown in parts of China and Hong Kong (C&HK) region due to coronavirus.

China accounts for 14% of polished diamond consumption while a larger proportion (35%) of exports from India is currently routed via Hong Kong. The weak demand conditions in key markets is also expected to impact the domestic cut and polished diamond industry in a major way.

Confirming this, Jay Sheth, Vice President, Corporate Ratings, ICRA Limited said that apart from recent developments in China, the CPD industry had been going through weak demand conditions in key markets and pressure on gross margins due to declining finished prices.

If the business lockdown continues in C&HK, industry pressure will aggravate thereby impacting cash flows. This can have a serious bearing, especially given the cautious lending to the sector and; potentially impact CPD players' credit profile.

He added that the pandemic in China will also hit near-term global demand for CPD and the widespread economic shutdown in C&HK region which will further delay demand recovery. The industry is already bearing the brunt of on-going US-China trade and political tensions.

Note that in recent years, banks' lending to the gems and jewellery sector has been cautious following corporate governance and related concerns.

Restrictions were placed towards sectoral exposure in the light of past and recent defaults and weak perception over transparency related issues. In this background, the coronavirus related blow shall continue to restrict lending to the sector over next few months.

How this pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space. Stay tuned.

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


Sensex Trades Flat; IndusInd Bank and Tata Steel Top Gainers
12:30 pm

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Share markets in India are presently trading on a flat note. The BSE Sensex is trading up by 41 points, while the NSE Nifty is trading up by 16 points.

The BSE Mid Cap index is trading up by 0.9%, while the BSE Small Cap index is trading up by 0.8%.

Sectoral indices are trading mixed with stocks in the FMCG sector and energy sector witnessing selling pressure, while metal stocks and healthcare stocks are witnessing buying interest.

The rupee is currently trading at Rs 71.60 against the US$.

Speaking of Indian stock markets, in his latest video, Rahul Shah shares a proven strategy that can give big returns in quick time.

Tune in now...

In news from the banking sector, as per a leading financial daily, the initial public offer (IPO) of SBI Cards and Payment Services will be kept open for four days.

Currently, IPOs are open for subscription only for three days.

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As per sources, the fourth day will be exclusively for retail investors, HNIs and shareholders and the bidding will be compulsory closed at 5 pm on the last day.

Last week, the markets regulator had cleared the IPO of SBI Cards after raising some doubts with its lead manager.

SBI, along with its nominees, currently holds 689.9 million equity shares, constituting 74% stake of the pre-offer issued, subscribed and paid-up equity share capital of the company.

SBI Cards offers a wide range of credit cards to individual and corporate clients including lifestyle, rewards, shopping, travel, fuel, banking partnership cards and corporate cards.

As of 30 September 2019, SBI Cards had a 18% share of the Indian credit card market, the second largest credit card issuer in India with 9.46 million credit cards.

HDFC Bank has the largest credit cards business in the country with 13.3 million cards issued, while ICICI Bank stood third with 7.9 million credit cards, according to data from the Reserve Bank of India.

In other news, private sector lender HDFC Bank has tied up with SAP Concur, a travel, expense, and invoice management solutions provider, and payments processor Mastercard for a corporate credit card for business travelers.

In an interview, Parag Rao, group head for payment solutions and marketing at HDFC Bank said that the bank aims to target 5,000 corporates with this card and is not experiencing any slowdown in credit card spending at an aggregate level.

Speaking of the credit card business, a quick look at India's credit card spending is a good indicator of the country's consumption potential.

Have a look at today's chart of the day:

India's Massive Consumption Megatrend

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

  • Credit card spending in India has clocked a rapid 32% annual growth rate over the last 5 years. I expect this trend is expected to continue for many years.

    India's young demographic and rapid urbanisation will be the driving force of this consumption megatrend.

    This is a megatrend worth watching. Stocks of companies that cater to this theme will benefit in the long run.

This is one of the megatrends that will help what Tanushree calls the Rebirth of India.

She has identified the 7 best stocks that will profit from the Rebirth of India. You can read about these top 7 stocks here.

Moving on, shares of Sterlite Technologies surged over 6% today after the company informed that it has added new orders of Rs 15 billion.

In a press release, the company said that these orders have ranged from continued business development in its core areas of optical connectivity solutions and network services to emerging areas such as software virtualization.

The company further added that its network creation capital expenditure has been accelerated by major European, Middle East, Africa and South East Asian network creators, driving over 65% of connectivity revenues from these international geographies.

Sterlite Technologies share price is presently trading up by 3.8%.

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


Sensex Opens Marginally Down; Metal and Realty Stocks Drag
09:30 am

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Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.2% while the Hang Seng is up 0.7%. The Nikkei 225 is trading up by 0.9%. Meanwhile, the S&P 500 and Nasdaq rose to record closing highs on Wednesday as optimism that China would take more measures to prop up its economy eased concerns about the economic impact of the coronavirus epidemic.

Back home, India share markets opened marginally lower. The BSE Sensex is trading down by 74 points while the NSE Nifty is trading down by 16 points. Both, the BSE Mid Cap index and BSE Small Cap index opened up by 0.2%.

Sectoral indices have opened the day on a mixed note with realty stocks and metal stocks witnessing selling pressure. Telecom and healthcare stocks are trading in green.

The rupee is currently trading at 71.78 against the US$.

In the news from mutual funds space. According to the data on the Association of Mutual Funds in India, the average asset under management (AUM) of overnight funds has grown five times over the last nine months.

In the last 10 months, the AUM of overnight funds has increased to Rs 525.2 billion as on 31 January 2020, from Rs 115.7 billion as on 30 April 2019.

Not only AUM, but even the number of investor folios under Overnight Funds has more than doubled to 46,763 as on 31 January 2020, from 21,363 as on 30 April 2019.

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Meanwhile, mutual funds focused on investing in fixed-income securities saw an inflow of over Rs 940 billion in three months ended December 2019, driven by infusion in liquid and overnight funds.

This comes following an outflow of Rs 50.6 billion in September quarter and fund infusion to the tune of Rs 196.9 billion in June quarter, as per the reports.

In addition, overnight funds, which invest in securities with maturity of one day, received inflows of about Rs 175.3 billion, higher than Rs 39.1 billion in the three months ended September 2019.

Interestingly, co-head of research, Tanushree Banerjee recently wrote about an irreversible megatrend in the mutual funds space.

It is the growth in the AUM of the Indian mutual fund industry.

This is evident in the chart below...

New High for Mutual Fund AUM

Here's a snippet of what Tanushree wrote about it in one of the edition of The 5 Minute WrapUp...

  • After a few hiccups in the first half of this fiscal, strong inflows into mutual funds have taken the industry's AUM to a new high.

    Can we call it a saturation point?

    Far from it!

    The total AUM of India's mutual fund industry is just about 13% of India's GDP.

    This megatrend of financialisation of savings has a long runway ahead of it.

This is one of the megatrends that will help what Tanushree calls the Rebirth of India.

She has identified the 7 best stocks that will profit from the Rebirth of India. You can read about these top 7 stocks here.

Moving on to the news from the automobiles sector. As per the Fitch Ratings, the slowing economy and weakening consumer sentiment will continue to weigh on auto sales and the marginal improvement seen in December quarter, driven by festive discounts, is unlikely to sustain.

The gross domestic product (GDP) growth slowed down to 6.1% in 2018-19 and is projected to hit a 10-year low of about 5% in 2019-20, primarily due to falling consumer demand and poor financing options for high-value items like automobiles.

Vehicle sales have been hampered by weak consumer sentiment and still-weak availability of financing following tighter liquidity at non-banking lenders since the middle of 2018. The sector also faces additional challenges from the adoption of stricter emission standards from April 1, the report said.

As per the reports, automakers could also face production disruptions if the novel coronavirus outbreak in China leads to a prolonged halt in supply of required auto components.

Now, how this pans out going forward remains to be seen.

Note that India's automobile industry is bracing itself for a unique challenge when the transition of BS-IV to BS-VI emission norms has to be made at the stroke of midnight on 31 March 2020.

No BS-IV vehicle could be sold from 1 April 2020, which means automakers would have to reduce their inventory on BS-IV models to zero by then.

The exercise is likely to see companies show extra caution in dispatching cars to dealers in the next few months, which may cause a continuation of the decline in wholesale numbers.

Meanwhile, electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

This year will be a real test for India's auto companies.

It will also tell us if this slowdown is temporary or if there has been a structural change in the sector.

In our view, companies in the sector adapting their business models to the rapidly changing environment will survive and thrive.

We will keep you updated on all the trends shaping up in this space. Stay tuned.

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


Sensex Ends Over 400 Points Higher, Rising Gold Prices, and Top Cues in Focus Today
Pre-Open

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Indian share markets continued their momentum during closing hours yesterday and ended on a positive note today.

At the closing bell yesterday, the BSE Sensex stood higher by 428 points (up 1.1%) and the NSE Nifty closed higher by 137 points (up 1.2%).

The BSE Mid Cap index ended up by 1.3% and the BSE Small Cap index ended the day up by 1.4%.

All sectoral indices were trading in the green with healthcare sector and energy sector witnessing most of the buying interest.

Speaking of Indian share markets, we've been telling you about the rebound in smallcap stocks in 2020 for quite some time now.

And the market trend since the start of 2020 tells us, it's already happening!

Have a look at the chart below:

Smallcaps Are Way Ahead of the Sensex in 2020

As you can see, since the start of 2020, smallcaps have beaten largecaps by a wide margin.

But this is just the start.

We believe smallcaps have a long way to go.

You can make good gains with a careful selection of smallcap stocks and long-term horizon.

As per Richa Agarwal, editor of our premium smallcap service Hidden Treasure, fundamentally strong smallcap stocks will not only survive but thrive in the long term.

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Aurobindo Pharma Receives EIR from USFDA

In news from the pharma sector, shares of Aurobindo Pharma surged 19% yesterday after the company's Unit IV received Establishment Inspection Report (EIR) with Voluntary Action Initiated (VAl) status from the US health regulator.

In a BSE filing, Aurobindo Pharma said that the USFDA had inspected company's Unit IV, a general injectable formulation manufacturing facility situated at Pashamylaram, Hyderabad, from 4th to 13th November 2019.

At the end of the inspection, the company had issued a 'Form 483' with 14 observations.

On November 13, 2019, the company had informed the stock exchanges that none of these observations are related to data integrity issues.

Currently, Unit 4 has 15 abbreviated new drug applications (ANDA) approvals pending over next one year.

Earlier this month, the company had reported a strong growth of 11.9% in operational revenues at Rs 59 billion in the December quarter (Q3FY20).

The company's consolidated earnings before interest, tax, depreciation, and amortisation (EBITDA) margin remained stable at 20.5% in Q3FY20. EBITDA grew 11.2% YoY at Rs 12.1 billion.

However, profit after tax (PAT) declined 1% YoY to Rs 7.1 billion, due to higher depreciation.

To know more about the company, you can read Aurobindo Pharma's latest result analysis on our website.

Speaking of pharma sector, in the video below, Tanushree tells us where the sector stands now and also about the potential for a rebound.

Watch Now...

Meanwhile, Tanushree is counting on 7 top stocks from the Indian stock market that will benefit from what she calls the Rebirth of India.

As per her, now is the right time to buy these stocks to profit from the Rebirth of India. You can read about them here.

Jet Airways Extends Deadline for Bids

In news from the aviation space, Jet Airways' Committee of Creditors (CoC) on Tuesday decided to extend the deadline for submission of bids to March 10 as a new entity evinced interest in the airline.

The deadline for submitting the bids for Jet Airways, which is undergoing insolvency process, ended on Monday.

Against this backdrop, the CoC extended the deadline for submission of bids to March 10.

Earlier, South American conglomerate Synergy Group and New Delhi-based Prudent ARC were given time to submit resolution plan. Reportedly, they failed to meet the deadline.

The beleaguered airline had shut its operations in April last year due to severe cash crunch.

Jet Airways was admitted under the insolvency process on June 20, 2019, after its bankers failed to find any takers despite months of negotiations.

The airline stopped flying on April 17 and it had around 14,000 employees on that date.

How all this pan out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

Gold Witnesses Buying Interest

In news from the commodity space, gold was witnessing buying interest yesterday. The yellow metal held steady above the key US$ 1,600 mark yesterday as an uptick in equities due to a drop in new virus cases was offset by fears of an economic fallout.

The increase in the number of new virus cases slowed in China's Hubei province even as the death toll rose by 132 as of Tuesday. This was seen as a welcome breather and meant some gains for gold.

Market participants are now awaiting the minutes of the Federal Reserve's January 28-29 policy meeting to take cues on what effect it would have on gold prices.

We will keep you updated on all the upcoming news from this space. Stay tuned.

Speaking of gold, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.

Here's what Ankit Shah wrote about this in one of the editions of The 5 Minute WrapUp...

  • In fact, gold has delivered double-digit gains in 10 of the last 15 years.

    During the entire 15-year period, gold has shot up 555% (compounded annual return of 12.1%).

    During the same period, the Sensex surged 511% (compounded annual return of 12.0%). If you include dividends, the Sensex returns would be higher than gold by a couple of percentage points.

    One must note that the Sensex returns are not representative of the broader market returns. Moreover, gold was a no-brainer. You didn't have to study financial statements, business models and forecast future earnings growth to get a double-digit return on your investment.

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