Sensex, Nifty Edge Up; Consumer Durables & Energy Stocks Rally
Closing

After trading flat in the noon session, Indian share markets witnessed buying momentum in the final hour of trade to finish on a firm note. At the closing bell, the BSE Sensex stood higher by 100 points, while the NSE Nifty finished up by 29 points. Meanwhile, the S&P BSE Mid Cap finished & the S&P BSE Small Cap finished up by 0.5% respectively. Gains were largely seen in consumer durables stocks, bank stocks and energy stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.68% and the Shanghai Composite rose 0.41%. The Hang Seng lost 0.76%. European markets too are trading mixed. The DAX is higher by 0.50%, while the FTSE 100 is leading the CAC 40 lower. They are down 0.16% and 0.06% respectively.

The rupee was trading at Rs 66.98 against the US$ in the afternoon session. Oil prices were trading at US$ 54.31 at the time of writing.

According to an article in The Economic Times, Britannia signed a memorandum of understanding with Greece's Chipita for a joint venture in India. Britannia will hold the majority stake in the venture that will involve an initial manufacturing investment of about US$11 million.

Britannia will set up facilities next to its existing plants to optimize logistics costs, and leverage its existing strengths of supply-chain and distribution networks.

The tie-up with Chipita is the first joint venture Britannia will formalize after its tie-up with New Zealand's Fonterra Dairy was dissolved in 2009 on account of lukewarm market response and losses. Britannia's venture with French food and dairy giant Groupe Danone SA was also terminated the same year after a protracted legal battle.

Reportedly, savory snacks in India are expected to register a 12% compounded annual growth rate over until 2020, with sales reaching Rs 445 billion. This growth is expected to be driven by increase in consumer's purchasing power, product innovation and expansion in lower tier cities and rural areas.

Britannia share price finished down by 0.7%.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

In another development, now out of the Maggi crisis, Nestle India is looking to diversify into new segments like premium coffee business, pet care, skin health and cereals while it looks at 2017 as a "year of aggression". It is also planning to consolidate its offerings and add new categories so as continue with double digit growth.

The company, as part of diversification, has launched 35 products in last six months and may remove some of those which are not performing well.

As per the company's Chairman, Nestle has taken Rs 1 billion hit on sales due to demonetisation and the sector will take another six months to overcome the impact of the government's move to scarp old high value notes.

Demonetisation Effect: Defensive Sectors Corrected As Much As Smallcaps

The FMCG segment is expected take at least two more quarters for a complete recovery as the lag in demand is not on just the industry only but also on the downstream demand as well.

Nestle share price finished the day up by 1.9% on the BSE.

Moving on to news from stocks in oil & gas sector. According to an article in The Livemint, the total debt of India's biggest energy companies stood at the lowest in eight years on account lower oil prices and scrapping of fuel subsidies.

As per the reports, total debt at Indian Oil Corp., the nation's largest refiner, stood at Rs 419 billion at the end of September, down from Rs 863 billion rupees in March 2014. Liabilities at Hindustan Petroleum Corp., the third-biggest fuel retailer, shrunk 65% in the same period.

Also, Bharat Petroleum Corp.'s US$600 million bond sale in January drew bids for three times the amount, helping the company price the 10-year debt at the tightest spread over US treasuries by any Indian company in a decade.

An improving credit profile is allowing refiners to raise long-term funds at cheaper rates to fund expansion. It is to be noted that India is overtaking Japan as the world's third largest oil user.

Brent oil prices have fallen by half in the past three years, providing the government with a window to free up controls. Diesel and gasoline subsidies have helped the energy companies as they no longer have to sell the fuels below cost. This frees up cash to invest in infrastructure for faster growth.

Hindustan Petroleum plans to spend US$8 billion over the next five years to help expand and upgrade its 60-year-old refineries.

Oil & gas stocks finished the trading day on a firm note with Reliance Industries and Hindustan Oil Exploration Company leading the gains.

And here's a note from Profit Hunter:

The S&P BSE Consumer Durables Index wasn't among the best performers of 2016, but the index has picked up pace quite well of late. The Nifty 50 Index gained 27% from its February 2016 lows. The Consumer Durables Index underperformed the benchmark, gaining 25% from the same lows.

After the Nifty topped out in September 2016, it retraced only 50% of its previous up move. The Consumer Durable Index made a new 52-week low of 10,561, retracing around 120% of the previous up move.

After making a 52-week low, consumer durables are now trading at a new 52-week high of 13,850. The index had a spectacular run from its December 2016 lows, gaining more than 27%, double the Nifty's gains.

Despite the new 52-week high, the Consumer Durables Index is still underperforming the Nifty by 2%. Will the current momentum help consumer durables outperform the Nifty?

S&P BSE Consumer Durables Index in Strong Momentum
Tata Steel at 52-Week High  


Sensex Trades on a Negative Note; FMCG Stocks Witness Selling Pressure
01:30 pm

After opening the day on a flat note, share markets in India witnessed selling activity and are trading on a negative note. Sectoral indices are trading on a mixed note with stocks in the metal sector and stocks in the realty sector trading in green, while stocks in the FMCG sector and stocks in the telecom sector leading the losses.

The BSE Sensex is trading down by 42 points (down 0.2%) and the NSE Nifty is trading down by 16 points (down 0.2%). Meanwhile, the BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.4%. The rupee is trading at 66.95 to the US$.

Siemens Ltd share price was trading up by as much as 2% in today's trade as the company announced it won an order worth Rs 2.87 billion.

Electrification and automation company Siemens Ltd and Siemens Rail Automation, Spain, jointly won the order worth Rs 2.87 billion to supply signalling technology for first two metro lines of Nagpur Metro i.e. the North-South and the East-West Corridors.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

Out of the total order, Siemens Ltd's share is worth Rs 1.46 billion

The project comprises the deployment and installation of the Siemens communications-based train control (CBTC) solution Trainguard MT for 38.2 kilometers of double track with 36 stations and two depots, as well as onboard equipment for 23 three-car trains.

The CBTC solution can enable headways of 90 seconds or less with precise train detection achieved through digitalized track database; enabling increase in the frequency of trains resulting in efficient commute for passengers.

On the financial front, Siemens' revenue decreased 0.9% to Rs 22.9 billion in Q3FY17 on yearly basis. The company's net profit boosted by 44% to Rs 1,600 million in Q3FY17 as compared to the same period in previous financial year.

Moving on to other news. According to a report by Retailers Association of India and Boston Consulting Group, India's e-commerce market is expected to be at US$ 50-55 billion by 2021 from the current US$ 6-8 billion.

The report revealed that on decoding the digital opportunity sectors that could see maximum e-commerce penetration would be consumer electronics, apparel, homeware and furniture, luxury, health, FMCG and food and grocery.

The report also noted that digital adoption by a user base over 35 years of age is much higher in the past two years alone. E-commerce adoption has increased 3.8 times from 4% to 15% in the over-35 age group between 2014 and 2016.

It is no doubt that India's e-commerce industry has seen a boom in the last 3-5 years. With a lot of startups scrambling to get a chunk of the e-commerce pie. Indian startups raised US$3.5 billion in funding in the first half of 2015. As of December 2015, eight Indian startups belonged to the 'unicorn club' (ventures valued at US$1 billion and upwards).

However, not one of these unicorns have been able to turn profitable and deliver real value.

As my colleague Richa Agarwal pointed out in a recent edition of the 5 Minute WrapUp:

  • With the startup fever, a whole new jargon has come into effect. Data integral to a sustainable business - profits, leverage, return on capital, cash flow - have become old fashioned. Fancy metrics like app installations, gross merchandise value, number of users - any creative term that raises the appeal of the startup's growth story - has become the buzzword. The story gets stretched till you're conditioned to believe in the fancy metrics...which are then used to justify high valuations. For startups that can get this far, next comes the public listing. The original investors, who invested in the story, find a decent exit. Thus enters the individual investor, scrambling for a piece of the presumed holy grail...hoping to ride the 'future Infosys or Apple'... Only to realise that he might be stuck with a company that is yet to establish a sustainable business model.
Loss-Making Unicorns

 Loss-Making Unicorns


Our big picture expert Vivek Kaul has even gone on to call these e-commerce companies a Ponzi Sceme, with individual investors...perhaps you...stuck at the end.

At Equitymaster, we take a different approach to picking businesses that could become future blue chips and offer great returns. We are here referring to well-established businesses that are yet to become well-known companies. Businesses that have not only stood the test of business and economic cycles, but have emerged stronger after every wave of adversity.

It's an approach that has beaten benchmark indices by nearly 3x since inception (Subscription Required). And has offered returns worth 4,841%, 3,042%, 1,058%, 550% and so on for our subscribers on certain bets. Want to know more? Discover the secret to hidden profits in little-known small companies.


Sensex Trades Marginally Lower; Telecom Stocks Witness Selling
11:30 am

After opening the day on a flat note, the Indian share markets witnessed choppy trades and are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the telecom sector and FMCG sector witnessing maximum selling pressure. Consumer durables stocks are trading in the green.

The BSE Sensex is trading down 49 points (down 0.2%) and the NSE Nifty is trading down 12 points (down 0.1%). The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up by 0.2%. The rupee is trading at 66.99 to the US$.

Indian stock markets are likely to witness volatility amid derivatives expiry during the week. Also, the ongoing UP assembly elections are said to weigh on stock market sentiments.

Along with that, cues from the Fed indicating an interest rate hike in its upcoming meet has made global stock markets trade on a volatile note. But as per Asad, the Fed's promise of more interest rate increases will lead to the end of easy money and will create big trends that traders can profit from.

Speaking of trading, Apurva Sheth has released a detailed report on what he believes could be an extremely effective four-step stock trading strategy. Get your hands on this report right now.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

As per an article in the Economic Times, the yearly SBI Composite Index (YoY) for February 2017 improved to 49.5 compared to last month's index of 47.0. The data indicated some improvement in the manufacturing activity.

However, the index declined sequentially, thereby indicating that full-fledged recovery in output may take some more time. The monthly Index declined marginally to 49.2 in February 2017 from 50.9 in January 2017.

Much of the fall in manufacturing activity is seen on the back of government's notebandi move.

Last week, the Reserve Bank of India (RBI) Governor Urjit Patel stated that India's growth will bounce back after a sharp notebandi-driven slowdown.

However, if one has to go by the ground realities, the economy is still facing troubles from notebandi. The government will continue with its lies and tell us that all is well on the notebandi front, but that doesn't make the situation any better for the common man.

In other major news, the country's highest valued company on the stock market - Tata Consultancy Services Ltd (TCS) - has announced a share buyback plan of up to Rs 160 billion. This is recorded as the biggest share buyback ever in the Indian capital market.

The proposed shares represent 2.85% of the total paid up equity share capital at Rs 2,850 per equity share. The buyback price is 13.7% higher than TCS's current market price.

The number of companies going for share buybacks has been on the rise lately. The trend picked pace from FY16, where a total of sixteen companies went for buybacks. The chart below shows the value of shares purchased through buybacks over the years. FY16 was comparatively a poor year in this regard. But on a YoY basis, the figure was higher by about 4x.

FY16 Sees an Uptick in Buyback of Shares

As regards FY17, many companies have already taken the plunge, while some are in the process. And going by the momentum, more could follow in the coming days.

So what should long-term investors do?

Doing nothing during a buyback may not be satisfying to many investors. Receiving cash may seem to be a better option. But remember, if you really are a long-term investor, buybacks could increase the value of your existing shares. The reduced number of outstanding shares will boost per share earnings as well as RoE. And in the long run, these two measures matter more than anything else.

In all, we believe investors should consider buybacks on a case-by-case basis.


Sensex Opens Flat; Metal and Energy Stocks Lead the Gainers
09:30 am

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.46% while the Hang Seng is up 0.09%. The Shanghai Composite is trading up by 0.26%. Stock markets in Europe and US closed their previous session on a flat note.

Meanwhile, share markets in India have opened the trading day on a flat note. The BSE Sensex is trading higher by 21 points while the NSE Nifty is trading higher by 5 points. The BSE Mid Cap index and BSE Small Cap index both have opened the day up by 0.3% & 0.4% respectively.

Barring auto sector, all the sectoral indices have opened the day in green with metal stocks and energy stocks witnessing buying momentum. The rupee is trading at 66.98 to the US$.

Information technology stocks have opened the day on a positive note with Tech Mahindra and Infosys being the most active stocks in this space. Tata Consultancy Services Ltd's (TCS) board has approved a share buyback plan of up to Rs 160 billion. The proposed shares represent 2.85% of the total paid up equity share capital at Rs 2850 per equity share.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

The announcement comes at a time when some Indian IT companies are caught in controversies. Earlier this month, Cognizant Technology Solutions Corp, announced that it would do share buybacks worth US$3.4 billion over two years. The announcement came even as Infosys squashed speculations that it was considering a Rs 120 billion share buyback program.

Main reasons behind a clamour for buybacks at the IT companies (Subscription Required) is that these companies have had only single-digit growth recently, leading to low shareholder returns. Shareholders can be rewarded through other means such as a buyback. Cash is idling at Indian IT companies as they are neither making acquisitions nor investing in growth, the reports noted.

TCS share price opened the trading day down by 0.6% on the BSE.

Flush With Cash

BPCL share price has surged 74% in Last one year

Moving on to the news from power stocks. As per an article in a leading financial daily, NTPC is planning to expand into cement manufacturing with the twin objectives of utilising fly ash from its power stations and create captive demand for electricity.

In this regard, the company is inviting expression of interest (EoI) from cement makers, offering a partnership for developing the proposed cement plants. The plant will be constructed on build, own, operate (BOO) basis.The interested players would have to set up cement plants with capacity of 1 million tonnes per annum or higher.

In addition, it will also help the selected company with land, water and power needs. The selected company will have to sign a long-term agreement for sourcing ash from NTPC and will also be responsible for marketing of products.

Moreover, a cement manufacturing foray for NTPC is necessary to meet Ministry of Environment's norm of utilising 100% ash. The company produces 65 million tonnes of fly ash, part of which is used for making bricks and land-filling.

NTPC has also felt the heat of decline in thermal power demand from power distribution companies (DISCOMs) and oversupply of capacity. Besides the JV for cement manufacturing, it will help NTPC to find consumers for generating capacity, the reports noted.

To know more about the company's financial performance, subscribers can access to NTPC's latest result analysis (subscription required) and NTPC stock analysis on our website.


What Do Buybacks Mean for shareholders?
Pre-Open

The number of companies going for share buybacks has been on the rise lately. The trend has picked pace especially after Union Budget 2016-17, where the government imposed an additional Dividend Distribution Tax (DDT). Many companies went on to declare dividends after the announcement. And those who missed the bus are now taking the share buyback route.

In a buyback, the company purchases its own shares from the stock market. Subsequently, it cancels them or keeps them as treasury shares. The whole buyback process results in the reduction of company's outstanding shares.

A buyback could mean the company has adequate cash to buy its own shares and is willing to reward its shareholders. It could also mean an improvement in financial ratios such as price to earnings, return on assets, and return on equity.

Apart from the above, buybacks make a lot of sense for companies now as they've turned tax efficient over dividends in India.

Many companies have already taken the plunge, while some are in the process. And going by the momentum, more could follow in the coming days...

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

So what should long-term investors do?

There's no doubt that tendering a part of your shares in a buyback could be a tempting proposition, especially if the buyback price is higher than the market price.

However, it's important to understand that buybacks reduce the outstanding number of shares. Thus, the shareholders who don't tender their shares will end up with a bigger piece of the pie.

Doing nothing during a buyback may not be satisfying to many investors. Receiving cash may seem to be a better option.

But remember, if you really are a long-term investor, buybacks will increase the value of your existing shares. The reduced number of outstanding shares will boost per share earnings as well as RoE. And in the long run, these two measures matter more than anything else.

In all, we believe investors should consider buybacks on a case-by-case basis.

Buybacks can be seen as a healthy development. However, that should be only one of the data points investors should look at. Ultimately, it boils down to management integrity, the company's moat as well as the health of the company's balance sheet.