Strong Start to the Week; Realty & Auto Stocks Gain
Closing

Indian share markets finished the trading session on a strong note amid firm Asian markets after comments from a Federal Reserve official eased worries about faster rate hikes in US.

At the closing bell, the BSE Sensex closed higher by 304 points and the NSE Nifty finished higher by 92 points. The S&P BSE Mid Cap finished up by 0.7% while S&P BSE Small Cap finished up by 0.9%.

Gains were largely seen in realty stocks, auto stocks and capital goods stocks.

Asian stock markets finished broadly higher today with shares in China leading the region. The Shanghai Composite is up 1.23% while Japan's Nikkei 225 is up 1.19% and Hong Kong's Hang Seng is up 0.74%. European markets are higher today with shares in France leading the region. The CAC 40 is up 0.49% while Germany's DAX is up 0.47% and London's FTSE 100 is up 0.24%.

Rupee was trading at Rs 64.66 against the US$ in the afternoon session. Oil prices were trading at US$ 63.51 at the time of writing.

The Market cap to GDP ratio for Indian companies too 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.

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 Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

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.

In news from automobile sector, Hero MotoCorp has inaugurated a new state-of-the-art authorized dealership - 'Himgiri Automobiles' in Gurugram in the state Haryana. With this, the company now has three dealerships in the City.

The new dealership in Gurugram offers all the services to its customers under one roof from focused sales consulting, fully-equipped service facility to availability of spare parts.

Situated on Sohna Road, the Dealership is strategically located to cater to customers from Badshahpur, Wazirabad and Ghatta village, in addition to serving neighbouring areas of Gurugram. Hero MotoCorp's other two dealerships in Gurugram are located at Mehrauli Road and Sohna-Gurugram Road.

Meanwhile, the company's chairman wants to build Hero MotoCorp into a transportation technology company rather than just be a commuter bike maker, EV is the segment to bet on - Hero's investment of over Rs 2 billion in Ather, an electric two-wheeler startup from Bengaluru, is a promise in that direction.

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For Hero, in the EV segment, the focus will largely be on the commuter segment. Market watchers believe that two-wheelers will help grow the EV segment - after all, sales of two-wheelers in India outpace those of cars 5:1

Hero Motocorp share price finished the day up by 1.2% on the BSE.

Moving on to news from banking sector. Oriental Bank of Commerce share price fell 10% to Rs 95.1, while Simbhaoli Sugars Ltd share price declined 16% to Rs 14.2.

The Central Bureau of Investigation (CBI) on Sunday registered a case against Simbhaoli Sugars Ltd and its top executives for causing a loss of Rs 1.09 billion to state-owned Oriental Bank of Commerce.

In the first information report (FIR), the investigative agency named the company, which is one of India's largest sugar makers, its chairman and managing director, chief executive officer, chief financial officer and directors for allegedly defrauding the bank.

This comes days after the CBI booked a Delhi-based diamond jewellery exporter for Rs 3.9 billion fraud at the Oriental Bank of Commerce (OBC).

In another development, following the fraudulent transactions worth Rs 114 billion detected at Punjab National Bank (PNB), Finance Minister Arun Jaitley has ruled out privatisation of public sector banks (PSBs) and said that the move may not find political consensus.

He also said that a lot of people have started talking of privatisation in the outcome of the PNB fraud. He pointed out that the issue of bank privatisation involves a large political consensus and also involves an amendment to the law (Bank Nationalisation Act).

Software stocks finished in red today with NIIT Ltd share price and Mphasis Ltd share price leading the losses. This comes after the Donald Trump administration tightened the norms for issuing US H-1B visa to those working in third-party sites.

The major concern with the new rules is that it could force a worker to return home after the end of each project. Nasscom President R Chandrashekhar said the new rule could make it costlier and cumbersome in managing things, leading to gaps in handling different projects by firms.

In news from pharma sector,  Sun Pharma share price is among the top losers on the bourses today after the United States Food & Drug Administration (USFDA) made three observations after inspecting its Halol, Gujarat plant.

India's largest drugmaker said that the USFDA conducted a Good Manufacturing Practices (GMP) inspection of Sun Pharmaceuticals Industries Ltd's Halol facility. At the conclusion of the inspection, the agency issued a Form 483 with three observations.

Sun Pharma finished the day down by 2.5%.

In another development, Lupin share price finished up by 1.8% after the company launched Testosterone Topical Solution, 30 mg per actuation having received an approval from the United States Food and Drug Administration (USFDA) earlier.

Testosterone Topical Solution, 30 mg per actuation had annual sales of around US$179 million in the US.

And here's a note from Profit Hunter:

Larsen and Turbo (L&T) is among the top gainer in the Nifty 50 Index - up 3.25%. Let's have a look at its chart.

The last time we reviewed the stock, it had broken above its strong resistance level of 1,260. It rallied nearly 17% after the break-out to touch a life-time high of 1,470. The 1,260 level is now the strong support for the stock. Previous resistances once broken usually act as a support on subsequent declines.

The stock corrected from its life high and found strong support near 1,275 which just shy of 1,260 support level. The rising trendline (red line) also acted as a support for the stock. The RSI indicator has also reversed after finding support from 40 level indicating change in momentum. Today, the stock is up 3.25% indicating strong buying interest in the counter.

So does this indicate we can see a new-life time high soon or this is just a pullback before the stock resumes its down move? Let's wait and watch...

L&T Bounces from Support Level
L&T Bounces from Support Level 

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

After opening the day in green share markets in India have continued the momentum and are presently trading comfortably above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the realty sector and stocks in the auto sector witnessing maximum buying interest. While stocks in the IT sector are leading the losses.

The BSE Sensex is trading up by 245 points (up 0.7%) and the NSE Nifty is trading up by 75 points (up 0.7%). Meanwhile, the BSE Mid Cap index is trading up by 0.8%, while the BSE Small Cap index is trading up by 0.9%. The rupee is trading at 64.68 to the US$.

In news from stocks in the pharma sector. Sun Pharma share price is among the top losers on the bourses today after the United States Food & Drug Administration (USFDA) made three observations after inspecting its Halol, Gujarat plant.

India's largest drugmaker said that the USFDA conducted a Good Manufacturing Practices (GMP) inspection of Sun Pharmaceuticals Industries Ltd's Halol facility. At the conclusion of the inspection, the agency issued a Form 483 with three observations.

As per USFDA, observations are made in Form 483 when investigators feel that conditions or practices in the facility are such that products may become adulterated or render injuries to health.

Sun Pharma's US supplies were hit over the past year after the US FDA found violations of manufacturing practices at the company's Halol manufacturing unit. US FDA conducted its first inspection of the facility in 2014 and another in December 2015. The company was given a warning letter with six observations, preventing it from making fresh filings of new drug applications.

In November-December 2016, Sun Pharma's Halol plant was re- inspected and the US FDA issued Form 483 with nine observations.

At the time of writing, Sun Pharma share price was trading down by 2%

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Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

However, note that USFDA alerts on Indian pharma companies have increased over the past few years. Regulators used to visit the plants every two years. Now they come every eight months. Increasing inspections have led to a total of 41 import alerts in the past eight years - 33 of them (80%) in just the last four years (2013-16). This clearly signifies increased USFDA scrutiny on Indian pharma firms. If that wasn't enough, increasing pricing pressure in the generics segment has dented realisations.

However, the recent development of USFDA expediting the drug approval process can bring some respite for Indian pharma companies. This comes as drug approvals for Indian companies have gone up 50% in the period from January to June 2017 compared to the same period last year, as can be seen from the chart below:

Expediting Drug Approval Process to be a Positive for Industry

While short-term pain is expected, companies with strong R&D capabilities and compliant plants will do well over the long term. The uncertainties make it important to be stock specific in the sector. It is important to look for companies that have the competence and staying power to overcome the challenges.

Moving on to news from stocks in the steel sector. JSW Steel share price is in focus today after media reports said that the steel major said that it is set to acquire Italy's second largest steel maker.

JSW Steel is close to finalizing a deal to acquire Aferpi, formerly known as Lucchini SpA, in a deal worth Rs 6 billion.

According to a leading financial daily, JSW Steel has been in talks with Algeria-headquartered Cevital Group on the acquisition for the last six months and is expected to make an announcement soon.

The acquisition of Aferpi by JSW comes at a time when its group company, JSW Energy, is gearing up for electric car production in India.

A foothold in Europe, one of the largest electric car markets, will enable the group to gain technical knowhow in electric vehicle production and localise manufacture of components much faster, said an analyst.

JSW Energy plans to invest about Rs 40 billion to produce e-vehicles in Gujarat and is scouting for a joint venture partner.

The deal also comes at a time when JSW steel lost out on the race to acquire the stressed assets of Bhushan Steel and Bhushan Power.

Notably, JSW steel - the county's most profitable major steel producer was in the process of raising over US$ 1.5 billion through various sources for acquiring stressed assets in the industry.

At the time of writing, JSW share price was trading up by 1%.


Sensex Continues Momentum; Realty Sector Up 2.2%
11:30 am

After opening the day on a positive note, stock markets in India have continued their momentum. Sectoral indices are trading on a positive note with stocks in the realty sector and auto sector witnessing maximum buying interest.

The BSE Sensex is trading up 232 points (up 0.7%) and the NSE Nifty is trading up 70 points (up 0.7%). Both - the BSE Mid Cap index and the BSE Small Cap index are trading up by 0.8%. The rupee is trading at 64.65 to the US$.

In the news from the banking sector, as per an article in the Economic Times, Axis Bank is aiming at transferring some bad loans to stronger sponsors through NCLT resolution next year. This comes in line with the company's strategy of serving only the better-rated borrowers.

Note that the bank is one of the worst-affected private sector banks in India after the Reserve Bank's asset quality review, which led to a huge increase in bad loans over the past two years.

The bank was also found to have under-reported impaired assets of over Rs 100 billion after the elevated NPA recognition.

At the time of writing, Axis Bank share price was trading up by 1.8% on the BSE.

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In the news from the IPO space, Aster DM Healthcare made a tepid debut today. The shares on the company got listed at Rs 182 on BSE, around 4% discount to its issue price of Rs 190.

The private healthcare service providers, which sold its shares in the primary market from February 12 to 15, received bids for 48.8 million shares (1.3 times) against 37.4 million shares on offer.

If you've been tracking the demand for IPOs, you would certainly think that 2017 is the year of IPOs. For one, IPO subscriptions were at sky high levels. But if the performance of recently listed IPOs are anything to go by, they have flattered to deceive. This is evident from the chart below:

Poor IPO Returns Post Listing

Note that the IPO activity in FY17 was mainly driven by Offer for Sale (OFS) rather than fresh issues. An OFS is a route through which existing promoters and private equity investors offload their stake. Here, the money from the sale goes to the selling shareholder. Whereas, in a fresh issue, the money raised goes to the company who, normally, utilizes this money to repay debt, for capital expenditure, etc.

Also, the number of Private Equity (PE) investors exiting these companies raised a red flag. These PE investors had bought a stake in the IPO at a fraction of the listed price. Sensing the frenzy, they were able to offload their stake with multifold returns.

The only person left high-and-dry here was the retail investor. And, this is not a recent occurrence. The IPO euphoria is something similar to what was seen in 2007-08. More than 70% of the IPOs listed in 2007 and 2008 were in the red, even today when the Sensex is at an all-time high.

So, for the retail investor, it is very important to ignore the noise and focus on the fundamental and valuations on the table. And more often than not, this approach works much better than following the herd.

If you want to know more about IPOs and whether they are right for you, you can download our free special report - How to Get Rich with IPOs.


Sensex Opens in Green; Metal & Banking Stocks Gain
09:30 am

Asian stocks are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.46% while the Hang Seng is up 0.62%. The Nikkei 225 is trading up by 0.82%. US stocks rallied on Friday, lifted by gains in technology stocks and a retreat in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.

Back home, India share markets opened the day on a positive note. The BSE Sensex is trading higher by 137 points while the NSE Nifty is trading higher by 35 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.7% & 0.6% respectively.

Barring IT stocks, all sectoral indices have opened the day in green with metal stocks and bank stocks witnessing maximum buying interest. The rupee is trading at 64.82 to the US$.

In the news from the IPO space. Aster DM Healthcare is set to debut on the bourses today. The private healthcare service providers, which sold its shares in the primary market from February 12 to 15, received bids for 48.8 million shares (1.3 times) against 37.4 million shares on offer.

The quota for qualified institutional buyers (QIBs) was subscribed 2.1 times, while non-institutional investors' shares was subscribed 0.6 times and retail portion 1.2 times.

The company, which sold the IPO in the price band of Rs 180 to Rs 190, has fixed the issue price at Rs 190.

Aster operates in multiple GCC (Gulf Cooperation Council) states and in India.

The issue comprised a fresh issue of shares worth up to Rs 7.3 billion and an offer for sale of 13.4 million shares by promoter Union Investments. The hospital chain was started by non-resident Indian businessman Azad Moopen.

Meanwhile, Jodhpur-based Engineering, procurement and construction (EPC) player HG Infra Engineering is all set to hit the primary market today with its Rs 4.6 billion initial public offering (IPO).

The company on Saturday garnered over Rs 1.4 billion from anchor investors.

The IPO consists of a fresh issue of shares aggregating up to Rs 3 billion and an offer for sale of up to 0.6 million scrips by the existing shareholders. The price band of the issue has been fixed at Rs 263-270 per share. The issue will close on February 28.

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To know our view on the above IPOs, you can read our IPO analysis here.

Also, if you want to know more about IPOs and whether they are right for you, you can download our free special report - How to Get Rich with IPOs.

If you've been tracking the demand for IPOs, you would certainly think that 2017 is the year of IPOs. For one, IPO subscriptions were at sky high levels. But if the performance of recently listed IPOs are anything to go by, they have flattered to deceive.

Of the 5 recent high profile IPOs which listed on the stock market, four have given negative returns as of yesterday's closing price.

The IPO activity in FY17 is mainly driven by Offer for Sale (OFS) rather than fresh issues. An OFS is a route through which existing promoters and private equity investors offload their stake. Here, the money from the sale goes to the selling shareholder. Whereas, in a fresh issue, the money raised goes to the company who, normally, utilizes this money to repay debt, for capital expenditure, etc.

Also, the number of Private Equity (PE) investors exiting these companies raised a red flag. These PE investors had bought a stake in the IPO recently at a fraction of the listed price. Sensing the frenzy, they were able to offload their stake with multifold returns.

The only person left high-and-dry here was the retail investor. And, this is not a recent occurrence. The IPO euphoria is something similar to what was seen in 2007-08. More than 70% of the IPOs listed in 2007 and 2008 were in the red, even today when the Sensex is at an all-time high.

Poor IPO Returns Post Listing


So, for the retail investor, it is very important to ignore the noise and focus on the fundamental and valuations on the table. And more often than not, this approach works much better than following the herd.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Dr Reddy's has received the establishment inspection report (EIR) from the US Food and Drug Administration (USFDA) for its formulations facility in Srikakulam, Andhra Pradesh.

The company said the USFDA has maintained OAI (Official Action Indicated) status at its API manufacturing plant in Srikakulam.

An OAI status is equivalent to finding of objectionable conditions at the audit site and also an indicative of regulatory and/or administrative sanctions by FDA.

The USFDA issues an EIR to an establishment that is the subject of an FDA or FDA-contracted inspection when the agency decides to close the inspection.

In April 2017, the company had informed about completion of the audit at its API manufacturing plant in Andhra Pradesh and issuance of two observations by the US drug regulator.

However, Dr Reddy's is addressing those issues, the reports noted.

Notably, the list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, Research Analyst thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

Dr. Reddy's Lab share price opened the day down by 2.6%.


Firm US Markets; Sun Pharma, Software Stocks & Other Top Cues to Sway the Markets Today
Pre-Open

Indian share markets finished the previous trading session on a strong note amid firm Asian markets after comments from a Federal Reserve official eased worries about faster rate hikes in US.

At the closing bell on Friday, the BSE Sensex closed higher by 323 points and the NSE Nifty finished higher by 108 points. The S&P BSE Mid Cap finished up by 1.5% while S&P BSE Small Cap finished up by 1.3%.

Gains were largely seen in metal stocks, pharma stocks and power stocks.

Top Stocks to Watch Out

Tata Global Beverages share price is expected to be in limelight today after Life Insurance Corporation (LIC) of India has reduced its share holding in Tata Global Beverages Ltd to 3.62% by selling 2.05% stake in open market.

Religare Enterprises plans to raise Rs 9.16 billion by issuing 175,559,960 warrants at an issue price of Rs 52.20. The proceeds will be used to meet long-term funding requirements of the company for growth capital, meet capital expenditure, to make investments as well as for general corporate purposes.

Tech Mahindra share price finished the previous session up by 3% as the company will invest US$79 million in Canada over the next five years to establish a centre of excellence, which will work on major technologies such as artificial intelligence (AI) and blockchain application.

Software stocks are expected to be in action today after the Donald Trump administration tightened the norms for issuing US H-1B visa to those working in third-party sites. The major concern with the new rules is that it could force a worker to return home after the end of each project. Nasscom President R Chandrashekhar said the new rule could make it costlier and cumbersome in managing things, leading to gaps in handling different projects by firms.

Siemens share price has been witnessing selling pressure after the company said it plans to sell its mobility division (which houses businesses linked to transport) along with the rail traction drives business and the mechanical drives business to its parent, Siemens AG or a wholly-owned subsidiary. The mobility division accounts for 10.46% of the turnover and 2.82% of the capital employed of the company for the year ended September 30, 2017.

Idea Cellular share price is expected to see some momentum today as the company has successfully closed a Qualified Institutions Placement (QIP) to raise Rs 35 billion.

Sun Pharma share price is expected to be in action today after the company said the US health regulator has issued three observations after inspecting its Halol facility in Gujarat.

Meanwhile, Biocon will reportedly start an R&D lab of its subsidiary Syngene in Genome Valley, Hyderabad, along with an expansion of its existing API/Intermediates facility.

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IPO Segment

HG Infra Engineering Ltd will launch its Rs 4.62 billion initial public offering on 26 February. HG Infra has set a price band of Rs 263-270 per share for the IPO. The offer will close on 28 February.

Founded in 2003, HG Infra is an infrastructure construction, development and management company with an extensive focus on road projects, including highways, bridges and flyovers. Its main business operations include providing engineering, procurement and construction (EPC) services and undertaking civil construction projects.

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 Crosses US$10,000

Bitcoin prices and cryptocurrency markets have improved marginally in Friday's session crossing the US$ 10K mark. Earlier this morning, it had dropped to a low of US$9,676.90.

Among the top 10 most valuable cryptocurrencies, Litecoin and Bitcoin Cash - both of which had sustained the biggest losses yesterday - recovered partially. Litecoin was up by 6.15% while Bitcoin Cash increased by 6.42% in its price

US Markets In Green

U.S. stocks jolted higher in the final hour of trading on Friday, erasing weekly losses as persistent distress about rising bond yields and the re-emergence of long-dormant inflation receded on Wall Street.

Federal Reserve policymakers still backed gradual interest rate hikes in 2018 at their Jan. 30-31 meeting. But they see stronger growth prospects in 2018 than they did in December, in part due to the Trump tax cuts. Fed officials see inflation rising to 2% over time.

Oil Prices Rise

Following a surprise report from the EIA, oil prices rose across the board, suggesting that bullish sentiment may be returning to the markets as crude prices hovered at two-week highs. It marked the fifth-straight weekly increase.

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.