Sensex Finishes Flat Ahead of Fed Outcome; Idea Surges 9%
Closing

Share markets in India finished flat as the sentiment turned tepid ahead of the outcome of the US Federal Reserve's meeting later in the day. At the closing bell, the BSE Sensex stood lower by 45 points, while the NSE Nifty finished down by 2 points.

Sensex Is Fairly Valued

Sensex Is Fairly Valued

If we look at the historical valuations of the Sensex, one thing becomes clear immediately. The market is not overvalued. Yes, individual stocks are overvalued, but not the entire market. However, the markets aren't cheap either. Interestingly, the Sensex P/E hasn't crossed 25 since mid-2008.If we were to tentatively consider a P/E of 25 as an upper limit, at least in the short-term, we would still get an upside of about 13% from current levels.

Here's why Sensex can rise 70% over next 2-3 years.

Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap finished up by 1% and 0.7% respectively. Gains were largely seen in realty stocks & auto stocks.

Telecom stocks finished the trading day on a firm note with Idea Cellular and Reliance Communications leading the gains.

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Idea share price surged 9.6% in today's trade after reports stated that ATC was close to completing a buyout of the firm's tower business. As part of the deal structure, ATC may merge Idea's tower business with its India portfolio as well as the acquired business of Viom. Idea Cellular has seen strong movements ever since the merger with Vodafone was announced. It surged over 45% in the past three months.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.08%, while the Nikkei 225 & the Hang Seng fell 0.16% and 0.15% respectively. European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.30% while Germany's DAX is up 0.13% and France's CAC 40 is up 0.10%.

The rupee was trading at Rs 66.51 against the US$ in the afternoon session. Oil prices were trading at US$ 48.55 at the time of writing.

Bharat Heavy Electricals Ltd (BHEL) share price surged 3.1% in today's trade after it was reported that the company commenced commercial operation of its first 800 MW unit. The commercial unit has highest-rating coal-based supercritical thermal power plant.

The milestone was achieved for the first unit of the 2x800 MW Yeramarus thermal power station of Raichur Power Corporation (RPCL), in Raichur district of Karnataka. Significantly, the commercial operation of this unit also marks company's foray as a developer into the field of power generation.

Meanwhile, BHEL is positioning itself as a transportation solutions provider, particularly in crowded urban settings in an attempt to keep pace with the fast-changing electricity sector. The company wants to become a turn-key metro rail end-to-end solutions provider and also manufacture electric vehicles such as buses, cars, two-wheelers and boats.

While BHEL has signed an agreement with Ashok Leyland Ltd and Tata Motors Ltd for developing a propulsion system for buses, the public sector unit is also seeking technical collaboration to manufacture metro rail locomotives and has initiated separate talks with Hitachi Transportation Systems, Mitsubishi Heavy Industries and Skoda Transportation.

The government wants to increase the share of waterways transportation from 6% of freight transported in India to 10% by 2020.

With an order book of Rs 984 billion that has contracted by 10% compared to a year earlier, BHEL's order inflow has become a cause of concern. The company's paltry order inflow of about Rs 13 billion represents a steep 79% fall from a year ago.

The total order inflow for the nine months ended December was about Rs 65 billion. While the capital goods manufacturer has a manufacturing capacity of 20,000 MW per annum its order inflow has trickled to around 6,000 MW every year.

Moving on to news from economic sector. According to a leading financial daily, the US Trade Representative (USTR) in its voluminous annual report on trade has said that India's GDP growth along with indirect taxation reforms could support considerably more US exports to the country in future.

It also said that the Goods and Services Tax (GST) regime in India, could provide an impetus to the creation of a common internal market that significantly lowers transaction costs. USTR has stated that India's new National Intellectual Property Rights (IPR) Policy could protect US innovations.

It also pointed out that while these reforms are encouraging, there has also been a general trend of tariff increases in India, which reflects an active pursuit of import substitution policies and also said that the US will press India to make meaningful progress in relation to these ambitious goals in 2017. However, it noted that the existing Indian trade and regulatory policies have inhibited the development of a more robust trade and investment relationship.

The report further said that, the US Trade Representative will follow through with work plans agreed on during the US India Trade Policy Forum (TPF) in October 2016, which will include convening digital video conferences and in-person meetings on intellectual property rights, promoting investment in manufacturing, agriculture and trade in goods and services. It added that India and US have set a target of increasing bilateral trade to US$500 billion.

Tata Power share price finished on an optimistic note (up 1.7%) after Tata Power Solar doubled its capacity for module manufacturing in Bengaluru. The company launched a fully automated manufacturing unit with capacity for module manufacturing increasing from 200 MW to 400 MW and 65 per cent increase in capacity of cell manufacturing from 180 MW to 300 MW.

In one of the largest mergers and acquisition in the space of renewable energy, Tata Powers Co Limited had acquired renewable energy division of Welspun Enterprise at Rs 100 billion. Through the deal it has acquired 990 MW solar power project assets in India.

And here's a note from Profit Hunter:

IT stocks are the top losers for the day. TCS (-2.7%), Infosys (-2.30%), HCL Tech (-1.45%), and Wipro (-1.30%) are the bottom four stocks in the Nifty 50 Index.

In an earlier note, we told you the Nifty IT Index is trading in a descending channel and how it could test the channel's resistance line at 10,650. A few days back, the index broke above this line and made a high of 10,821.

Today, the index fell sharply by 1.65% and is just below the channel's resistance line. The index seems to have given a false breakout.

The RSI indicator, which measures the strength of the trend, is not going into the overbought territory of 70. This indicates weakness in price.

If this is indeed a false breakout, the Nifty IT Index might re-test the channel's support line. But if it gains some momentum, it could create a big trend in the index.

To identify these big moves, Apurva Sheth, research analyst, has launched a new trading service, Peak Profit Alert He intends to capture longer-term trends using his proprietary trading system, SCOREFASTTM.

Click here and know more about this service.

Nifty IT Index - False Breakout?
Nifty IT Index - False Breakout? 


Sensex Remains Volatile; IT Stocks Drag
01:30 pm

After opening the day on a cautious note, share markets in India have continued to remain range bound and are trading marginally below the dotted line. Sectoral indices are trading on a mixed note with stocks in the consumer durables sector and stocks in the realty sector leading the gains, while stocks in the IT sector are trading in red.

The BSE Sensex is trading down by 15 points (down 0.1%), and the NSE Nifty is trading up by 2 points (up 0.02%). Meanwhile, the BSE Mid Cap index is trading up by 0.9%, while the BSE Small Cap index is trading up by 0.6%. The rupee is trading at 65.52 to the US$.

Glenmark Pharma's share price was in focus today as the drug major announced its Ankleshwar plant received US Food and Drug Administration (USFDA) clearance.

Glenmark Pharmaceuticals Ltd's active pharmaceutical ingredients (API) manufacturing plant at Ankleshwar in Gujarat, in which the USFDA had earlier observed certain violations of norms, has now been cleared by the US drug regulator.

The facility received an Establishment Inspection Report (EIR) on Tuesday. The EIR is issued by the USFDA only if it finds the facility to be deemed acceptable.

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Glenmark sources APIs from Ankleshwar unit for many of its crucial formulations that are supplied to the US market and, therefore, the clearance for this plant is a positive development.

The USFDA had issued a Form 483 to Glenmark's Ankleshwar plant with four observations relating to violation of good manufacturing practices after the inspection of the facility in December 2016.

Form 483 relates to certain critical observations issued to a company at the end of an inspection if there were any violations of the Food Drug and Cosmetic Act and other related acts of the US Government.

Companies that receive its observations must respond in writing with a corrective action plan and implement it quickly. If the company does not meet the USFDA's expectations, a warning letter may be issued.

In a regulatory filing on 21 February, Glenmark had said it had responded to USFDA's observations for Ankleshwar plant, giving details of its corrective measures in January.

Glenmark Pharma's share price rose as much as 2% in intraday trade as market participants cheered the announcement.

Moving on to news about the economy. According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Consumer Price Index (CPI) rose to 3.6% in February, snapping a four-month downtrend.

CPI inflation rose to a three-month high of 3.6% from 3.2% in January.

The inflation numbers were up on the back of expensive food and fuel items, even as manufacturing products saw a decline in inflation.

CPI Inflation at 3-month High
CPI Inflation at 3-month High

CPI Food inflation rose to 2% in February, up from just 0.6% in the previous month.

However, vegetable prices kept falling but the rate of decline came down in February as compared to January. The deflation stood at 8.3% in February against 15.6% in the previous month.

Pulses saw fall in retail prices at the rate of 9% in February against 6.6% in January.

Cereals and fruits turned expensive at a rising rate. Similarly, fuel items too witnessed a rise. Fuel inflation rose to 3.9% against 3.4% in the month gone by.

The data justified the Reserve Bank of India's caution on loose monetary stance amid expected increase in interest rates in the United States in the next few days.

In the February monetary policy review, the RBI paused on rates as it expects inflation to firm up due to the rapid pace of remonetisation. The likelihood of RBI cutting the policy rates in April remained subdued.

The next meeting of the monetary policy committee is scheduled for April 5-6.

Interest rate increases, in any form would lead to the end of easy money and create big trends that traders can profit from.

To capture these big trends, you need to have a solid trading system in place.

Since March 2015, Apurva Sheth, research analyst, has been helping subscribers beat the benchmark index by a huge margin and generate solid returns in just weeks with his short-term trading service, Swing Trader.

And now Apurva has launched a new trading service, Peak Profit Alert. He intends to capture the longer-term trends of the stocks based on his proprietary trading system, SCOREFASTTM.

This SCOREFASTTM system was built in-house by Apurva. It employs nine crucial indicators to identify trades that can generate double and triple-digit returns in a period of just a few weeks or months. Click here and know more about this service.


Sensex Witnesses Volatility Ahead of FOMC Decision
11:30 am

After opening the day on a flat note, share markets in India witnessed volatile trades and are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the telecom sector and energy sector witnessing maximum buying interest. IT stocks are trading in the red.

The BSE Sensex is trading up 9 points (up 0.03%) and the NSE Nifty is trading up 6 points (up 0.1%). The BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 0.6%. The rupee is trading at 65.47 to the US$.

Indian stock markets are witnessing volatility today ahead of the Fed's decision regarding interest rate. Many market participants are of the view that the Fed will increase its interest rates this time. Also, some of the most recent data from the US has fueled optimism for an interest rate hike by the Fed.

Fed Chair Janet Yellen last week signaled that the US central bank would likely raise rates at its March 14-15 policy meeting. It raised interest rates in December 2016 and has forecast three rate hikes for 2017.

The Fed's promise of more interest rate increases would lead to the end of easy money and create big trends that traders can profit from.

Just Released: Multibagger Stocks Guide
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To capture these big trends, you need to have a solid trading system in place.

Since March 2015, Apurva Sheth, research analyst, has been helping subscribers beat the benchmark index by a huge margin and generate solid returns in just weeks with his short-term trading service, Swing Trader.

And now Apurva has launched a new trading service, Peak Profit Alert. He intends to capture the longer-term trends of the stocks based on his proprietary trading system, SCOREFASTTM.

This SCOREFASTTM system was built in-house by Apurva. It employs nine crucial indicators to identify trades that can generate double and triple-digit returns in a period of just a few weeks or months. Click here and know more about this service.

In other news, data released yesterday showed India's wholesale price index (WPI) inflation rising 6.55% in February. This was seen on the back of higher fuel, power, and food prices. Fuel and power inflation rose 21.02% in February from 18.14% last month. Food inflation firmed up to 2.69% in February from a 0.56% fall in January.

Along with the WPI, the month of February also saw retail inflation going up by 3.65%.

The above developments dimmed the prospects of an interest rate hike by the Reserve Bank of India (RBI) next month and has also raised concerns about economy growth.

Can Inflation Come Back to Haunt the Economy?

Can Inflation Come Back to Haunt the Economy?

There are many causes of inflation in India and one can say that the inflation in India is here to stay. The real question comes as what can be the best bet to protect your wealth from these inflationary pressures?

One of our editions of The 5 Minute WrapUp answers the above questions by explaining how buying solid stocks can help in beating inflation.


Sensex & Nifty Open Flat Ahead of Fed Outcome
09:30 am

Asian equity markets are lower today following losses in US stocks as traders awaited a decision on interest rates from the US Federal Reserve. The Nikkei 225 is off 0.29%, while the Hang Seng is down 0.07%. The Shanghai Composite is trading up by 0.09%. Stock markets in the US & Europe finished their previous session on a weak note.

Meanwhile, Indian share markets have opened the day on a sluggish note ahead of outcome of the Federal Reserve policy meeting tonight. The BSE Sensex is trading higher by 1 point while the NSE Nifty is trading flat. The BSE Mid Cap index opened flat while BSE Small Cap index both have opened the day up by 0.2%.

Sectoral indices have opened the day on a mixed note with consumer durables stocks and healthcare sector leading the pack of gainers. While information technology and capital goods stocks are witnessing selling pressure. The rupee is trading at 66.18 to the US$.

Automobile stocks are trading mixed with Maharashtra Scooters and Tata Motors being the most active stocks in this space. As per an article in a leading financial daily, in the first major move under N Chandrasekaran's chairmanship, Tata Motors is reducing staff by offering a voluntary retirement scheme (VRS) to significantly prune its middle management.

The company is in the process of bringing down the management layers down to five from the existing 14 to cut costs. The VRS package has been approved by the board and the company says that it's part of a larger endeavour to cut costs and make overall operations more streamlined.

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Reportedly, this is part of a human resource restructuring drive that is expected to transform the automaker into a much leaner company with a flat hierarchical structure.

This also comes at a time when Tata Motors has been changing gears to keep up with the ongoing trend in the industry to offer a variety of products while enhancing production synergies. Further, it intends to use modular platforms and cut costs on that front in the future. It is also expanding its horizon by introducing the sub-brand Tamo, and also announcing a likely partnership with the Volkswagen Group.

Tata Motors share price opened the day up by 0.3%.

Moving on to the news from stocks in mining sector. According to a leading financial daily, boards of three subsidiaries of Coal India Limited have slashed valuations of the shares of these companies by at least 75% over the values declared earlier this month.

As per an article in The Economic Times, the earlier valuations did not reflect the true valuation of either the subsidiaries or the parent. Although, the amount of money that Coal India will receive post reduced valuation through proposed share buybacks remains the same at Rs 50.63 billion.

The number of shares to be bought back by the company has been increased to keep the total sum the same. The earlier valuations included factors that are considered for valuing international companies, resulting in higher valuations.

Big Buybacks of the Public-Sector Units

Big Buybacks of the Public-Sector Units

Historically, various plans of government's stake sales had hit a stone wall. In 2015-16, the government had set a record target of raising Rs 695 bn through disinvestment, but only managed Rs 321 bn. To avoid a repeat of last year, it is exploring a new strategy. It is expecting the cash PSUs to use the cash in buybacks.

Meanwhile, the finances of three of the seven coal-producing subsidiaries of Coal India may nosedive this fiscal due to poor production and sales. As per the reports, between April and February this fiscal, Western Coal Fields, which seems to be the worst off, saw its output drop by 5.3% and its offtake decrease by 8.7%.

Bharat Coking Coal Ltd's output rose 2.6%, but coal sales dropped by 3.2%. ECL's output rose 2.3% and despatch, 12.6%. All the three companies were lagging behind their targets by a margin of between 3% and 14% in output and 6% and 19% in offtake.

Poor coal demand has been the primary reason for this. Moreover, the fortunes of CIL and its arms were affected by the close to 50% drop in the e-auction price in the last quarter.

The Poor performance of its subsidiaries and provisioning for higher wages (due to ongoing wage negotiations) dented CIL's third quarter performance. CIL reported a 20% drop in net profit to Rs 28.84 billion in the October-December 2016 quarter.

Coal India share price began the trading day down by 0.2%.


Fate of 'Cashless' in the Post-Demonetisation Era
Pre-Open

Back in November when the Prime Minister surprised the nation with a blanket note ban, now popularly known as notebandi, 'cashless' and 'digital' transactions were in the limelight. There was a notable increase in digital wallet transactions; people couldn't stop talking about Paytm, Freecharge and other digital payment apps.

Four months down the line however, the surge in digital transactions which sustained for just over two months, is fast fading away.

The government, in the past four months tried to push cashless and digital payments in a big way by organizing massive events such as 'Digi Dhan Mela', launching new applications and transaction channels such as BHIM, Unstructured Supplementary Service Data (USSD), Bharat QR and the like.

The government left no stone unturned in pushing the masses towards the adoption of digital means of transactions using mobile wallets and the Unified Payments Interface (UPI).

Third party digital apps had a field day, adding thousands of new users over the past four months.

With such emphasis on digital transactions during demonetisation in India, it is easy to assume that digital transactions would naturally increase in the post-demonetisation period.

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However, it is not the paradigm shift the government expected.

According to Reserve Bank of India (RBI) data, cashless transactions have gone down by 21.3% in February, as compared to December last year. From a peak of Rs 104 trillion worth digital transactions in December, the figure has come down to Rs 92.6 trillion in monthly cashless transactions in February.

Even on the digital wallets front, transaction values have gone down considerably over the last few months. While four major wallet companies in India claim a combined 12 million merchants have joined their platform, transactions have gone down from Rs 21 billion in January to Rs 18.7 billion in February.

The reasons for this decline?

Most importantly, increased money supply. Although the supply of cash in the economy is nowhere near the pre-notebandi levels, it has certainly increased from the date when 86% of the currency in circulation was demonetized.

Further, the RBI has been steadily lifting withdrawal limits imposed during notebandi. RBI lifted all limits on savings account cash withdrawal post notebandi.

In a two-stage process, the weekly withdrawal limit per account had been raised to Rs 50,000 from Rs 24,000, with effect from February 20. Further, all limits on ATM withdrawals also ceased from March 13.

In addition to this, small traders who were quick to adapt alternate transaction channels such as mobile wallets and other payment gateways switched back to cash as transaction costs in these channels proved to be a deterrent.

It is evident that India has a lot of ground to cover to become a truly digital economy. However, creating a proper infrastructure for digital transactions, laws on fraud and transaction security, and similar policy changes will go a long way in making India a cashless society.