Sensex Plunges 500 Points; Metal & Energy Stocks Continue to Fall
Closing

Indian share markets continued to witness further selling pressure in the afternoon session with financial and energy stocks taking the brunt as fears of a trade war due to the imposition of US tariffs preyed on global markets.

At the closing bell, the BSE Sensex closed lower by 509 points and the NSE Nifty finished lower by 165 points. The S&P BSE Mid Cap finished down by 1.1% while S&P BSE Small Cap finished down by 1%.

We generally refer to PE or price to earnings ratio to gauge whether the market is undervalued or overvalued. If we go by this ratio, the Indian market is clearly in overvaluation territory.

There is still another ratio, which is frequently used to evaluate the valuations. The market capitalization to GDP ratio. It is one of Buffett's favourite indicators of broader market value. The market cap of all the listed companies in the country divided by the gross domestic product (GDP) of the country gives us this ratio.

Market Cap to GDP Ratio Close to 100%

The idea behind this ratio is simple. Stock prices are derived from expected earnings for corporates and GDP represents revenue of the country. This gives investors an estimate of whether the two are moving in tandem. A ratio above 100% shows overvaluation and one below 50% shows that the market may be undervalued.

Even this ratio is showing valuations reaching its peak levels. India's market cap to GDP ratio reached 95%. This ratio was more than 100% after the 2007 bull run. Stock prices had seen a significant meltdown after that amid the global financial crisis.

Asian stock markets finished lower today with shares in China leading the region. The Shanghai Composite is down 0.65% while Japan's Nikkei 225 is off 0.58% and Hong Kong's Hang Seng is lower by 0.12%. European markets are mixed today. The DAX is up 0.35% while the FTSE 100 gains 0.17%. The CAC 40 is off 0.09%.

Rupee was trading at Rs 64.87 against the US$ in the afternoon session. Oil prices were trading at US$ 61.33 at the time of writing.

--- Advertisement ---
Benefit from the Market Crash, With These 5 Safe Stocks

For over 15 years, our Safe Stocks recommendation service has recommended solid stocks that have stood the test of time.

Even today, amongst the fear of a market crash...

We have used the accumulated experience of over 15 years to bring you...

The top 5 safe stocks that could potentially strengthen your portfolio.

And today, you can claim this special report...!

Click here to find out how...
------------------------------

Moving on to news from engineering sector. Larsen & Toubro's (L&T) construction arm -- L&T Construction and Dedicated Freight Corridor Corporation of India (DFCCIL) have signed contract worth Rs 28.64 billion for Eastern Dedicated Freight Corridor.

The Railways Strategic Business Unit of L&T Construction's Transportation Infrastructure Business has signed a major contract with DFCCIL. The EPC order involves construction of 222 Route Km of a single-track corridor from Khurja to Pilkhani in Uttar Pradesh.

L&T share price finished the day down by 2.1% on the BSE.

In news from PSU banks, Punjab National Bank (PNB) share price finished up by 0.3% after it was reported that the bank has approved issuance of Non-convertible secured/unsecured debentures (NCDs) aggregating upto an amount Rs 80 billion in tranches.

In another development, PNB detected yet another fraud at Mumbai branch which is at the centre of India's biggest banking scam. In this case, PNB's Brady House branch - fraudulently - issued Rs 90 million of Letters of Undertaking (LoUs) to Chandri Papers and Allied Products.

This comes a month after the second largest bank reported the biggest banking scam of over Rs 110 billion - initially, which later turned out to be a whopping Rs 136 billion fraud.

Telecom stocks finished the day on a mixed note with ITI Ltd share price and MTNL share price leading the losses.

Bharti Airtel share price finished the day down by 0.6% after it was reported that the The Telecom Regulatory Authority of India (Trai) has pulled up Bharti Airtel Ltd for failing to comply with tariff reporting requirements by not informing it about certain segmented tariffs offered to consumers to retain them.

As per an article in The Livemint, Trai has sought responses from Airtel to queries ranging from circle-wise launch date of these tariffs, criteria for classification of consumers availing these tariffs and whether these were reported to the regulator.

The new norms on pricing released by Trai on 16 February also state that in case of violation of tariff reporting requirements, an operator can be penalised Rs 5,000 for every day of delay, subject to a maximum of Rs 2 lakh.

In news from the economy, emphasizing on efforts being taken by the government to boost manufacturing in the country, Minister of Commerce & Industry, Suresh Prabhu has said that India could become US$5 trillion economy by 2025, provided that there is consistent growth in manufacturing, services and agricultural sectors.

Prabhu underlined key role of the private sector to create new business models and strategies and leverage new technologies in order to fuel growth in the Indian economy and gave assurance of government's support to it, noting that government will act as the facilitator in this process.

Besides, he said that the government is focusing on twelve Champion Sectors with a view to drive manufacturing growth and to create employment opportunities in India. He added that these sectors have potential to become global champions and drive double digit growth in manufacturing.

Further, heads of industry bodies CII, FICCI, IFC, NASSCOM and NitiAayog, have expressed need to focus on various issues like technological disruptions, challenges due to climate change, positive use of India's demographic dividend, conscious effort to make India's manufacturing sector a part of global value chain and recognizing the importance of small and medium scale enterprises to fuel India's growth story.

And here's a note from Profit Hunter

The Nifty 50 Index traded on a volatile note during the week.

On Monday, it opened the session gap up and rallied nearly 200 points. The positive momentum continued until the next day where the index hit a high of 10,478. But it couldn't sustain its upward trend for long and slipped lower for the remainder of the week.

Today, the index is down 165 points, finally closing the weekly session 0.31% down.

Last week, the index found a strong support near 10,000 - 10,100 zone (previous resistance now support). The 200 day moving average (DMA) also acted as a good support for the index.

It bounced up from these support levels, but it is now back near the 200 DMA.

So can the index again find support from the 200 DMA?

Or will it continue to slip lower? In that case, 10,000 is the level to watch out for.

Nifty 50 Index Trades Volatile
Nifty 50 Index Trades Volatile 

Sensex Trades in Red; Metals Sector Leads Losses
01:30 pm

After opening the day in red, share markets in India have continued the downtrend and are presently trading below the dotted line. Sectoral indices are trading mixed with stocks in the energy sector and stocks in the realty sector trading in red. While stocks in the consumer durables sector are trading in green.

The BSE Sensex is up by 310 points (down 0.9%) and the NSE Nifty is trading down by 100 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.4%, while the BSE Small Cap index is trading down by 0.2%. The rupee is trading at 64.88 to the US$.

In news from stocks in the aviation sector. Interglobe Aviation, which operates the Indigo Airliens brand was under pressure, and slumped over 1.2% in early trade today.

The company's shares witnessed selling pressure after the aviation regulator, Directorate General of Civil Aviation (DGCA) ordered the grounding of 8 Indigo and 3 GoAir planes.

This has led to the companies cancelling flights. The grounding of planes due to engine malfunction have led IndiGo and GoAir to cancel around 620 flights this month. IndiGo has decided to cancel around 480; the rest are of Go Air. The airlines will give passengers an option to choose an alternate flight or get a full refund.

On Monday, DGCA had ordered the companies to ground A320 Neo aircraft fitted with Pratt & Whitney engines, citing safety concerns.

--- Advertisement ---
Benefit from the Market Crash, With These 5 Safe Stocks

For over 15 years, our Safe Stocks recommendation service has recommended solid stocks that have stood the test of time.

Even today, amongst the fear of a market crash...

We have used the accumulated experience of over 15 years to bring you...

The top 5 safe stocks that could potentially strengthen your portfolio.

And today, you can claim this special report...!

Click here to find out how...
------------------------------

The DGCA order follows reports of three separate incidents involving mid-air engine shutdowns for the same type of aircraft.

The problem stems from a component that can show early signs of wear and is located in an area that must withstand high pressure.

IndiGo controls 39.6% share of the domestic market, with 153 planes and over 1,000 daily flights to 49 cities.

Indian Aviation Spreading its Wings

Air travel has recorded double-digit growth for 40 consecutive months, thanks to low fares, the addition of new flights/destinations, and overall growth in the economy.

What's foreseeable for India's aviation traffic in 2018 is some pressure on the back of the consistent rise in crude oil prices. Earlier this month, Brent crude oil briefly breached US$70 per barrel and touched its highest level since December 2014. Crude prices have been driven up by production curbs in OPEC nations and Russia, as well as by robust demand on the back of healthy global economic growth.

Oil prices are closely monitored by the Indian air carriers, as aviation turbine fuel is their single largest input cost. A sharp rise in the cost of fuel puts pressure on margins, and consequently an increase in air fares.

Although air travel is becoming the new normal, investors need to understand the industry dynamics before buying up aviation stocks.

Moving on to news from the IPO space. The Rs 9.6-billion initial public offering (IPO) of state-run Bharat Dynamics which closed yesterday, barely managed to sail through.

The IPO received a lukewarm response from retail investors and was subscribed just 1.3 times.

Note that the high net-worth individual (HNI) and employee portions failed to garner full subscription.

While, the institutional investor portion of the IPO was subscribed 1.5 times and the retail portion had garnered 1.4 times subscription.

Headquartered in Hyderabad, Bharat Dynamics is the sole manufacturer of Surface to Air Missiles (SAM), Torpedoes and Anti-Tank Guided Missiles (ATGM) in India. It is a public sector undertaking under the Ministry of Defence.

The company has grown its revenues and profits at a compounded annual growth rate of 130% and 5% respectively in the preceding three years. At the upper price band of Rs 428, the company is valued at 16 times it's FY17 earnings. Get a detailed analysis and our view on this initial public offer by clicking here (subscription required).

Speaking of 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.

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.

But it doesn't make sense to completely ignore this space. The IPO space has also given us names like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders.

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.


Sensex Down Over 230 Points; Energy Stocks Witness Losses
11:30 am

Indian share markets are presently trading on a negative note. Sectoral indices are trading in the red with stocks in the energy sector and metal sector witnessing maximum selling pressure.

The BSE Sensex is trading down 236 points (down 0.7%) and the NSE Nifty is trading down 71 points (down 0.7%). The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 64.85 to the US dollar.

In the news from global financial markets, Japan's industrial production declined more than estimated in January. Data from the Ministry of Economy, Trade and Industry showed that Industrial production fell a seasonally adjusted 6.8% month-over-month in January. This was more than the 6.6% decrease reported earlier and a growth of 2.9% seen in December.

Shipments contracted 5.7% over the month and inventories dropped 0.5%.

On a yearly basis, industrial production growth eased to 2.5% in January from 4.4% in December.

Data also showed that capacity utilization declined sharply by 7.3% monthly in January, reversing a 2.8% rise in the previous month.

Last week, the Bank of Japan (BoJ) kept its monetary stimulus unchanged and also stuck to its upbeat view on the economy. However, the above data has led to concerns about the growth of the economy.

Note that Kuroda has said to maintain the BOJ's ultra-easy policy.

--- Advertisement ---
Benefit from the Market Crash, With These 5 Safe Stocks

For over 15 years, our Safe Stocks recommendation service has recommended solid stocks that have stood the test of time.

Even today, amongst the fear of a market crash...

We have used the accumulated experience of over 15 years to bring you...

The top 5 safe stocks that could potentially strengthen your portfolio.

And today, you can claim this special report...!

Click here to find out how...
------------------------------

The BoJ has pushed back the timing to reach its price target many times since it deployed its massive stimulus programme in 2013. It now hopes that consumer inflation will achieve its 2% target by March 2020, as signs of strength in the economy and a tight job market boost wages giving households higher purchasing power, allowing firms to hike prices.

What remains are many issues that can hamper Japan's economic growth going forward.

Also, the recent win of Japanese Prime Minister Shinzo Abe in elections also signals the continuation of Abenomics - the ultra-loose monetary and fiscal policies. These policies have influenced excessive money printing, too much debt, and too much government intervention in Japan.

As Ankit writes in one of the editions of Equitymaster Insider... "With Abenomics, Japan has gone overboard trying to revive its economy. The Bank of Japan is a Top 10 holder in over 90% of Japanese stocks. And it remains one of the biggest buyer of Japanese stocks."

It would be interesting to see what impact the central bank's ultra-easy money policies will have on the economy going forward. Meanwhile, we'll keep you updated on all the recent developments in this space.

In the news from the IPO space, the initial public offer of Hindustan Aeronautics Ltd (HAL) has opened for subscription today.

The offering is entirely an offer for sale (OFS) of 34.1 million shares by the Government of India (GOI) as part of its 2017-18 disinvestment programme. With the offer for sale, the GOI is diluting 10.2% of its stake in the Bangalore-based aerospace and defence company.

Hindustan Aeronautics is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including aircraft, helicopters, aero-engines, avionics, accessories, and aerospace structures.

In FY2016-17, it was recognized as the largest defence public-sector undertaking in India in terms of value of production. And according to Flight International, the company was the 39th largest aerospace company in the world in terms of revenue (in USD million) in 2016.

The company reports a sustained track record of profitability and has paid dividends to its stakeholders every year for over four decades. As of December 31, 2017, the company's order book was Rs 684.6 billion.

To know our view on this IPO, you can read our IPO note on Hindustan Aeronautics Ltd (requires subscription).

To know more about how you can safely profit from the ongoing IPO rush, download our FREE report - How to Get Rich with IPOs.

Also note that with big ticket IPOs in the limelight, SMEs have also joined in to get a share of the pie.

The amount raised by SME IPOs in 2017 stood at 17.85 billion, more than three times the amount raised in 2016. The number of SME IPOs launched also doubled from 66 to 132. This is evident from the chart below:

SME IPO Boom in 2017

While it doesn't make sense to completely ignore this space, a certain sense of caution is definitely merited.


Sensex Opens Lower; PSU & Metal Stocks Top Losers
09:30 am

Asian stocks are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.05% while the Hang Seng is down 0.22%. The Nikkei 225 is trading down by 0.24%. Meanwhile, The Dow Jones industrial average rose on Thursday, but the S&P 500 and Nasdaq composite closed lower as market participants assessed the possibility of a trade war.

Back home, India share markets opened the day on a negative note. The BSE Sensex is trading lower by 123 points while the NSE Nifty is trading lower by 28 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.2%.

Sectoral indices have opened the day on a mixed note with healthcare stocks and realty stocks witnessing maximum buying interest. While, PSU stocks and metal stocks are trading in red. The rupee is trading at 64.94 to the US$.

In the news from the economy. India's trade deficit widened in February over the same month last year but narrowed from an over four-year high last month. This came on the back of growing exports and moderating imports.

Trade deficit, the gap between exports and imports, widened 36.4% from a year ago at US$12 billion, according to data released by the commerce ministry. The deficit stood at US$16.3 billion last month, the widest since May 2013.

India's exports rose 4.5% year-on-year to US$25.8 billion in February, while imports grew 10.4% to US$37.8 billion in the same period. The government is looking at a 6.5% export growth for the year, the reports noted.

Growth was led by increasing outbound shipments of petroleum products, and organic, inorganic chemicals. Exports of gems and jewellery, which is typically the second major contributor to the bill, declined 5.14%. Engineering goods exports saw a marginal decline last month.

Notably, the World Bank, in a prior report, said that while India's openness to trade has increased significantly in the long-run, there were signs of slowdown in the medium-term. The Reserve Bank of India, in its latest monetary policy review, had said that export growth is expected to improve.

--- Advertisement ---
Benefit from the Market Crash, With These 5 Safe Stocks

For over 15 years, our Safe Stocks recommendation service has recommended solid stocks that have stood the test of time.

Even today, amongst the fear of a market crash...

We have used the accumulated experience of over 15 years to bring you...

The top 5 safe stocks that could potentially strengthen your portfolio.

And today, you can claim this special report...!

Click here to find out how...
------------------------------

On the import front, shipments of crude oil, coal, pearls and precious stones inflated the bill. Gold imports declined for the second straight month, while machinery imports grew. Brent crude oil prices fell 4.74%, and prices of the yellow metal too declined 1.58% last month. The two commodities contribute nearly a third to the country's imports.

Moving on to the news from the IPO space. Bandhan Bank's Rs 44.73 billion initial public offering (IPO) saw a subscription of 42% on the first day of bidding on Thursday.

The portion of shares reserved for institutional investors in the Bandhan Bank IPO was subscribed 1.26 times, while those for retail investors and high net-worth individuals (HNIs) saw a subscription of 12% and 1%, respectively.

The Bandhan Bank IPO received bids for 35 million shares against the total issue size of 83.5 million shares.

The issue, which will close on 19 March, is in a price band of Rs370-375 per share.

Bandhan Bank's IPO will the largest by a local bank.

The Kolkata based Bandhan Bank along with IDFC Bank received the final nod to start banking operations by RBI in 2015. One of the conditions of the license was public listing within three year which the bank will fulfil now. It started operations on 23 August 2015 and converted its microfinance business into a bank. As of September 2017, it had 864 branches in 33 states across the country.

Meanwhile, public sector helicopter-maker Hindustan Aeronautics (HAL) Rs 42.3-billion initial public offer, through which government is divesting 10.2% holding, will hit the market today.

The company is selling 10.2% of its equity through an offer-for-sale route through the IPO and has fixed a price band of Rs 1,215-1,240 a share for the offer that will close on March 20.

The sale is part of the governments Rs 750-billion divestment process, which for the first time in many years, has already crossed the target.

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

Speaking of IPOs, the demand for IPO's has reached sky-high levels. Avenue Supermarts was seen as the first company last year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies, among others.

IPO Subscription Times (2017)

This 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.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

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 ongoing IPO rush.


Global Stocks Amid Simmering Trade Worries; IPOs & Top Stocks to Sway the Market Today
Pre-Open

On Thursday, Indian share markets ended lower after a choppy session with financial stocks continuing their downtrend, while fertiliser stocks gained after the continuation of a government subsidy for urea.

The S&P BSE Sensex ended down by 150 points while the broader Nifty 50 index settled at 10,360, down 51 points.

Top Stocks in Focus

HG Infra Engineering share price will be in focus after company said it has been declared, lowest bidder (L-1) for new EPC project under Ministry of Road Transportation & Highway (MORTH) for upgradation to two lanes with paved shoulder configuration from Kundal to Jhadol in the state of Rajasthan.

Jet Airways has expanded its domestic network and added 144 new weekly flights comprising both non-stop and one-stop services as part of its summer schedule, beginning from March end.

NMDC share price will be in focus after it reported 31.32 million tonnes (MT) of iron ore production and logged sales volume of 31.92 MT up to the month of February 2018.

Fertilizers companies will hog limelight after the government approved a proposal to extend urea subsidy till 2020.

Indian Hotels Company share price will be in focus after Tata Sons acquired more than 6% stake in the company from three promoter entities as part of restructuring the investment portfolio.

--- Advertisement ---
A Proven Way to Profit from This Market Crash

The news might tell you that it is time to panic and start selling your stocks.

But how would you feel if we told you that there is a proven way to profit from these uncertain times?

Well, we have discovered 5 Safe Stocks that could potentially profit from this market meltdown.

We are sure you are intrigued.

Click here to find out which stocks we are talking about.
------------------------------

Global Stock Market Drivers

Stocks and bonds fluctuated in Europe and Asia as traders assessed the first statements of President Donald Trump's new economic adviser. US equity futures pared gains and Treasuries drifted higher.

Lackluster US retail sales data provided the last major economic indicator prior to the Federal Reserve's policy decision next week.

Here are some of the key things happening this week:

  • Japan industrial production will be out today.
  • EU27 government officials will discuss the European Union's Brexit position.

IPO Buzz

The initial public offering (IPO) of defence firm Bharat Dynamics got 1.23 times subscription on the third day of the bidding process on Thursday.

And, the IPO of private lender Bandhan Bank was subscribed 41.65% on the first day of the bidding process on Thursday.

Meanwhile, HDFC AMC (Asset Management Company), a subsidiary of mortgage lender HDFC filed a draft red herring prospectus on Thursday for initial public offer with capital market regulator. HDFC will sell over 4% stake in its asset management arm HDFC AMC through the IPO.

Speaking of IPOs, the demand for IPO's had reached sky-high levels last year.

One shall note that, 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.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

To know more, download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the IPO rush.

Oil Steadies as Equities Gain

Oil prices were broadly steady on Thursday, supported by a pickup in equity markets, but held back by evidence that supply will overtake demand this year.

Brent crude futures LCOc1 were last down 13 cents on the day at US$64.76 a barrel, while US West Texas Intermediate (WTI) crude futures CLc1 were up 1 cent at US$60.97 a barrel.

Global oil demand is expected to pick up this year but supply is growing at a faster pace, leading to a rise in inventories in the first quarter of 2018, the International Energy Agency (IEA) said on Thursday.

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.