Sensex Ends Marginally Higher; Realty and Energy Stocks Witness Buying
Closing

Indian share markets witnessed volatility during closing hours and ended their day marginally higher. Gains were largely seen in the realty sector and energy sector, while auto stocks and telecom stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 71 points (up 0.2%) and the NSE Nifty closed higher by 35 points (up 0.3%). The BSE Mid Cap index closed down by 0.2%, while the BSE Small Cap index ended the day down by 0.1%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 1.4% and the Nikkei was trading up by 0.6%.

European markets were trading on a mixed note. The FTSE 100 was up by 0.7%. The DAX was trading down by 0.02%, while the CAC 40 was up by 0.1%.

The rupee was trading at 68.55 to the US$ at the time of writing.

Note that the rupee was trading on a positive note today against the US dollar on sustained foreign fund inflows amid buying in domestic equities. The dollar, on the other hand, was witnessing selling pressure after soft US data increased bets the Federal Reserve will cut interest rates later this year.

Speaking of Indian share markets, the current scenario in the Indian stock market looks very similar to what happened in 2013.

Back then, mid and small cap stocks witnessed a similar correction while the BSE Sensex stayed put.

Is It 2013 All Over Again?

2018-19 has also followed a similar pattern.

As Sarvajeet Bodas writes in today's edition of The 5 Minute WrapUp...

These businesses Sarvajeet is talking about are businesses that have delivered earnings even in tough times.

These stocks are most likely to lead the next leg of the market rally when it happens.

From the finance space, DHFL share price was in focus today after the company in a BSE filing said it would be selling its entire 30.63% stake in Avanse Financial Services.

An article in The Economic Times first reported on February 26 that PE firms including Warburg Pincus, Kedaara Partners, CX Partners and Centrum Capital are in talks to acquire 80% stake in Avanse held by parent WGC Group and associate company Dewan Housing Finance Corporation Ltd (DHFL).

Moving on to the news from the aviation sector, Jet Airways share price was also in focus today. The stock of the company witnessed selling pressure on reports that the company is set to delay payment on interest on bonds due on March 19.

The stock was also in focus as the company founder and Chairman Naresh Goyal's self-imposed deadline to announce an update on the resolution plan gets over today.

On March 1, Goyal had written to the airline's pilots, appealing for continued support and assured them that the senior management will provide an update on the resolution plan by March 18.

Lenders to the company have also told Jet's strategic partner Eithad Airways that if the company is unable to accept the terms of revive the airline, it should exit so that a new investor can be bought in.

Note that reports had also suggested that the debt-laden airline could be staring at another default of US$ 109 million, which is to be paid by March 28 to the HSBC Bank Middle East as the second tranche of the US$ 140-million loan it had taken in 2014 and for which Etihad stood guarantor.

On March 11, Jet Airways defaulted on its external commercial borrowings (ECBs) of US$ 31 million, payable to HSBC and guaranteed by Etihad Airways.

In a letter to HSBC on March 11, the domestic airline had said it is going through a severe liquidity crunch and is working on a bank-led resolution plan for its revival.

Selling pressure is also seen on reports that Etihad Airways is unlikely to agree with the provisional debt resolution plan proposed by the lenders.

As per an article in a leading financial daily, a meeting of the board of Etihad in Abu Dhabi last Tuesday remained inconclusive, with several members expressing reservations about the terms proposed by the lenders that included adding two nominee directors from the promoter group of Jet Airways, led by founder Naresh Goyal.

As per the provisional pact, a 'new investor' was to inject between Rs 16 billion to Rs 19 billion for about 20% in Jet Airways and the Goyal-led promoter group's stake was to fall to 17.1%. At present, Etihad holds 24% stake in Jet, while promoter Goyal and his family own a controlling 51% stake.

Etihad's board is expected to meet again to discuss the revised terms.

An early resolution to the financial woes is crucial for crisis-hit Jet Airways as 61 of its 116 aircraft are currently grounded by lessors due to non-payment of lease rentals. It has also delayed salaries to pilots and interest payments on its debt.

Jet Airways had tried to lease or sell some of its owned aircraft to raise money that could help pare its over Rs 80 billion debt. But the plans, including a wet leasing deal with TruJet for its ATRs, got stuck.

As per an article in a leading financial daily, aircraft lessors have been supportive of the company's efforts in this regard. The company is also making all efforts to minimize disruption to its network due to the above and is proactively informing and re-accommodating its affected guests.

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

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


Indian Indices Erase Gains; Auto Stocks Under Pressure
12:30 pm

Share markets in India are presently trading on a flat note. Sectoral indices are trading mixed with stocks in the auto sector and telecom sector witnessing selling pressure while realty stocks, energy stocks and banking stocks are witnessing buying interest.

The BSE Sensex is trading up by 15 points, while the NSE Nifty is trading up by 12 points. The BSE Mid Cap index is trading down by 0.1% and the BSE Small Cap index is trading down by 0.2%.

A lot of people in the market are playing the prediction game ahead of the elections these days.

A common theme is to sit on cash to escape the volatility ahead of the upcoming elections. In case there is an unexpected event, you can then get in post the correction.

But does timing the market work?

Not really, if you see the market performance in the year of the past three national elections (2004,2009 and 2014).

Downside of Timing The Stock Market

Looking at the returns in the above chart, staying out of the market to escape volatility would have been a costly affair every time.

The market gave above average returns in all three of those years.

This does not mean one can expect the same in the future.

But there's one thing for sure. Predicting short-term directions of the market is a futile and many a times a costly affair.

That's why we at Equitymaster, believe in picking safe stocks when they are actually 'safe' i.e. during such times of high pessimism and uncertainty.

Moving on, the rupee is currently trading at Rs 68.64 against the US$.

The rupee rose to its highest in more than 7 months, boosted by strong dollar inflows while broad weakness in the US currency over the previous week aided sentiment.

The domestic currency has gained past 69 mark for the first time since August 10, 2018.

In the news from the engineering space, L&T share price is in focus today as the company is likely to buy 20.4% stake held by Cafe Coffee Day (CCD) founder V.G. Siddhartha, followed by an open offer to buy an additional 31% stake in the company.

L&T has agreed to pay Rs 981 per share to buy the entire stake held by Siddhartha and two of his CCD firms.

An acquirer company is required to make an open offer to gain control of a listed firm only after acquiring 25% stake. However, in this case, L&T is set to use a section of the takeover code stipulated by the markets regulator.

According to market regulator's takeover rules, an acquirer can launch an open offer to gain control of a listed firm only it makes a public announcement to acquire more than 25% stake and voting rights in the listed firm eventually.

Shares of Mindtree are also in focus today as the company announced it will consider share buyback plan on March 20 to fend off attempts by engineering major Larsen & Toubro (L&T) from making a hostile takeover bid.

The announcement of a possible share repurchase has come amid reports of L&T's board giving the green signal to buy stake in Mindtree.

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

Moving on to the news from the automobiles sector, Maruti Suzuki share price is witnessing selling pressure today on reports of production cut due to slower demand.

As per an article in The Economic Times, Maruti is estimated to have cut production by 26.8% to about 126,000 units.

Here's an excerpt from the article:

  • A slowing demand in India's passenger vehicle market has prompted the car market leader, Maruti Suzuki India, to cut production by a quarter over March last year.

    Slowing demand and uncertainties ahead of the elections pushed the production level this month to its lowest since March 2015.

Shares of India's top selling car maker fell as much as 4.4% on back of the above news. The fall marked their biggest daily percentage loss since January 25, 2019.

Speaking of automobiles sector, one thing we must keep in mind is that not all auto companies will make money over time. And also, you shouldn't stay away from auto stocks altogether.

Even Tanushree Banerjee, Co-head of research at Equitymaster, believes that there are businesses in this sector that you cannot ignore. She is particularly talking about the blue-chip auto stocks.

Here's Tanushree...

  • One out of every three household in India is a buyer of their products. They own some of the cult brands in Indian automobile space. They have formidable R&D teams. They have been through several economic cycles over decades. Few have even visited near-bankruptcy in the past and come out successful.

    Yet, some of the biggest passenger car, commercial vehicle, and two-wheeler companies in India have seen a huge dent in valuations in recent times.

    This could be the opportunity long term investors were waiting for.

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


Sensex Opens Strong; Banking and Energy Stocks Gain the Most
09:30 am

Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 1.1% while the Hang Seng is up 0.9%. The Nikkei 225 is trading up by 0.6%. US stocks rose on Friday, led by technology companies, as a report on progress in US-China trade talks lifted sentiment, pushing the S&P 500 to its best week since November.

Back home, India share markets opened on a strong note. The BSE Sensex is trading up by 254 points while the NSE Nifty is trading up by 80 points. The BSE Mid Cap index opened up by 0.3% while BSE Small Cap index opened down by 0.3%.

Except healthcare stocks and automobile stocks, all sectoral indices have opened in green with oil & gas stocks and bank stocks leading the pack of gainers.

The rupee is currently trading at Rs 68.95 against the US$.

Speaking of Indian share markets in general, how do things look on the valuations front?

The Sensex price to earnings ratio has moved over the last five years. It has mostly been in a rising trend, except some intermittent declines.

But the Sensex tells a very a selective, skewed story of just the 30 largest companies.

So, it would be worth seeing the valuation trend of a much broader index.

Ankit Shah just did that and picked the NSE 500 for his latest study.

What he found was the NSE 500 index was trading cheap before the BJP came to power at the Centre in 2014. Since then, the price to earnings ratio of the index has been trending higher, like the Sensex.

It is interesting to note that the NSE 500 index has almost doubled between February 2014 and now. The price to earnings multiple of the index has gone up almost 70% during the same period, as can be seen from the chart below.

Market Valuations - 2014 to 2019

What does all of this mean?

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

  • What this means is that the gains have mostly come from valuation multiple expansion and only about 30% from earnings growth.

    While the NSE 500 P/E ratio is down 12% from its August 2018 high of 34.5, it's still quite on the higher side.

    As such, I believe the key to the next bull run would be a good growth in earnings of listed Indian companies.

Whether this growth comes in, and how, remains to be seen. We will keep you updated on developments from this space.

In the news from the economy. India's trade deficit narrowed to a 17-month low of US$9.6 billion in February as merchandise imports fell on the back of lower crude oil prices.

The trade deficit had stood at US$9 billion in September 2017.

According to data released by the commerce ministry, exports growth was relatively tepid at 2.4% in February, while imports contracted 5.4% in dollar terms.

In rupee terms, however, exports and imports expanded at 13.3% and 4.7% respectively, mostly because of depreciation in the rupee. So far this year, the rupee has weakened 2.1%, the worst performer among Asian currencies.

Cumulatively, during the first 11 months of the fiscal year 2019 (April-February), exports and imports grew at 8.9% and 9.8%, respectively, while the trade deficit expanded to US$165.5 billion from US$148.6 billion during the same period a year ago.

Other macro-indicators including factory output and the gross domestic product (GDP) also point toward a slowdown in overall economic activity.

The index of industrial production grew 1.7% in January, while gross domestic product in the December quarter slowed to a five-quarter low at 6.6%.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Cadila Healthcare has received final approval for USFDA for Valsartan and Hydrochlorothiazide Tablets in various strengths.

Reportedly, the drug is used to treat high blood pressure.

It will be manufactured at the group's formulations manufacturing facility at Moraiya, Ahmedabad.

The group now has 256 approvals and has so far filed over 350 ANDAs since the commencement of the filing process in FY04.

In another development, Lupin has been cautioned by the USFDA that its Somerset (New Jersey) facility may be subject to regulatory or administrative action and that it may withhold approval of any pending applications or supplements in which this facility is listed.

The company's subsidiary Novel Laboratories Inc has received a letter from the US health regulator, classifying the inspection conducted at its Somerset (New Jersey) facility in December 2018, as Official Action Indicated (OAI).

'Official Action Indicated' means approvals of pending applications or supplements from this site maybe withheld.

Cadila Healthcare share price & Lupin share price opened the day up by 0.3% & 5% respectively.

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


Sensex Ends Above 38,000-Mark, Embassy Office Parks IPO, and Top Stocks in Action Today
Pre-Open

On Friday, share markets in India traded on a positive note throughout the day and ended higher.

The BSE Sensex closed higher by 269 points to end the day at 38,024. Kotak Mahindra Bank and ONGC were among the top gainers.

While the broader NSE Nifty ended up by 84 points to end at 11,427.

Among BSE sectoral indices, power stocks gained the most by 1.9%, followed by IT stocks and banking stocks.

Top Stocks in Action Today

Bank of India share price will be in focus today as the lender is planning to raise around Rs 4-5 billion from sale of a non-core asset including Star Union Dai-Ichi Life Insurance, STCI Finance and Sidbi by end of March. The bank has floated request for proposals of the same.

Zee Media share price will be in focus today as the company has entered into exclusive two-year partnership with Taboola, the leading discovery platform. The partnership will see Zee Media implement Taboola Feed on desktop, mobile web and in-app to increase user engagement and generate additional revenue.

Wipro share price will also be in focus today as the company has launched Industrial Internet of Things (IIoT) Centre of Excellence (CoE) in Kochi in the state of Kerala. The CoE marks the company's commitment to developing innovative IIoT solutions that span across the technology stack for its customers.

Market participants will also track M&M share price.

Reportedly, Mahindra & Mahindra (M&M) has received over 13,000 bookings for its compact SUV, Mahindra XUV300. Launched on February 14, 2019, the XUV300 has entered the top three in the Compact SUV segment in its very first month.

To know more about the company, you can read M&M's Q3FY19 Result Analysis and M&M's Annual Report analysis on our website.

Turbulence Ahead for Jet Airways

Jet Airways share price could be staring at another default of $109 million, which is to be paid by March 28 to the HSBC Bank Middle East as the second tranche of the $140-million loan it had taken in 2014 and for which Etihad stood guarantor.

On March 11, Jet Airways defaulted on its external commercial borrowings (ECBs) of $31 million, payable to HSBC and guaranteed by Etihad Airways. In a letter to HSBC on March 11, the domestic airline had said it is going through a severe liquidity crunch and is working on a bank-led resolution plan for its revival.

Selling pressure was seen last week on back of the above news and reports that Etihad Airways is unlikely to agree with the provisional debt resolution plan proposed by the lenders.

As per an article in a leading financial daily, a meeting of the board of Etihad in Abu Dhabi remained inconclusive, with several members expressing reservations about the terms proposed by the lenders that included adding two nominee directors from the promoter group of Jet Airways, led by founder Naresh Goyal.

Oil Prices

Oil prices edged up on Friday, with US crude climbing to its highest so far this year as production cuts led by OPEC and US sanctions against Venezuela and Iran likely created a slight deficit in global supply in the first quarter.

Reportedly, prices have been prevented from rising further by concerns that an economic slowdown will soon start denting growth in fuel demand.

The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia - known as the OPEC+ alliance - have been withholding around 1.2 million barrels per day (bpd) in crude supply from the start of the year to tighten markets and prop up prices.

OPEC+ ministers will meet at the group's headquarters in Vienna, Austria, on April 17-18 to decide output policy.

According to reports, with OPEC withholding supply and US sanctions preventing Iranian and Venezuelan oil from entering markets, global crude flow data in Refinitiv showed a slight supply deficit likely appeared in the first quarter.

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

From the IPO Space...

Bengaluru-based Embassy office parks plans to raise 47.5 billion from the initial public offering (IPO) which opens today. The price band for the Embassy Office Parks REIT IPO is Rs 299-300 apiece.

The investment objective of Embassy Real Estate Investment Trust (REIT) is to own, operate and invest in rent or income generating office real estate and related assets in accordance with the REIT regulations.

The Embassy REIT has been given a long-term rating of AAA by ICRA. Some competitive strengths include, high quality infrastructure, well known sponsors and top-class office properties.

Speaking of IPOs, we at Equitymaster believe 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.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.