Sensex Ends Day Marginally Higher; Realty Stocks Gain the Most
Closing

After opening the day in green, share markets in India witnessed volatile trading activity throughout the day and ended the day in green. Sectoral indices were mixed, with stocks in the realty sector and stocks in the pharma sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 35 points (up 0.1%) and the NSE Nifty closed up by 21 points (up 0.2%). The BSE Mid Cap index ended the day up 0.5%, while the BSE Small Cap index ended the day up by 0.6%.

Asian stock markets finished in red. As of the most recent closing prices, the Hang Seng was down by 0.5% and the Shanghai Composite was down by 0.1%. The Nikkei 225 was down by 0.3%. Meanwhile, European markets too were trading in red. The FTSE 100 was down by 0.1%, the DAX was down by 0.1% while the CAC 40 was down by 0.2%.

The rupee was trading at Rs 66.42 against the US$ in the afternoon session. Oil prices were trading at US$ 68.09 at the time of writing.

In news from stocks in the IT sector. TCS share price was in focus today after the IT services major became the first Indian company to hit a total market capitalization of US$100 billion.

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The latest spike in TCS shares has been driven by its March quarter earnings, in which the company reported a 5.7% growth in consolidated net profit at Rs 69 billion.

The US$100 billion milestone puts TCS in esteemed company, with only 63 other companies worldwide, including the likes of Amazon, Microsoft, Alphabet (Google) and Facebook.

With TCS achieving such milestones, the IT sector seems to have turned the corner.

How It Paid Off to Bet on the Uncertainties in the IT Sector

During the financial year 2017-18, the BSE Sensex delivered a return of about 11%. Blame the market correction that started in February for the modest returns.

However, the BSE IT index gained over 19% during the same period. Now, that's a significant outperformance. If you were holding some solid IT stocks last year, you have most likely fared better than the Sensex.

But last year, the markets were not as optimistic on the sector as they are now.

Look at the chart...

During the first half of 2017-18, the IT sector was among the underperformers, and it was lagging way behind the Sensex.

During the first half of 2017-18, the IT sector was among the underperformers, and it was lagging way behind the Sensex. In fact, until October 2017, the index was still hovering near levels seen in April 2017.

But once the mood of the market changed, the IT index not only recovered, but went on to outperform the Sensex.

In Ankit Shah's (Research Analyst) premium newsletter Insider, the IT sector was his top pick since launch of the service in July 2017.

Here's Ankit discussing what gave him the foresight to recommend so many promising IT stocks.

  • Last year when I had discussions with my fundamentals-based research team, I got a clear sense that the uncertainty and negativity surrounding the IT sector -- the H1-B visa problem, the global slowdown concerns, strengthening of the Indian rupee, high attrition rates, etc. -- was blown out of proportion. There was a good contrarian opportunity to buy 'uncertainty' when the markets were fearful of IT stocks.

    Like I said earlier, it is during moments of 'uncertainty' that lucrative investment opportunities are created.

TCS share price ended the day up by 0.3%.

Moving on to news from stocks in the pharma sector. Unichem Labs share price is in focus today after the United States Food & Drug Administration (USFDA) completed its inspection of the company's Ghaziabad facility with no integrity or repeat observations for the unit.

The US regulator which began inspections on 16 April 2018, cleared the facility with nothing adverse to report.

Note that this inspection also covered one of the first to file molecules.

Unichem share price ended the day up by 6.7%.

Is this the right time to buy pharma stocks?

There was a time when almost every stock in the pharma sector was considered to be a safe stock. You could just pick the top 5-6 companies from this sector and expect to make decent returns over time.

In fact, it was termed as defensive sector. However, in last two years things have changed a lot. There is enormous uncertainty in the industry.

Uncertainty regarding price erosion in the United States as well as hostile US FDA visits, have changed a once defensive sector into a risky sector.

However, we believe this could be point of consolidation in the industry i.e. with stricter norms, lower margins, and pricing pressure, the industry may see many exits and acquisitions. This could lead to relatively fewer but higher quality players.

We believe, if you can pick a niche company with good financials and strong management, this is a good time to consider pharma stocks.

And here's a note from Profit Hunter:

The Nifty 50 Index continue to move up. The stock that tops the index list is the Indusind Bank. It is up nearly 4% and is trading at its new life-time high.

The last time we reviewed the stock, it had touched a life-time high of 1,804. Thereafter, the stock consolidated in a broad range of 1,590 - 1,800 for nearly seven months. Earlier this month, it broke out of this consolidation and rallied to touch a new life-time high of 1,878 a few days back.

It corrected for three trading sessions and today, it bounced up from the break out level. The break out level (which was previous resistance) usually act as a support post the break out. The stock is now trading at its fresh life-time high.

So it will be interesting to see how long the stock continues the upside momentum.

Indusind Bank Hits a New Life-time High
Indusind Bank Hits a New Life-time High 

Sensex Up Over 160 Points; Realty and IT Stocks Top Gainers
12:30 pm

After opening the day marginally lower, stock markets in India witnessed buying interest and are presently trading on a positive note. Sectoral indices are trading on a mixed note with stocks in the realty sector and IT sector witnessing maximum buying interest.

The BSE Sensex is trading up 165 points (up 0.5%) and the NSE Nifty is trading up 57 points (up 0.5%). The BSE Mid Cap index is trading up by 0.6%, while the BSE Small Cap index is trading up by 0.8%. The rupee is trading at 66.21 to the US dollar.

In the news from the steel sector, as per an article in the Economic Times, the government is said to roll out a red carpet to big foreign players who want to set up greenfield steel projects.

With this, the country's steel manufacturing capacity is expected to rise to 150 million tonnes by 2020.

As per the news, steel Secretary Aruna Sharma said the sector provides huge growth potential against the backdrop of the country becoming the world's second largest alloy producer with increasing consumption.

From the banking space, HDFC Bank share price is in focus today as the bank reported 20.3% year-on-year growth in net profit to Rs 48 billion for the quarter ended 31 March 2018. The profits were boosted by both interest and non-interest-income growth with net interest income growing 17.7% to Rs 106.6 billion and other income by 22.7% to Rs 34.5 billion during the quarter.

The lender also reported 18.7% growth in advances over March 2017 contributed by retail loans. The loan mix between retail and wholesale was in 57:43 ratio as compared with 55:45 at the end of December quarter. Retail loans grew 27.4% and wholesale loans 9.4%.

Tata Steel share price is also in focus today as it was reported that the company is in talks with lenders including HDFC Bank, Yes Bank, Standard Chartered Bank, DBS Bank, Kotak Bank Mahindra Bank and mortgage financier HDFC to raise Rs 170 billion.

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How to retire at 40 instead of 60?

In our view, one of the best ways to retire wealthy, and retire soon, involves small cap stocks.

However, please note that it's not true for every small cap!

What you need are solid small caps with huge growth potential…

And once you find such small caps, one could potentially…
  • Retire at 40 instead of 60.
  • Retire by multiplying money instead of saving money.
  • And retire within 5 to 10 years instead of working for 35 to 40 years.

And that's exactly what we have been doing for our valued subscribers for a decade now!

So, today, we are going to reveal how exactly you can do that too, through our small cap stocks recommendation service.

And there is another good news for you…

Since, Equitymaster is celebrating its 22nd Anniversary, you have a unique opportunity to claim 1 year access to our Premium Small Cap Recommendation service… Virtually FREE! (Worth Rs 6,000 per annum)

But this unique opportunity ends on 27th April 2018.

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------------------------------

In the news from commodity space, market participants are tracking crude oil prices today.

Oil prices gave off earlier weakness on the back of a tweet from US President Donald Trump. As per the news, oil traders will continue to weigh ongoing efforts by major global crude producers to reduce a supply glut against a steady increase in US production levels in the week ahead.

Over the week, a meeting was held between Joint Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC ministerial monitoring committee (JMMC) to boost compliance with the production pact and even discuss how they would like crude near US$ 100.

Last week, crude oil was headed for its biggest weekly advance in more than eight months on speculation that tensions in the Middle East may lead to supply disruptions, reinforcing a buy call on commodities by Goldman Sachs Group Inc.

The risk of conflict in Syria, as well as ongoing tensions between Saudi Arabia and Iranian-backed rebels in Yemen, has raised concerns over supply security in the energy-rich region.

While OPEC said its output last month fell to the lowest in a year, with worldwide inventories set to decline significantly later this year, the International Energy Agency (IEA) sees a second wave of shale revolution in the US.

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

Note that crude oil prices have been witnessing a rising trend of late. However, this is not good news from India's perspective.

As we wrote in one of the editions of The 5 Minute WrapUp...

  • Fiscal revenues are at risk. Particularly if the government is forced to consider a cut in fuel excise duties due to a rally in oil prices. In recent times, a sharp jump in excise collections has helped indirect tax collections. Any risk to revenues and subsequent threat to the fiscal deficit target at 3.2% of GDP would require tighter spending cuts.

    Secondly, the impact on inflation needs to be monitored. This narrowing the central bank's scope for further rate cuts.

    Lastly, low crude prices were a positive growth impetus through higher discretionary incomes for households and lower input costs for manufacturers and farmers. Part of this benefit is likely to be eroded as retail fuel costs rise. As for corporations, expansion in gross margins caused by falling commodity prices is also likely to wane, pressurising profitability.

You can read the entire article here.

Pharma stocks are witnessing buying interest today. Among the top gainers in the BSE Healthcare index are Merck Ltd (up 11.6%) and Unichem Laboratories Ltd (up 7%).

Speaking of pharma stocks, did you know the BSE Healthcare Index is down 20% over the past three years? During the same period, the BSE Sensex is up 21%.

The BSE Healthcare Index has underperformed the Sensex

And this was a sector they called 'evergreen'.

Have Investors boarded a plane that's about to crash? Or is it just turbulence on the way to a smooth and safe landing?

Here's what we wrote about the same in today's edition of The 5 Minute WrapUp:

  • It's important to understand the core issues. Regulatory problems for pharma companies have increased over the past few years. The frequency of visits as well as quality expectations have increased a lot.

    The intensity of competition has also increased. Faster approvals of drugs have led to price erosion for generic players.

    While we expect the pain to continue in the short-term, the long-term picture still looks bright.

    Stricter norms and pricing pressure will ensure only quality players remain. Companies with strong R&D facilities and quality compliant plants will have an edge over the others.

    Those are the only pharma stocks you should be looking at.

    And even among those, only three of them offer enough margin of safety today.

You can access these safe stocks here.


Sensex Opens Flat; ICICI Bank & Infosys Top Losers
09:30 am

Asian share markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.3% while the Hang Seng is down 0.2%. The Shanghai Composite is trading down by 0.1%. US stocks dropped on Friday as a decline in Apple pushed the technology sector lower. A rise in interest rates also kept a lid on equities.

Back home, Indian share markets opened the day on a flat note. The BSE Sensex is trading down by 9 points while the NSE Nifty is trading down by 6 points. The BSE Mid Cap index and BSE Small Cap index both opened the day on a flat note.

Sectoral indices have opened the day on a mixed note with realty stocks and energy stocks witnessing buying interest. While, IT stocks & bank stocks have opened the day in red. The rupee is trading at 66.02 to the US$.

In the news from the banking sector. HDFC Bank reported 20.3% year-on-year growth in net profit to Rs 48 billion for the quarter ended 31 March 2018.

The profits were boosted by both interest and non-interest-income growth with net interest income growing 17.7% to Rs 106.6 billion and other income by 22.7% to Rs 34.5 billion during the quarter.

Within non-interest income, profit on sale of investment component was Rs 0.2 billion compared with Rs 1.8 billion in the year-earlier period.

The lender also reported 18.7% growth in advances over March 2017 contributed by retail loans. The loan mix between retail and wholesale was in 57:43 ratio as compared with 55:45 at the end of December quarter. Retail loans grew 27.4% and wholesale loans 9.4%.

The bank's gross non -performing assets were at 1.3% of gross advances as on 31 March 2018 against 1.3% as on 31 December 2017 and 1.1% as on 31 March 2017. In absolute terms, gross NPA in March end was Rs 86.1 billion as compared with Rs 58.9 billion in the year earlier period.

The lender had made a provision of Rs 11.3 billion during the quarter for bad loans as compared with Rs 9.9 billion during the same period of last year.

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How to retire at 40 instead of 60?

In our view, one of the best ways to retire wealthy, and retire soon, involves small cap stocks.

However, please note that it's not true for every small cap!

What you need are solid small caps with huge growth potential…

And once you find such small caps, one could potentially…
  • Retire at 40 instead of 60.
  • Retire by multiplying money instead of saving money.
  • And retire within 5 to 10 years instead of working for 35 to 40 years.

And that's exactly what we have been doing for our valued subscribers for a decade now!

So, today, we are going to reveal how exactly you can do that too, through our small cap stocks recommendation service.

And there is another good news for you…

Since, Equitymaster is celebrating its 22nd Anniversary, you have a unique opportunity to claim 1 year access to our Premium Small Cap Recommendation service… Virtually FREE! (Worth Rs 6,000 per annum)

But this unique opportunity ends on 27th April 2018.

So, you need to act fast…Only 4 days left!

Click here to learn more…
------------------------------


Total provision made by the bank was Rs 15.4 billion as compared with Rs 12.6 billion.

On the liabilities front, total deposits increased by 22.5% while term deposit growth was 33.2%. The share of low-cost deposits at the end of March was 43.5% as compared with 43.9% in December end.

HDFC Bank share price opened the day down by 0.2%.

Moving on to the news from IPO space. The initial public offering (IPO) market is gearing up for a burst of activity, with at least 12 companies planning to raise more than Rs 170 billion over the next two months, after a quiet start to the June quarter.

Reportedly, the introduction of the new Indian accounting standards (IndAS) as one of the reasons why IPO-bound companies have not approached the market so far, this quarter.

All companies, including unlisted ones, having net worth of between Rs 2.5 billion and Rs 5 billion have to prepare their financial accounts for the year ended 31 March 2018 as per the IndAS accounting standards. Companies with net worth of Rs 5 billion or more had to implement the new standard a year earlier.

As per the reports, the pipeline in the June quarter will be very healthy. The market/IPO outlook continues to be strong and robust for the next two quarters if not the entire year.

Several major IPOs, including those of HDFC Asset Management Co. Ltd, auto parts maker Varroc Engineering Ltd, non-banking financial company IndoStar Capital Finance Ltd, microfinancier CreditAccess Grameen Ltd and women's apparel maker TCNS Clothing Co. Ltd, are set to hit the market this quarter.

Other companies that may launch their IPOs in the quarter include seafood exporters Devi Seafoods Ltd and Nekkanti Sea Foods Ltd. Both said they would decide on the timing of the launch after they get regulatory approval for their respective share sales.

In the first quarter of 2018, 14 companies raised a total of Rs 185.9 billion through the IPO route, a more than fourfold increase from the Rs 41.9 billion raised by five companies in the same period a year earlier.

In 2017, 64 companies tapped the IPO market to raise Rs 671.5 billion.

IPO activity last year was dominated by large issuances such as HDFC Standard Life Insurance Co. Ltd, SBI Life Insurance Co. Ltd, ICICI Lombard General Insurance Co. Ltd, New India Assurance Co. Ltd and General Insurance Corp. of India Ltd, which collectively raised Rs 437.6 billion.

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.

You can also download our FREE report - How to Get Rich with IPOs. This guide will show you how to safely profit from the ongoing IPO rush.


Rally in IT Stocks may Continue Today and Top Stocks to Watch Out for in Today's Trade
Pre-Open

Information Technology Stocks Could Rally Given the Sharp Surge on Friday

S&P Information Technology index ended higher by 5% in Friday's trade. The rally was led by stocks such as Cyient, Mindtree, Tata Consultancy Service (TCS). These stocks surged in the range of 7%-10%.

Infosys too surged 4%, despite reporting results which were subdued as compared to TCS. TCS has given a revenue and margin guidance for FY19 well above that of Infosys. Further, client addition for TCS has surpassed that of Infosys in the fourth quarter. Where TCS added three clients with more than US$ 100 million billing, Infosys just managed to add one.

Not only this, the attrition rate for TCS was lower as compared to Infosys indicating a relatively higher job satisfaction. All these factors have led to TCS garnering a higher valuation than Infosys. While TCS trades at a trailing price-earnings (p/e) multiple of 23.6 times, Infosys trades at 15.4 times.

The valuation premium is significant. This premium may contract if Infosys is able to report a stellar performance in FY19.

Rupee depreciation too may help these companies to perform better in FY19. Rupee has depreciated between 3-4% since the beginning of 2018. As most of the IT services are exported, a depreciation in rupee bodes down well for the financials of IT companies.

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The depreciation may continue given the fact that India has to repay a huge sum of external debt in the coming years. India's external debt stands at US$ 513 billion and almost half of the same has to be repaid in the next year. This may put pressure on the rupee. Further, a rise in the bond yields in the US may also led to the strengthening of the dollar.

The IT stocks which were depressed in the past two years on account of lower global growth and a shift to digitization have moved upwards on better prospects of global growth going ahead. A falling rupee too would help these companies post better numbers going ahead.

Stocks in Action Today

After two years of depressed earnings, all eyes are now on corporate results. The stocks have risen in the previous two years mainly on the back of re-rating of price/earnings (p/e) multiple. The earnings were suppressed mainly on the back of demonetization and implementation of goods and service tax (GST).

One more quarter of depressed earnings will lead to a higher price to earnings multiple, which could lead to deep correction in the indices. Recovery in the corporate earnings will be the key for the index to inch upwards going ahead.

HDFC Bank declared its results on Saturday. The stock is expected to react in today's trade. Further, Bharat Financial Inclusions Ltd, LIC Housing Finance, Swaraj Engines are expected to be in action today as they declare their results for the quarter ending March 2018.