Sensex Ends Day in Green; Energy Stocks Top Gainers
Closing

After opening the day in green, share markets in India witnessed positive trading activity throughout the day and ended the day deep in green. Sectoral indices too ended the day in green, with stocks in the energy sector and stocks in the capital goods sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 166 points (up 0.5%) and the NSE Nifty closed up by 30 points (up 0.3%). The BSE Mid Cap index ended the day flat, while the BSE Small Cap index ended the day down by 0.1%.

Asian stock markets too finished in green. As of the most recent closing prices, the Hang Seng was up by 1.2% and the Shanghai Composite was up by 2%. The Nikkei 225 was up by 0.9%. Meanwhile, European markets too were trading on a positive note. The FTSE 100 was up by 0.3%, The DAX, was up by 0.6% while the CAC 40 was up by 0.2%.

The rupee was trading at Rs 66.33 against the US$ in the afternoon session. Oil prices were trading at US$ 68.99 at the time of writing.

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In news from stocks in the IPO space, ICICI Securities share price was in focus today after the stock market regulator has sought details of a large investment made by ICICI Prudential Mutual Fund (ICICI MF) in the flop IPO of affiliate ICICI Securities Ltd.

ICICI Securities had to cut its IPO size to Rs 35 billion from the original target of Rs4,017 crore because of poor investor interest. Of this, a large chunk was bought by ICICI MF.

The Rs 40.2 billion initial public offering (IPO) of ICICI Securities could only manage 78% subscription. However, including anchor allotment, the issue received a total of 88% subscription.

One shall note that, first time in almost 3 years a firm debuted on the exchanges after getting less than 80% subscription.

ICICI Securities share price, opened the day below its issue price and ended the first day down 14.4% from its issue price.

IPO Subscription Times (2017)

One space which tests the investor's contrarian philosophy is the IPO space. The demand for IPO's has reached sky-high levels. Avenue was the first company this year to cross the 100 time subscription mark swiftly followed by CDSL and Dixon technologies lately.

The market euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space. For every Reliance Power - like issue, there have been issues like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it. 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.

Moving on to news from the chemicals sector. According to a leading financial daily, Tata Chemicals is looking at business opportunities related to the exploration and import of lithium from Bolivia to India and possibly to other countries where the company operates.

A team of senior executives from the company recently visited the South American nation, which has the largest deposits of lithium in the world, and held meetings with government officials there, two people aware of the development said.

One of India's largest Indian manufacturers of chemical, crop nutrition and consumer products, Tata Chemicals' interest in lithium is guided by the fact lithium and cobalt are the two most important commodities needed to develop batteries for electric vehicles (EVs), the thrust vehicles for automobile manufacturers in India and across the world.

At present a lithium-ion battery accounts for 40% of the total cost of an electric vehicle. Lithium has other uses such as in mobile phone batteries and solar panels.

Tapping into the potential of lithium can be a great opportunity for Tata Chemicals as demand for lithium will only increase in the coming years in the domestic market and globally.

Tata Chemicals share price ended the day down by 0.2%.


Indian Indices Trade Marginally Higher; Energy Stocks Witness Buying Interest
12:30 pm

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the oil & gas sector and healthcare sector witnessing maximum buying interest. Metal stocks are trading on a negative note.

The BSE Sensex is trading up 79 points (up 0.2%) and the NSE Nifty is trading flat. The BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.1%.

The rupee is trading at 66.44 to the US$.

In the news from the automobile sector, as per an article in the Economic Times, the government is planning to double the mandatory local content in electric vehicles to 70% in three years and impose heavy duties on imports.

This is to ensure that domestic manufacturing of electric vehicles gets a big boost from the Rs 87 billion proposal to shift public transport to battery-operated vehicles.

The development is said to have huge implications for domestic car makers such as Tata Motors and Mahindra & Mahindra, which are facing competition from foreign players like China's BYD, which recently won tenders with low bids that seemed unviable to local rivals.

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

Speaking of electric vehicles, note that the government is targeting to have all cars propelled by electric engine by 2030. The target is more daunting than in many advanced countries.

According to the industry, the 2030 target would require eight to ten times the global stock of such vehicles. India would need to sell more than 10 million electric cars in 2030, compared to 5,000 electric vehicles India had on the road in 2016.

As you can see from the chart below, India is barely visible compared to other developed countries when it comes to battery cars.

Is India Prepared to Meet the Ambitious Battery Car Target?

As an article in Business Standard suggests, such a big jump in scale for the auto industry in 13 years seems difficult. The basic infrastructure is missing. There are not enough charging stations. For this massive shift, the charging stations will need to be as ubiquitous as petrol pumps.

Another issue is the price of the lithium ion battery, which constitutes 30% to 40% of the cost of the car. For this plan to succeed, the price of the battery needs to come down.

The auto industry is already facing regulatory headwinds. The shift from BS-IV emission norms to BS-VI has been two years ahead of schedule without an intermediate stage. The government, if it is serious about such ambitious targets, should offer the necessary infrastructure support and do its bit for a smooth transition.

In the news from commodity space, the petroleum and natural gas ministry has estimated India's crude oil import bill may increase 20% to US$ 105 billion in this financial year from US$ 88 billion in 2017-18.

This is assuming average crude oil price of US$ 65 per barrel for the year, about US$9 a barrel less than the current rate.

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.


Sensex Opens Firm; Realty & FMCG Stocks Gain
09:30 am

Asian share markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 2% while the Hang Seng is up 1.3%. The Nikkei 225 is trading up by 0.7%. US stocks fell on Monday as tech shares declined, while investors fretted over higher interest rates. Wall Street also zeroed in on the busiest week of the earnings season.

Back home, India share markets opened the day on a firm note. The BSE Sensex is trading up by 151 points while the NSE Nifty is trading up by 18 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.4% & 0.3% respectively.

Sectoral indices have opened the day on a mixed note with realty stocks and FMCG stocks witnessing buying interest. While, IT stocks & metal stocks have opened the day in red. The rupee is trading at 66.22 to the US$.

In the news from the IT sector. Tata Consultancy Services Ltd (TCS) on Monday surpassed the US$100 billion mark in market value, becoming only the second Indian firm after Reliance Industries Ltd to do so.

Notably, TCS has added US$10.9 billion in revenue over the past seven years. That is roughly the size of India's second largest IT services firm Infosys Ltd, which ended FY18 with US$10.9 billion in revenue.

Over the past few years, TCS has pulled away from its nearest rival, widening the revenue gap from US$1.5 billion in 2008 to US$8.15 billion in 2018.

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The gap between TCS and Infosys captures the resurgence in the Mumbai-based company's fortunes since N. Chandrasekaran, the current chairman of Tata Sons Ltd, took over as CEO in November 2009.

Reportedly, with TCS signing up several large new deals, the gap between India's top two software services providers is only likely to widen.

In the March quarter, TCS claims to have won over 450 small digital deals with a total value of over US$1 billion. TCS's deal wins in digital-the fuzzy umbrella term which each company uses to classify revenue generated from areas generally classified as social, mobile, analytics, cloud computing and Internet of Things-is higher than the US$905 million worth of total deal wins, including rebids and new wins, by Infosys in the quarter.

TCS share price opened the day down by 0.5%.

Moving on to the news from telecom space. As per an article in The Economic Times, Bharti Airtel has announced massive network roll-out plans for FY18-19 to further expand its high speed mobile data footprint across the state of Gujarat.

As a part of its network expansion program - Project LEAP, Airtel announced its plans to add more than 6000 new sites in FY 2018-19. This will be done along with the deployment of an additional 2000 KMs of optic fiber across Gujarat.

While stepping up the data capacities and taking services deeper into rural and unconnected areas, the massive roll-out would mean addition of 16 new sites every day to Airtel's future-ready network in Gujarat.

This network expansion will follow the massive ramp up of Airtel's network in FY 2017-18 which witnessed over 6600 new sites being deployed across Gujarat, extending Airtel's mobile broadband footprint in the State to 20000 towns & villages.

With this roll-out, the number of Airtel's mobile sites in Gujarat would go up by 25% to 29,000, further enhancing the network speeds and voice quality.

The addition of fresh optic fiber would extend Airtel's fiber backbone to 13,800 KMs, supporting the growth of high speed data services in the region.

One shall note that, one of the biggest and most resilient telecom companies in India, Bharti Airtel, has been the victim of loss of pricing power in the sector.

Bharti Airtel's Sliding Valuations

Sliding operating margins had a direct impact on the company's return on equity over the past decade. And the poor operating numbers apart from debt heavy balance sheet weighed on the valuations.

Bharti Airtel share price opened the day down by 1%. The stock will be in focus today as it is set to announce results for quarter ended March today.


Indian Indices Continue Momentum, Oil Prices in Focus, and Top Stocks in Action
Pre-Open

On Monday, share markets in India opened on a positive note and ended the day in green after a volatile day of trading.

The BSE Sensex closed higher by 35 points to end the day at 34,450. While the broader NSE Nifty ended the day higher by 21 points to end at 10,585.

Among BSE sectoral indices, realty stocks rose the most by 1.8%, followed by pharma stocks at 1.3%. IndusInd Bank and M&M were among the top gainers.

Top Stocks in Action Today

TCS share price is likely to be in focus after the IT services major became the first Indian company to hit a total market capitalization of US$100 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.

HPCL share price and BPCL share price are among the stocks to watch today as oil prices continue to rise unabated.

IPO Buzz

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.

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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.

Oil Prices in Focus

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.