Jet Airways and Yes Bank - What's Next for these Beaten Down Stocks?
Podcast

Jet Airways and Yes Bank, both once market darlings are now being shunned by market participants.

The National Stock Exchange (NSE) exchange notified that the shares of the airline will be shifted from rolling segment to trade for trade segment, wherein the settlement in the scrip will take place on gross basis with 100% upfront margin and 5% price band.

Trading in the futures and options (F&O) segment of the exchanges will also be stopped.

Meanwhile Yes Bank was among the top losers in the market this week.

Uncertainty related to the bank's provisions and extent of non-performing assets, along with a slew of ratings downgrades have put the bank under pressure.

Now what's next for these beaten down market darlings?

Tune in to find out...


Sensex Ends 289 Points Lower; Realty and Banking Stocks Witness Selling
Closing

Indian share markets fell sharply during closing hours. Barring capital goods sector, all sectoral indices ended on a negative note with realty stocks, telecom stocks, and banking stocks losing the most.

At the closing bell, the BSE Sensex stood lower by 289 points (down 0.7%) and the NSE Nifty closed down by 91 points (down 0.8%). The BSE Mid Cap index closed lower by 1% and the BSE Small Cap index ended the day down by 0.8%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng was down 0.7% and the Nikkei was up by 0.4%. The Shanghai Composite stood lower by 1%.

In the news from the pharma space, Aurobindo Pharma share price was in focus today. The stock of the company witnessed selling pressure today after USFDA pointed out data integrity lapses at the company's finished dosages plant at Bachupally in Telangana.

The FDA issued Form 483 with 10 observations to Aurobindo Pharma on the plant which was audited by the US drug regulator between May 13 and May 24.

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The USFDA said that laboratory records do not include complete data derived from all tests, examinations and assay necessary to assure compliance with established specifications and standards.

From the aviation space, Jet Airways share price hit its all-time low level today after reports showed that Directorate General of Civil Aviation (DGCA) has cancelled critical authorisations to Jet Airways' engineering department.

As per the news, it was stated that India's aviation regulator has cancelled critical authorisations to Jet Airways' engineering department, rendering the grounded airline defunct and unable to carry out any maintenance work on aircraft.

The action taken by the DGCA will impact the airline's most critical assets, its planes, which are in constant need of maintenance and preservation even as they are grounded.

The airlines stock also witnessed sharp selling yesterday and fell over 20% after stock exchanges decided to impose trading restrictions on the debt-laden airline.

According to a circular issued by NSE, the decision was taken as a part of preventive surveillance measures to curb excessive volatility. The decision would be effective from 28 June.

The stock exchange notified that the shares of the airline will be shifted from rolling segment to trade for trade segment, wherein the settlement in the scrip will take place on gross basis with 100% upfront margin and 5% price band.

Trading in the futures and options (F&O) segment of the exchanges will also be removed. The exchanges also cited the company's failure to submit financial results for the year ended 31 March, as well as observations made by its auditor, as reasons for its decision.

Note that several people from the top management have left the airline company in the past few months. Lenders to the cash-strapped airline, led by the State Bank of India (SBI), are seeking investors to recover their dues.

The airline's total liability, including unpaid salaries and vendor dues, is nearly Rs 150 billion. In any case, if Jet Airways is admitted to the National Company Law Tribunal, under bankruptcy resolution lenders may recover only a fraction of the Rs 84 billion the airline owes them.

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

In the news from the macroeconomic space, India's wholesale price-based inflation (WPI) slipped to 22-month low at 2.45% in May.

The fall here was helped by lower prices for food articles, and fuel and power items.

Inflation in food articles basket was 6.99%, down from 7.37% in April. However, onion prices spiked during the month with inflation at 15.89%, as against -3.43% in April. Vegetables inflation eased to 33.15% in May. This was down from 40.65% in the previous month. Inflation in potato was -23.36%, against -17.15% in April.

Inflation in 'fuel and power' category cooled to 0.98%, from 3.84% last month. Manufactured items too saw decline in prices with inflation at 1.28% in May, against 1.72% in April.

The WPI inflation in May is the lowest in 22 months, since July 2017, when it was at 1.88%.

It was at 3.07% in April and 4.78% in May 2018.

Earlier this week, government data showed retail inflation touching a seven-month high of 3.05% in May 2019.

Higher vegetable and food prices led to the fourth consecutive monthly increase in retail inflation, which is calculated on the basis of Consumer Price Index (CPI).

As per the data released by Central Statistics Office (CSO), inflation in the food basket increased to 1.83% in May. The same was recorded at 1.1% in April.

The retail inflation in April 2019 was revised upwards to 2.99% from the earlier 2.92%. The retail inflation level during the May 2018 was recorded at 4.87%.

The Reserve Bank of India has set the targets of 4% for the inflation rate.

The Monetary Policy Committee (MPC) under the central bank factors in CPI-based retail inflation while finalising its monetary policy.

From the NBFC sector, market participants were also tracking Gruh Finance share price. Stock of the company witnessed selling pressure today after the promoter Housing Development Finance Corporation (HDFC) sold more than 4% of the company's paid-up capital in the open market.

Earlier, on May 25, the housing finance company had sold 32.6 million equity shares, representing 4.4% of the paid-up capital of Gruh Finance at price of Rs 310 per share.

While on March 28, HDFC had sold 12.2 million shares of Gruh Finance at a price of Rs 260 per share.

Reportedly, HDFC being a shareholder of Gruh Finance is entitled to 14.96% of post-amalgamation paid-up capital of Bandhan Bank, based on the share exchange ratio.

However, the Reserve Bank of India (RBI) has directed the Corporation to hold 9.9% or less of the paid-up capital of Bandhan, post the merger.

In view of this, HDFC is required to sell such number of shares in Gruh Finance so as to be entitled to 9.9% of the post amalgamation paid up capital of Bandhan.

Speaking of non-banking financial companies (NBFCs), note that NBFCs were flush with funds from banks, insurance companies, and asset management companies i.e. mutual funds in 2016.

You can see this clear as day in the chart below...

One Chart that Predicted the NBFC and Mutual Fund Crisis Back in 2016

One Chart that Predicted the NBFC and Mutual Fund Crisis Back in 2016

And with these funds and without the necessary restrictions, NBFCs become reckless in deploying the funds.

Here's what Tanushree Banerjee wrote about this in today's edition of The 5 Minute WrapUp...

  • Let's look back at 2016...

    Banks, mutual funds, and insurance companies were competing with each other to lend to NBFCs.

    And why not?

    Not only were the fast growing NBFCs hungry for funds, they also offered attractive yields.

    The NBFCs took more risk than banks by lending without collaterals. But they charged higher interest rates; which meant their margins remained far higher than that of banks.

    It's no wonder the NBFCs caught everyone's fancy. In fact, between 2013 and 2016, the top NBFCs saw their valuation multiples move up three to eight times.

As per Tanushree, the problem in the NBFC sector is far from over. But she believes the good quality NBFCs, and housing finance companies will continue to flourish and you can make the most of the opportunity by buying the safest NBFCs.

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


Sensex Trades Lower; Gruh Finance Slips on Block Deal
12:30 pm

Stock markets in India are presently trading on a negative note. The BSE Sensex is trading down by 291 points and the NSE Nifty is trading down by 68 points. Meanwhile, the BSE Mid Cap index and the BSE Small Cap index are trading down by 0.5% and 0.3% respectively.

Among the sectoral indices, healthcare stocks, telecom and realty stocks are witnessing maximum selling pressure. Capital goods and power stocks are trading in green.

In the news from the NBFC sector. Gruh Finance share price slipped 8% on the BSE in early morning trade after the promoter Housing Development Finance Corporation (HDFC) sold more than 4% of the company's paid-up capital in the open market.

Earlier, on May 25, the housing finance company had sold 32.6 million equity shares, representing 4.4% of the paid-up capital of Gruh Finance at price of Rs 310 per share.

While on March 28, HDFC had sold 12.2 million shares of Gruh Finance at a price of Rs 260 per share.

Reportedly, HDFC being a shareholder of Gruh Finance is entitled to 14.96% of post-amalgamation paid-up capital of Bandhan Bank, based on the share exchange ratio.

However, the Reserve Bank of India (RBI) has directed the Corporation to hold 9.9% or less of the paid-up capital of Bandhan, post the merger.

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The Secrets Identifying  10X StocksThe convergence of multiple economic forces has created a opportunity where regular folks could become super rich in Modi 2.0 and beyond.

So to guide you in profiting from it, our Co-Head of research Tanushree has revealed the full details in her book titled, "50 Reasons Why The Rebirth of India Is Inevitable".

This book is currently selling for Rs 1,950 on Amazon. But by acting fast, you could get a copy delivered to your address in India for virtually FREE.

More than 1,000 copies of this hardbound book have been claimed already.

Click here to find out how to grab your virtually FREE copy now…
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In view of this, HDFC is required to sell such number of shares in Gruh Finance so as to be entitled to 9.9% of the post amalgamation paid up capital of Bandhan.

Moving on to the news from the pharma sector. Dr. Reddy's Laboratories has entered into a definitive asset purchase agreement with Upsher-Smith Laboratories, LLC (Upsher-Smith).

As per the scheme, the company would sell its US and select territory rights for Zembrace Symtouch (sumatriptan injection) 3 mg and Tosymra (sumatriptan nasal spray) 10 mg, (formerly referred to as 'DFN-02'), which are commercialized through its wholly owned subsidiary, Promius Pharma, LLC.

Under the agreement, the company will receive US$70 million as upfront consideration, US$40.5 million in near term milestones and additional financial considerations including, existing contractual obligation and inventory.

Subsequently, the company will receive sales-based royalties on a quarterly basis, the reports noted.

To know more about the company, you can access to Dr. Reddy's Q3FY19 result analysis and Dr. Reddy's Stock Analysis on our website.

At the time of writing, Dr. Reddy's Lab share price was trading down by 0.7%.

Here's an interesting data on Dr. Reddy's Lab, investing just Rs 100,000 in Dr. Reddy's Labs in 1992, it would have given a whopping Rs 4.89 crores in 2014!

Profit Opportunities in the Rebirth of India

Profit Opportunities in the Rebirth of India

Co-head of Research, Tanushree Banerjee believes, the opportunities in the Rebirth of India are not only more profitable than the ones in 1991 but the gains could come faster too.

Tanushree has explained this historic opportunity in detail at the Rebirth of India summit

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


Sensex Opens Flat; Realty and Energy Stocks Lose
09:30 am

Asian share markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.1% while the Hang Seng is down 0.5%. The Nikkei 225 is trading up by 0.3%. US stocks rose on Thursday after two days of declines, as energy shares rebounded with oil on concerns of a supply disruption following attacks on two tankers in the Gulf of Oman.

Back home, India share markets opened flat amid subdued global cues. The BSE Sensex is trading down by 40 points while the NSE Nifty is trading down by 11 points. Both, the BSE Mid Cap index and BSE Small Cap index opened on a flat note.

Barring metal stocks and capital goods stocks, all sectoral indices have opened the day on a negative note with realty stocks and energy stocks leading the losers.

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.

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The Secrets Identifying  10X StocksThe convergence of multiple economic forces has created a opportunity where regular folks could become super rich in Modi 2.0 and beyond.

So to guide you in profiting from it, our Co-Head of research Tanushree has revealed the full details in her book titled, "50 Reasons Why The Rebirth of India Is Inevitable".

This book is currently selling for Rs 1,950 on Amazon. But by acting fast, you could get a copy delivered to your address in India for virtually FREE.

More than 1,000 copies of this hardbound book have been claimed already.

Click here to find out how to grab your virtually FREE copy now…
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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

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.

Moving on, the rupee is currently trading at 69.58 against the US$.

Snapping its two-session gaining streak, the rupee dived 16 paise to close at 69.50 against the US dollar on Thursday amid a sharp rise in crude oil prices.

Brent crude futures, the global oil benchmark, soared 3.8% to US$ 62.27 per barrel after attacks on two oil tankers in the Gulf of Oman triggered fears of supply disruptions.

The rupee opened at 69.33 per dollar and fell further to touch a low of 69.56 at the interbank foreign exchange market.

The local unit finally settled at 69.50, down by 16 paise over its previous close. The rupee Wednesday closed at 69.34 against the US dollar.

Foreign investors purchased shares worth a net Rs 1.7 billion on Thursday, provisional exchange data showed.

The 10-year government bond yield was at 7.01% on Thursday.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.04% lower at 96.96.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

  • Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative traders association has indicated that forex may be traded in 6 decimals in the coming few years.

    It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.

    Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

Moving on to the news from the pharma sector. As per an article in a leading financial daily, Wockhardt received zero observations from the US health regulator after inspection of its bioequivalence centre at Aurangabad in Maharashtra.

The United States Food and Drug Administration (USFDA) carried out inspection of the bioequivalence centre located at R&D centre, Aurangabad from June 10 to June 12.

During the inspection, bioanalytical and quality systems of bioequivalence studies of Tamsulosin 0.4 mg capsules and Metoprolol ER tablets were audited, the reports noted.

At the end of inspection, there was nil observation (i.e. zero 483 observation), signifying that best practices were followed, in compliance to regulations.

This outcome would lead approvals of abbreviated new drug applications (ANDAs) in pipeline for which bioequivalence studies are being or will be done in the said centre.

Wockhardt share price opened the day up by 2.6%.

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


Oil Prices amid Gulf Tanker Incident, Global Stock Market Drivers and Top Stocks to Watch Out Today
Pre-Open

The Indian share markets ended flat on Thursday weighed down by banking and automobile stocks. Weak global cues and rising retail inflation too contributed to a lackluster trade.

The BSE Sensex closed 15 points lower at 39,741 levels. While Power Grid and M&M were the top gainers, YES Bank and IndusInd Bank slipped the most.

The Nifty 50 settled just above the psychological level of 11,900 at 11,914 mark, up 8 points.

Among sectoral indices, while public sector banks, metals and IT stocks slid, realty and financial services stocks soared.

Yes Bank shares and IndusInd Bank tanked on Thursday after global brokerage house UBS slashed price target sharply by 47% and 18%, respectively, citing weak earnings going ahead.

Top Stocks in Focus

DHFL share price will be in focus as promoters are in talks with private equity firms and are expecting to garner US$1 billion by selling nearly 50% of their holdings. The Wadhawan family, the promoters of the company, currently holds close to 40% stake in the company.

Jain Irrigation said it has not defaulted on debt obligation and is confident of reducing debt by Rs 20 billion. The stock will be watched out for.

Mishra Dhatu Nigam has secured one order worth about Rs 2 billion. The cumulative order book position of the company as on date is about Rs 19 billion.

--- Advertisement ---
50 Reasons Why Regular Folks Could Get Rich In Modi 2.0 And Beyond… (FREE Book)

The Secrets Identifying  10X StocksThe convergence of multiple economic forces has created a opportunity where regular folks could become super rich in Modi 2.0 and beyond.

So to guide you in profiting from it, our Co-Head of research Tanushree has revealed the full details in her book titled, "50 Reasons Why The Rebirth of India Is Inevitable".

This book is currently selling for Rs 1,950 on Amazon. But by acting fast, you could get a copy delivered to your address in India for virtually FREE.

More than 1,000 copies of this hardbound book have been claimed already.

Click here to find out how to grab your virtually FREE copy now…
------------------------------

The National Stock Exchange of India (NSE) will remove Jet Airways from daily trading of futures and options with effect from June 28. The reason cited by the NSE is the company's failure to respond to queries about persisting rumours in the market.

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

FDI in India Surges by 6%

The UN Conference on Trade and Development (UNCTAD) in its report 'The World Investment Report 2019' has said that Foreign Direct Investment (FDI) to India surged by 6% to US$42 billion in 2018, with strong inflows in the manufacturing, communication and financial services sectors, and cross-border merger and acquisition activities.

The report ranked India among the top 20 host economies for FDI inflows in 2017-18.

It also emphasized that prospects for FDI inflows into South Asia are largely determined by expectations of growing investment into India.

The report mentioned that India has historically accounted for 70% to 80% of inflows to the subregion.

Further, the growth in cross-border M&As for India from US$23 billion in 2017 to US$33 billion in 2018 was primarily due to transactions in retail trade (US$16 billion), which includes e-commerce, and telecommunication (US$13 billion).

The report added that India and the UAE, not traditionally in the top 20 outward investor countries, were also considered as among the top 10 most important sources of FDI for the 2019 to 2021 period.

Global Stock Market Drivers

European stocks and US equity futures turned higher on Thursday, shrugging off losses in Asia despite a host of simmering geopolitical tensions.

Tensions simmer in Hong Kong following Wednesday's clashes between police and protesters, the trade dispute between the US and China remains unresolved, and President Donald Trump fires fresh barbs at Germany.

The hope for many traders is a newly dovish Federal Reserve can help blunt some of these threats.

Here are some key events coming up:

  • The race to succeed Theresa May heats up with the first Conservative Party leadership ballot.
  • Euro-area finance ministers meet in Luxembourg. On the agenda: financial penalties for Italy over its debt load, and the euro-area budget.
  • China and the US release industrial production and retail sales data today.

Oil Prices Surge After Suspected Tanker Attack near Iran

Oil prices jumped as much as 4% on Thursday after a suspected attack on two tankers in the Gulf of Oman near Iran and the Strait of Hormuz, through which a fifth of global oil consumption passes.

The charterer of the former said the vessel was "suspected of being hit by a torpedo". The manager of the latter said it had been damaged as a result of a "suspected attack" but that its cargo was still intact.

The incident followed last month's nearby sabotage attacks on vessels off the Fujairah emirate, one of the world's largest bunkering hubs.

Brent crude futures were up US$1.72 at US$61.69 a barrel, having risen earlier by as much as 4.5% to US$62.64.

US West Texas Intermediate crude futures were up US$1.32 at US$52.46 a barrel. WTI earlier rose as much as 3.9% to US$53.11.

Both benchmarks are nevertheless headed for a weekly loss.

Oil prices had slumped in the previous session on an unexpected rise in US crude stockpiles and a dimming outlook for global oil demand.

The United Kingdom Maritime Trade Operations, part of the Royal Navy, said on Thursday that it was aware of an incident in the Gulf of Oman, near the Iranian coast.

Tensions in the Middle East have escalated since US President Donald Trump withdrew from a 2015 multinational nuclear pact with Iran and reimposed sanctions, notably targeting Tehran's key oil exports.

Iran, which has distanced itself from the previous attacks, has said it would not be cowed by what it called psychological warfare.

Also supporting oil bulls were signs that OPEC members were close to reaching an agreement on continuing production cuts.