Sensex Ends 157 Points Higher; Metal and Power Stocks Rally
Closing

Indian share markets traded on a positive note most of the day and ended higher. Gains were largely seen in the metal sector, power sector and realty sector, while IT stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 157 points (up 0.4%) and the NSE Nifty closed higher by 51 points (up 0.4%). The BSE Mid Cap index ended the day up 0.8% and the BSE Small Cap index ended the day up by 0.5%.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.2% and the Shanghai Composite was down by 0.9%. The Nikkei 225 was down 0.4%.

Speaking of Indian share markets, when it comes to stock market performance, multinational corporations (MNCs) have outperformed the broader market.

The Nifty has a MNC index. This index comprises 15 listed companies. The foreign shareholding in them is over 50% and/or the management control is vested in the foreign company.

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As can be seen in the chart below, this Nifty MNC Index has outperformed the Nifty 50 index in the last five years.

Nifty MNC Index Outperforms the Benchmark Index

Nifty MNC Index Outperforms the Benchmark Index

Why the outperformance?

Sarvajeet Bodas answers this question in the recent edition of The 5 Minute WrapUp. He writes...

  • Generally, MNCs have a vast global experience. These companies have weathered the competition in many markets across the world.

    Also, MNCs generally have strong parentage. This helps create strong brands and gain market share.

    Not to mention MNCs have strong balance sheets. This brings stability during times of market volatility.

    Similarly, in the past, MNCs have demonstrated good capital allocation. Hence they, consistently delivered high returns on capital.

    Finally, MNCs typically have high standards when it comes to board composition, corporate governance, and operational efficiency. All this helps to maximise shareholder wealth.

In Smart Money Secrets, we have recommended such a company from the MNC space.

If you haven't subscribed to Smart Money Secrets yet, you can access the report by signing up here.

In the news from energy sector, NTPC share price was in focus today. The stock of the company witnessed buying interest today after the company announced it had won solar energy projects by UPNEDA.

The state-run power major said it has won 40 megawatt (MW) solar energy projects in an auction conducted by Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA).

The projects shall be set up under EPC (engineering, procurement and construction) mode and shall add to the installed capacity of NTPC.

In the news from the commodity space, crude oil continued its momentum seen this week and witnessed buying interest today.

Oil prices rose over 1% today to hit their highest in nearly a month as widely-watched data showed US crude stockpiles fell more than expected.

As per the data, US crude stockpiles dropped by 7.5 million barrels in the week ended June 21 to 474.5 million. This compared with analyst expectations for a decrease of 2.5 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.3 million barrels.

Gains were also seen on the back of tensions between Iran and the United States.

Earlier this week, US Secretary of State Mike Pompeo said significant sanctions on Tehran would be announced soon which will be aimed at further choking off resources that Tehran uses to fund its activities in the region.

Market participants will be closely tracking crude oil prices in the coming weeks ahead of the OPEC meet.

The members of the Organization of the Petroleum Exporting Countries (OPEC) have agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2 where they will discuss whether to extend a deal on cutting 1.2 million barrels per day of oil production that runs out this month.

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

To know more on crude oil, you can read one of Vijay Bhambwani's recent articles: Is OPEC Dying?

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


Indian Indices Trade Marginally Higher; Sun Pharma Gains 3%
12:30 pm

Share markets in India are presently trading on a positive note. Sectoral indices are trading on a mixed note with stocks in the power sector, capital goods sector and realty sector witnessing buying interest, while IT stocks and telecom stocks are trading in red.

The BSE Sensex is trading up by 78 points while the NSE Nifty is trading up by 19 points. The BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 0.4%.

Speaking of Indian benchmark indices, note that overall, the Sensex PE ratio has been in expansion mode over the last five years.

Between the election results of 2014 and 2019, the Sensex PE expanded by 52%.

The chart below shows the change in the Sensex price to earnings (PE) multiple over the last five years of Modi government.

Sensex Rally Driven by PE Expansion in Modi's First Term

Sensex Rally Driven by PE Expansion in Modi's First Term

What this means is that most of the gains in Modi's first term have come mostly from an expansion of valuation multiples and only partially due to earnings growth.

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What are the implications for investors in Modi's second term?

Ankit Shah answers this question in one of the latest edition of The 5 Minute WrapUp. Here's an excerpt of what he wrote...

  • In my view, what worked in Modi's first term may not necessarily work in the second one. Back in 2014, you could have put your finger on a random set of stocks, and there were good chances you would make money.

    But right now, the circumstances are quite different. The overall markets are trading at elevated valuation multiples. The economy has been showing signs of fatigue. The financial sector is still in a mess. Unemployment levels are high.

    For much of Modi's first term, the global markets were in a bull run. However, global economic conditions are not as favourable now. There are growing fears of an impending global slowdown. There has been an escalation in the US-China trade war.

    Given all these factors, do not expect the markets to have a broad-based bull run in Modi's second term.

With the elections done, the markets will now move based on earnings visibility, economic policies, global sentiments, and so on.

So, look out for the stocks that will rise fast when the tide of the market turns up.

SBI Life Insurance share price is in focus today. Stock of the company hit a 52-week high of Rs 715 per share, up 6% intra-day, on the BSE with heavy buying seen at the counter in response to excessive bids being received for stake sale.

The firm, which has put Rs 16.3 billion worth of shares under offer for sale (OFS), received bids for nearly 86 million shares against 25 million shares on offer.

Most of the bids came at Rs 670 per share, higher than the base price of Rs 650 set for the OFS, the data provided by stock exchanges showed. The two-day OFS opened on Tuesday for non-retail investors and today for retail investors.

Foreign partner of SBI Life Insurance, BNP Paribas Cardif proposed to sell up to 25 million shares, representing 2.5% stake in the insurance company. Following the sale, its holding will drop to 5.2% from 7.7% now.

Meanwhile, state-owned Life Insurance Corporation of India (LIC) has sold over 19.2 million shares, representing about 2% stake of Asian Paints, through open market transaction.

With this transaction, LIC's stake in Asian Paints has now come down to 3% from 5% earlier.

Reportedly, the total sale value could not be ascertained as the insurer sold the shares over a period of time between January 9-June 24, 2019.

Moving on to the news from the aviation space, shares of SpiceJet gained as much as 5% today after the low-cost carrier said it would launch eight new daily international flights from Mumbai and Delhi in July.

The company in a regulatory filing said, "SpiceJet will service Mumbai-Riyadh-Mumbai, Mumbai-Dhaka-Mumbai, Delhi-Dhaka-Delhi and Delhi-Jeddah-Delhi with daily non-stop flights".

Reports state that SpiceJet will use its 168-seater Boeing 737-800 aircraft on all these routes. The airline currently operates 597 average daily flights to 62 destinations, including 53 domestic and 9 international locales.

In other news, as per an article in The Economic Times, Jet Airways' employees have been shunted out of the airline's corporate headquarters in suburban Mumbai by its owners as the airline failed to renew its lease agreement.

Here's an excerpt from the article:

  • Siroya Centre, located in Andheri in the western suburbs of the city, had been leased to Jet and been its workplace for close to a decade. The evacuation moves happened last night. The property has been already put up for lease through commercial real estate services firm JLL, its website showed.

    A team of insolvency professionals headed by Grant Thornton's Ashish Chhawchharia had also been working out of Jet's office space in addition to what remains of Jet's management. They will now either file a complaint to the police or get a court order as a remedial action to stall the evacuation.

The move may attract legal action as the cash-strapped airline is undergoing an insolvency resolution process directed by National Company Law Tribunal (NCLT).

The insolvency resolution process started after the NCLT last Thursday admitted a plea by Jet's biggest lender the State Bank of India on repeated loan repayment defaults by the airline.

Note that Jet Airways has a debt of nearly Rs 85 billion on its books with total liabilities of around Rs 250 billion.

Jet stopped flying on April 17, running out of funds to stay afloat and failing to raise cash. Its lenders have unsuccessfully been trying to find it a new investor.

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

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


Sensex Opens Marginally Higher; Capital Goods & Power Stocks Lead
09:30 am

Asian share markets slipped on Wednesday and the dollar pulled back from three-month lows after Federal Reserve officials tempered expectations in the markets for aggressive monetary easing.

Fed Chair Jerome Powell on Tuesday said the central bank is "insulated from short-term political pressures," pushing back against US President Donald Trump's demand for a significant rate cut.

The Shanghai Composite is off 0.9%, while the Hang Seng is up 0.1%. The Nikkei 225 is trading down by 0.5%.

Back home, India share markets have opened the day on a positive note. The BSE Sensex is trading up by 60 points while the NSE Nifty is trading up by 12 points. The BSE Mid Cap index and the BSE Small Cap index have opened the day on a flat note.

Sectoral indices have opened the day on a mixed note with stocks in the power sector and capital goods sector witnessing buying interest, while IT stocks and realty stocks are trading in red.

The rupee is trading at Rs 69.45 against the US$.

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In the news from the finance sector, mortgage lender Dewan Housing Finance Corporation (DHFL) said it is yet to repay Rs 2.3 billion out of the total Rs 3.8 billion of commercial paper to a dozen investors. On Tuesday, the company in a regulatory filing said it has repaid Rs 1.5 billion so far.

This is the second time this month that the company has missed the repayment deadline on a set of outstanding bonds.

Earlier this month, DHFL defaulted on interest payment of Rs 8.5 billion on its non-convertible debentures, following which its credit rating was downgraded to default or 'D' by rating agencies CRISIL and ICRA.

The delay in repayment comes ahead of the meeting of lenders to be held in the first week of July to hammer out a rescue package that includes loan restructuring, fresh working capital support, inducting a new financial investor, and a new management team.

On June 17, The Economic Times reported that the Employees' Provident Fund Organisation (EPFO) had sought details of DHFL's plans for cash generation amid mounting concerns of default. The largest domestic institutional investor in debt assets sought to redeem half of its DHFL investments exercising the 'put option', an exit route given to investors before scheduled maturities.

EPFO invested about Rs 13 billion in debt securities sold by DHFL. When EPFO made the investment in 2014-15, the company's debt was rated 'AAA' by CARE. As per rules, EPFO cannot invest in any debt securities rated below 'AA+'. But pension and insurance funds such as EPFO are not required to show mark-to-market losses.

Over the past few months, the company has sold retail loans worth Rs 300 billion via securitization. It has also sold several of its strategic retail assets, including affordable housing arm Aadhar Housing Finance, educational loan business Avanse and DHFL Pramerica Asset Managers.

In January, DHFL sold Rs 13.8 billion of wholesale loans to foreign alternative investment management fund Oaktree Capital, which buys distressed loan portfolios at a discount.

Data showed that State Bank of India (SBI) is the largest lender to DHFL with a total exposure of around Rs 100 billion. DHFL has repaid around Rs 400 billion of its financial obligations since September and remains committed to meeting all debt obligations in a timely manner, the company said in its regulatory filing on Tuesday.

Speaking of NBFC space, the liquidity crisis, a slew of corporate defaults, and the bloodbath in many stocks from this sector has left investors in deep fear and panic.

However, it is not that all NBFCs have fared badly.

In a recent edition of The 5 Minute WrapUp, Ankit Shah has picked the top three NBFC gainers and losers (in terms of market capitalisation) over the last one year.

As can be seen in the chart below, while several NBFCs have suffered badly and destroyed investor wealth, there have also been quality NBFC stocks that have been wealth creators.

NBFC Crisis - Top Gainers and Losers

NBFC Crisis - Top Gainers and Losers

So, as Ankit shares, the key takeaway here is to never write off an entire sector and to always stay on the lookout for quality stocks in sectors going through temporary headwinds.

In fact, in Ankit's premium newsletter Insider, one of his cherry-picked housing finance stock has performed quite well despite the NBFC crisis.

Moving on to the news from the IT sector, Persistent Systems' subsidiary - Persistent Systems Germany GmbH has entered into a share purchase agreement to acquire 100% share capital of Youperience GmbH, a salesforce certified gold partner in Germany.

The acquisition is subject to customary closing conditions which are expected to be completed within 2 weeks.

Reportedly, the proposed acquisition strengthens the company's salesforce practice in Europe and in the salesforce marketing cloud domain.

Persistent System share price has opened the day up by 1.5%.

To know more about the company, you can read the company's latest result analysis on our website.


Indian Indices End Higher, IPO Buzz, and Top Cues in Focus Today
Pre-Open

On Tuesday, Indian share markets witnessed most of the buying interest during closing hours and ended their trading session on a strong note. Gains were largely seen in the energy sector, metal sector and realty sector.

At the closing bell on Tuesday, the BSE Sensex stood higher by 312 points (up 0.8%) and the NSE Nifty closed higher by 97 points (up 0.8%).

Top Stocks in Action Today

Trent share price will be in focus today as the company said it was seeking shareholder's approval to allot up to 24.7 million equity shares to Tata Sons. After the transaction, the stake of Tata Sons, holding company of Tata Group, in Trent will increase to 33% from the current 28%.

To know more about the company, you can read Trent's latest result analysis on our website.

Alembic Pharma share price will also be in focus today as the company has received approval from the US health regulator for Oseltamivir Phosphate capsules, used for treatment of influenza infection.

Market participants will also track ITC share price.

Reportedly, promoters of Hotel Leelaventure told the NCLT that ITC was trying to scuttle their deal with Brookfield.

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From the IPO Space...

IndiaMART InterMESH's initial public offer (IPO) was subscribed 66% on its second day of issue. Delhi-based IndiaMART InterMESH is an online marketplace and business-to-business (B2B) classifieds platform.

The Rs 4.8 billion IPO of IndiaMart InterMESH comprises an offer for sale (OFS) by promoters, which means the company will not get any proceeds from public issue. The promoters' holding will be reduced to 53% from 58% after the issue.

As of 2:00 pm on Tuesday, the offer received 17,75,895 bids against the total issue size of 26,92,824, data from the National Stock Exchange (NSE) showed.

Gold Rally Continues

Gold prices continued their momentum and reports state that there could be some more upside left as rising bets on lower interest rates, a weaker dollar and confrontations between the US and countries including China and Iran catapulted prices to six-year highs.

Globally, prices are already up 10% in the past four weeks, breaking above US$ 1,400 an ounce for the first time since 2013.

Gold prices have also been supported by central banks buying the metal at the fastest rate in decades to diversify their reserves. A report citing World Gold Council data, said that global central banks are among the world's largest investors in gold, with total holdings of more than 30,000 tonnes as on February 2019.

Vijay Bhambwani, in his latest article has explained why gold prices are on the rise and how it's not a cause for cheer.

Here's a snippet from the article:

  • Gold is the cave investors hide in, when the mind is overwhelmed with fear and alternate investment ideas run out.

    The Indian investor in gold is a breed apart. He must contend with the local currency peg as well. It's a well-known fact that the INR has a history of depreciating between 3.5% to 5% per annum on a long period average (LPA) basis. Every time the INR falls versus the Dollar, gold rises on currency considerations alone. This is why gold is off its peak in Dollar terms but it's near lifetime highs in INR. Any further depreciation and gold rises.

To know more, you can read his full article: Gold Is Rising. Should You Be Happy?

From the Commodity Space...

Oil prices inched lower on Tuesday, weighed down by concerns over declining crude demand and a Saudi pledge to offset any shortfall from countries hit by sanctions, as the market shrugged off risks to supply linked to tensions around Iran.

Hopes for progress in the trade war between China and the United States during this week's G20 meeting were dampened by a comment from a senior US official saying US President Donald Trump was "comfortable with any outcome" from the talks.

The chief executive of Saudi Aramco, state oil firm of OPEC's de facto leader said its spare capacity of 12 million barrels per day (bpd) was sufficient and that it would meet its customers' needs.

Demand concerns were briefly overcome last week when Brent climbed 5% and US crude surged almost 10%, its strongest week since 2016, after Iran shot down a US drone, adding to tensions stoked by previous attacks on oil tankers in the area.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies including Russia appear likely to extend a deal on curbing output when they meet on July 1-2.

As you know, rising crude oil prices have a big impact on the Indian economy as it imports over 70% of its energy needs.

Rise in crude oil increases input costs for dependent firms. It also means rising inflation. Rising inflation means rising interest rates.

It also puts pressure on the government to cut excise duty, thereby impacting its revenues. We have already seen that happening.

Research Analyst, Richa Agarwal believes that this has the potential to bring down sentiments in the domestic markets. She further believes that, if oil prices continue their upward march in a tight global environment, a broader correction in the sentiment fueled domestic market cannot be ruled out.

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