Dull End to the Week; IDFC Bank Gains on Merger News
Closing

Indian share markets continued to trade rangebound in the afternoon session amid weak global markets. At the closing bell, the BSE Sensex stood lower by 9 points, while the NSE Nifty finished down by 9 points. Meanwhile, the S&P BSE Mid Cap finished flat & the S&P BSE Small Cap finished up by 0.3%. Gains were largely seen in realty stocks, pharma stocks, and energy stocks. While, software stocks and automobile stocks finished in red.

Bharat Forge share price rose 0.8% after the company's subsidiary signed pact with Israel's Aerospace Industries to build new maintenance center in India for selected advanced air defence systems. The two companies have also agreed on expanding their joint operations for development, manufacturing and marketing of precise ammunition systems.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.17%, while the Hang Seng & the Nikkei 225 fell 0.49% and 0.32% respectively. European markets are lower today with shares in France off the most. The CAC 40 is down 0.35% while Germany's DAX is off 0.22% and London's FTSE 100 is lower by 0.18%.

The rupee was trading at Rs 64.73 against the US$ in the afternoon session. Oil prices were trading at US$ 44.38 at the time of writing.

In news from IPO space, amidst a strong initial public offer (IPO) pipeline along with a favourable capital markets environment, the IPO financing market is expected to remain buoyant during the current financial year 2017-18.

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According to the credit rating agency, ICRA's latest report, the present, average size of the IPO financing market which is around Rs 175 billion to Rs 225 billion per issuance, could rise to Rs 650 to 700 billion for issuances which are a large as well as with higher investor interest.

The credit rating agency further said that in the previous financial year, the IPO financing market remained vibrant on surge in high net worth individual (HNI) interest in IPOs to take benefit on the listing gains. The median subscription level for the non-institutional investor, which include HNI investors, category stood at 80 times for the IPOs in FY17, as against 2 times for FY16.

The report also noted that the field is dominated by non-banking financial company (NBFC) arms of some of the leading players in the capital markets and wealth management businesses. Its analysis of the issuances during the period from April 2016 to June 2017 shows that out of the total of 31 issuances, 24 issuances were listed at a premium, with median listing gains of 14%.

IPO Frenzy Continues

As per The Economic Times, at least fifty more companies are likely to come out with IPOs this year, raising between Rs 400 and Rs 600 billion. To put that in perspective, in 2007-08, 84 companies raised Rs 410 billion via IPOs.

The markets were buoyant then too, trading at an average PE of 21 times. Today, the Sensex PE is 23 times.

Moving on to news from the banking sector. IDFC bank share price was up 2.2% in today's trade after it was reported Shriram Capital and IDFC Bank are set to begin 90 days of exclusive negotiations next week for an all-stock merger that could create a Rs 600 billion financial powerhouse, with both groups filling gaps in each other's businesses.

As per an article in The Business Standard, the merger with Shriram Capital will help the IDFC group to meet its financial inclusion targets and increase its retail portfolio. IDFC Bank's loan portfolio is made up predominantly of corporate and infrastructure advances.

With problems in the infrastructure sector and tepid demand for corporate credit, the bank has been aggressively looking at the retail and SME (small and medium enterprises) segments to expand business.

Meanwhile, RBL bank share price recovered in the afternoon session to finish up by 0.4%. The bank said that the divergence between its own gross bad loan estimates and those made by the RBI stood at Rs 3.39 billion at the end of 2015-16.

RBL Bank's gross non-performing assets (NPAs) as assessed by the RBI stood at Rs 5.47 billion for 2015-16, the bank said in its annual report. It had reported gross NPAs of Rs 2.08 billion as on 31 March 2016.

In news from airlines stocks, Interglobe Aviation (Indigo) share price finished the trading day on an optimistic note (up 1.1%) the company clarified that it only interested in taking over the international operations of national carrier Air India if the arrangement doesn't involve the government holding on to any stake in the airline.

The airline's interest in acquiring a stake in Air India arose out of its plans to operate low-cost long-haul flights out of India.

And here's a note from Profit Hunter:

The Nifty 50 Index ended the week on a strong note. On Monday, it opened the weekly session with 67 points gap up and continue to trade in an uptrend throughout the week. Finally, on Friday, the index witnessed minor profit booking on back of weak trends in global markets. The index ended the week with 1.46% gains.

Last week, the index closed below its 20-day exponential moving average (EMA), which was acting as a good support since January 2017. The RSI indicator had also slipped below its 50 level, which offered support during declines.

But the bulls did not give up as the index regained strength by closing above its 20 EMA and RSI again trading in its bullish territory above 50.

But the 9,700 level is now acting as a resistance for the index. It slipped twice from this level in month of June and this week also the index corrected after hitting a high of 9,700. We also observed highest open interest built-up in 9,700 strike, which means that this level will offer a strong resistance as indicated in our rollover report.

So will the bulls be able to push the index above 9,700 level to make a fresh high? Let's wait and watch...

The 9,700 Level - Hurdle in Near-Term
The 9,700 Level - Hurdle in Near-Term


Indian Indices Trade on a Flat Note; IT Stocks Witness Selling
01:30 pm

Share markets in India are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the healthcare sector and realty sector witnessing maximum buying interest. IT stocks are trading in the red.

The BSE Sensex is trading down 41 points (down 0.1%) and the NSE Nifty is trading down by 16 points (down 0.2%). The BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 64.70 to the US$.

The Fitch group company, BMI Research in its latest report has said that Indian economy may recover in the coming quarters and is likely to log a real Gross Domestic Product (GDP) growth of 6.9% in fiscal year 2017-18, though it also noted that real GDP growth slowed substantially to 6.1% year-on-year in Q4FY17.

As per the report, India's growth is expected to pick up after the impact of 2016 November's demonetisation drive, but debt-laden state-run banks will likely stop the recovery before its full potential.

BMI Research has said that the negative effects from the demonetisation measure is already wearing off, and the Indian economy will likely benefit from positive demographic trends, greater external stability (due to improved terms of trade from lower oil prices), and continued reforms that should help to improve the country's admittedly poor business environment.

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The report however stated that the public-sector banks are still weak and plagued with mounting non-performing assets (NPAs), and it is likely to weigh on India's growth potential. It further added that despite the Reserve Bank of India's efforts to clean up these bad loans, these will likely take some time to be worked through the system, and therefore, credit allocation to the productive sectors of the economy is likely to be negatively affected.

Public sector banks have been in the spotlight but for all the wrong reasons. A deadly combination of rising provision on surging bad loans and sluggish interest income growth on poor credit offtake have severely crippled the earnings of state-run banks. Even their balance sheets have considerably weakened by the mounting bad loans burden. But most of their stocks have defied gravity.

Soaring Stocks...Eroding Balance Sheets

The bad loans of these banks have shot up to alarming proportions such that out of every Rs 100 lent out by them a minimum of Rs 10 has gone bad.

In the news from commodity markets, gold is witnessing selling pressure today.

The commodity traded on a negative note during the week. It opened its session lower during the start of the week ahead of the Fed minutes. Also, the volatility seen in global markets weighed on the metal during the end of the week.

To keep a tab on the movements in gold, silver and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.


Indian Indices Trade Marginally Lower; Banking Stocks Witness Selling
11:30 am

Share markets in India are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the healthcare sector and realty sector witnessing maximum buying interest. Banking stocks are trading in the red.

The BSE Sensex is trading down 59 points (down 0.2%) and the NSE Nifty is trading down by 20 points (down 0.2%). The BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 64.73 to the US$.

The European Central Bank (ECB) released the minutes of their latest meeting on Thursday. As per the minutes, ECB policymakers are open to a further step toward reducing their monetary stimulus. However, they are likely to move slowly on this decision out of fear of causing market turmoil.

With inflation in the euro zone slowly rebounding, the ECB is preparing to dial back its stimulus policy of ultra-low rates and massive bond purchases. However, doing so would be a challenge for the ECB after years of easy money policies.

Last month, the ECB kept interest rates unchanged in its monetary policy meet. President Mario Draghi said the ECB governing council is not convinced that the recent rebound in inflation in the eurozone is durable because wage growth remains sluggish.

Meanwhile, the bank affirmed that it intends to run its monthly net asset purchases of 60 billion euros until the end of December 2017, or beyond, if necessary.

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However, the bank did not mention the possibility of further interest rate cuts. This may indicate the ECB aims to end its ultra-easy monetary policy.

The ECB has been pouring money into the eurozone to boost inflation from a near-deflationary level.

Most of the economic problems we see today are fueled by the easy money policies that central banks have adopted around the world. However, with the changes happening at central banks of late, it seems that the end of easy money is near.

In other news from currency markets, the dollar is witnessing buying interest against the rupee. This is seen ahead of the US employment data to be released today.

Gains for dollar were also seen on the back of higher US Treasury yields which rose this week amid concerns that the US Federal Reserve will begin unwinding its bond holding programme sometime this year.

Dollar Inches Upwards

While the above gains come as a respite for the dollar, one must note that the rupee has gained 6% so far this year. Most of these gains came as the dollar fell on the back of political turmoil surrounding US President Donald Trump.

On must note that the appreciation in the rupee comes as a welcome breather for importers in India. A softer rupee helps importers to buy goods and services at a cheaper rate that earlier. This is vital for a developing economy that relies heavily on imports. This bodes well for the Indian economy as higher imports normally mean increased economic activity.

But on the other hand, the rise in rupee can spell trouble for exporters. The exporters are at a disadvantage owing to the currency appreciation as this renders their produce expensive in the international markets as compared to other competing nations whose currencies haven't appreciated on a similar scale. This tends to take away a part of the advantage from Indian companies, which they enjoy due to their cost competitiveness.

Nonetheless, a stronger rupee will pull down commodity prices. This will help in keeping a tab on the rising inflation.

While there are advantages as well as disadvantages of a rising rupee, one needs to understand whether the rise in the rupee is sustainable to derive any reasonable conclusion at this stage.

For one, the weakness of the US dollar is largely due to the relative unattractiveness of US assets. This is in part due to a very low interest rate regime prevalent in the US economy. Already there are indications that this low interest rate regime may not be sustainable for long. This means that US interest rates may go up and this may likely strengthen the US dollar.

To keep a tab on the movements in rupee-dollar and other currencies, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.


Sensex Opens on a Cautious Note; FMCG & IT Stocks Top Losers
09:30 am

Asian equity markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.26% while the Hang Seng is down 0.41%. The Nikkei 225 is trading down by 0.14%. The Wall Street ended lower on Thursday after disappointing labor market data clashed with the possibility of a more hawkish Federal Reserve.

Meanwhile, share markets in India have opened the day on a flattish note. The BSE Sensex is trading lower by 32 points while the NSE Nifty is trading lower by 9 points. The BSE Mid Cap Index and BSE Small Cap index both opened the day up by 0.2%.

Sectoral indices have opened the day on a mixed note with power stocks and healthcare stocks leading the gains. While, FMCG stocks and information technology stocks are trading in red. The rupee is trading at 64.78 to the US$.

Telecom stocks opened the day on a mixed note with Bharti Infratel and AGC Networks leading the losses. As per an article in The Economic Times, the Tata Group and Bharti Enterprises have held exploratory talks to evaluate a mega alliance involving their telecom, overseas cable and enterprise services, and direct-to-home TV businesses.

Apparently, Bharti Airtel is mulling a merger with unlisted Tata Teleservices and Tata Sky and the listed Tata Communications.

Reportedly, if the alliance does fructify, it will consolidate the Indian telecom market still further, and narrow the field down to three main players: Idea-Vodafone, Reliance Jio, and the Airtel-Tata combine.

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The merger will enable Bharti Airtel, the bigger partner in the alliance, to close the gap between Idea-Vodafone both in terms of numbers of subscribers as well as revenue market share.

For the Tatas, the merger will provide an opportunity to fold their loss-making telecom business into a bigger company and become minority investors.

In addition, the merger will form a stronger enterprise player with a large optic-fibre network. The Tata-Bharti combine would also become a dominant leader in the DTH space.

Bharti Airtel share price began trading up by 0.8% on the BSE.

Moving on to the news from the IPO space. As per an article in a leading financial daily, the insurance regulator has approved SBI Life Insurance Co. Ltd's application for an initial public offering (IPO) seeking to raise as much as Rs 70 billion.

SBI Life will be the second insurer after ICICI Prudential Life Insurance Co. Ltd to sell shares to the public in India. Last year, ICICI Prudential sold shares worth Rs 60.57 billion through an IPO and became the first insurance company to get listed. At the time of listing, ICICI Prudential was valued at Rs 480 billion.

SBI Life is a joint venture between State Bank of India (SBI) and BNP Paribas Cardif. SBI holds 70.1% and BNP Paribas Cardiff 26%. Private equity firm KKR and Singapore-government owned investment company Temasek hold 1.95% each in the life insurer.

SBI is likely to dilute around 8% and BNP Paribas Cardif, along with the others, the reports noted.

The insurance sector in India is set to grow leaps and bounds, with FDI caps being liberalised and FIPB approvals for foreign investment also done away with. It is only a matter of time that this sector will witness a flurry of M&A activities which will require the regulator to act swiftly and proactively as far as matters such as approval are concerned, the reports noted.

Our big-picture editor, Vivek Kaul, recently penned a pertinent report on entire insurance industry. We strongly recommend you go through the full report on what's really happening in the insurance industry in India...and how it affects you. If you have not accessed Vivek Kaul's Letter yet, sign up here.

By the way, we have also prepared a guide to help you understand the valuation of insurance businesses.

Are IPOs a Sure Shot Way to Make Money?

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France's Sovereign Debt, India-Sino Dispute and Stocks to Watch Out Today
Pre-Open

Share markets in India closed the Thursday session on a positive note on the back of strong recovery in PSU banks. Hopes of positive quarterly earnings and -free roll-out of the goods and services tax (GST) also lifted sentiment.

The Nifty ended above 9650-mark after clocking 9700 during the day's trade. The Sensex closed up 124 points.

State Bank of India, ITC, and Bharti Infratel gained the most, while Bajaj Auto, Mahindra and Mahindra and Hindalco lost the most.

Global Markets Adrift Amid Uncertainty

Asian stocks fell broadly on Thursday as minutes from the Federal Reserve's last meeting showed a lack of consensus among members over when to start reducing the Fed's securities portfolio.

Meanwhile, the 30-year Japanese government bond (JGB) yield rose to 0.893%, its highest level since February 23, with Reuters attributing the move to increased expectations that the European Central Bank (ECB), the Fed and other central banks will be tightening policy.

That would make those country's bond yields more attractive to investors than the lower-yielding JGBs. Bond yields move inversely to prices. Oil prices rose after slumping about 4%.

In another development, as per the Bank of France governor Mr. Villeroy de Galhau, France would face a "sovereign debt shock" by not regaining control over its public debt before interest rates increase sharply.

He urged the French president to comply with the European Union's deficit ceiling of 3% of economic output, deferring tax cuts if necessary. If France can't repair its finances it will face a competitiveness shock with higher overheads than its European peers.

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Sino-India Border Dispute...

As per an article in The Economic Times, China-India trade cooperation has deepened over the years and the bilateral trade has grown 24 times in 15 years. China has emerged as one of the fastest-growing sources of Foreign Direct Investment (FDI) into India.

A number of Chinese companies are setting up manufacturing units in India. It is India that depends on China in the trade equation-India's trade deficit with China has risen to US$ 46.56 billion. China's exports to India account for only 2% of its total exports.

Yet, no one can deny India offers China a promising market. An armed conflict will threaten trade ties. Maybe that's why China stopped Indian pilgrims from visiting Mansarovar but not trade through Nathu-la. China stopping the trade route might have invited a similar Indian response.

From the Banking Sector...

The Nifty PSU bank index surged as much as 2.8%, in the previous session. Bank stocks had fallen in June, snapping a 5-month winning run, amid worries about provisioning levels at a time when the sector is starting bankruptcy proceedings against 12 of the country's largest loan defaulters.

As per an article in The Economic times, open interest in the Bank Nifty is near the lowest level since early February and that a fall below the 23,000-mark could lead to the rate-sensitive index falling sharply owing to concerns that asset quality woes will continue to dent their earnings in the current financial year.

The Bank Nifty index has gained 28.5% since the beginning of this year, outperforming the benchmark Nifty's 17.7% gain during the period. Among individual stocks, banks have gained up to 78% this year, with DCB Bank gaining the most.

Top Cues in Action Today...

On the energy stocks front, market participants are expected to keep an eye out for HPCL-ONGC merger. As per a leading financial daily, the Divestment Department has issued a Cabinet note on merger of HPCL with ONGC.

An in-principle approval will be taken for 51% stake sale in HPCL to ONGC. The nod will be taken in order to hand over HPCL's management control to ONGC and this divestment could be done through a strategic sale. A core group of secretaries approved the divestment in HPCL on June 20, the report added.

Meanwhile, Zydus Cadila and Phibro Animal Health Corporation have announced their intention to enter into a long-term arrangement to license Phibro's innovative poultry vaccine technologies and know-how to a new vaccine manufacturing facility.

Lately, pharmaceutical companies have been facing a surfeit of problems in the largest generic market, the US. Rising competition and consolidation in the distribution channel have led to price erosion and delayed approvals for them.

Once considered a safe haven for investors has been on a steady decline over the past two years. But just like IT, there are interesting, niche pharma stocks that are worth your attention.

So, what is key to identifying potential multibagger stocks? How does one pick them at the right time and ride them to their full potential? How many multibaggers do you really need to achieve the big riches that you desire?

Most importantly, are there any stocks right now that could turn out to be multibaggers? Click here to know everything that you need to know right now about mutlibagger stocks...