Sensex Ends Marginally Lower; Software Stocks Fall on Muted Results
Closing

Indian share markets finished marginally lower in the afternoon session. At the closing bell, the BSE Sensex stood lower by 17 points, while the NSE Nifty finished down by 5 points. Meanwhile, the S&P BSE Mid Cap finished up by 0.2% & the S&P BSE Small Cap finished down by 0.4%. Gains were largely seen in PSU stocks, pharma stocks, and energy stocks while, software stocks finished in red.

Infosys share price rose in morning trade before finishing down by 0.4% after the company reported better than expected earnings. The company reported 3.3% quarter-on-quarter (QoQ) in June quarter net profit at Rs 34.83 billion.

The company also maintained its full-year revenue guidance.

Meanwhile, TCS share price fell 1.9% after it reported muted earnings. The company reported sequential dollar revenue growth of just 2% in a seasonally strong quarter, and its margins fell by 240 basis points.

Asian stock markets finished higher today with shares in Hong Kong leading the region. The Hang Seng is up 0.16% while China's Shanghai Composite is up 0.13% and Japan's Nikkei 225 is up 0.09%. European markets are mixed to lower. Shares in London are off as the FTSE 100 drops 0.23%. The DAX is down 0.07% while the CAC 40 in France is unchanged.

The rupee was trading at Rs 64.45 against the US$ in the afternoon session. Oil prices were trading at US$ 46.30 at the time of writing.

In news from IPO space, the initial public offer of infrastructure firm Salasar Techno Engineering was oversubscribed 5.07 times on the second day of bidding.

The IPO, which will close on 17 July, received bids for 16,852,375 shares against the total issue size of 3,321,000 shares, data available with the NSE showed.

Proceeds from the issue will be utilized for meeting working capital requirements and general corporate purposes. Salasar Techno provides customised steel fabrication solutions in the domestic market.

IPO Frenzy Continues

It's raining IPOs. Fund raising for the year has crossed Rs 100 billion mark. That's only happened twice before!

Buoyancy in the markets has given fundraising a boost. Positive sentiments have attracted investors in hordes. And retail investors are active like never before, taking oversubscription to insane levels. With issues like Avenue Supermarts (DMart) and CDSL , oversubscription of 100 times or more seems to be the new norm.

And this might just be the beginning. 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.

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In another development, India Ratings (Ind-Ra) has said that growth of coal consumption in India may remain tepid as plant load factor of thermal power plants (PLF) is likely to drop in the current fiscal. It has estimated that prices for the benchmark Newcastle coal with 5,500 calories of energy value will hover between US$ 50 per tonne and US$ 60 per tonne between 2018 and 2022.

The rating agency further said that given domestic coal availability likely to increase, thermal coal imports may decline by 15-20 million tonnes annually over the next two-three years and government policies in large seaborne trade participants and persistent substitution to renewable energy are likely to have a significant influence on coal prices.

Ind-Ra believes investment in new coal projects is likely to remain subdued globally due to gloomy long-term demand prospects. Many top global suppliers may not invest in raising output, creating a strong floor for prices. It also pointed that higher-than-expected volume ramp-ups by large global miners and proliferation of renewables, major downward revision in royalties or taxes, and major decline in global economic activity may pose a downside risk to assumed prices.

Mining stocks finished the trading day in red with Coal India share price and GMDC share price leading the losses.

Moving on to news from pharma stocks. Cipla and Swiss giant Novartis are reportedly in preliminary talks to jointly market asthma drug Xolair, just months after they ended a legal battle over another respiratory drug. Xolair (Omalizumab) is an injectable prescription medicine used to treat moderate to severe persistent asthma in patients whose symptoms are not controlled by inhaled corticosteroids.

Cipla lost its battle with Novartis in March, when the Delhi High Court stayed the company's request to sell copies of Novartis respiratory brand Onbrez (indacaterol).

Cipla share price finished the day up by 1% on the BSE.

Meanwhile, Biocon Ltd share price rose 8.9% after the company said FDA Oncologic DAC Favors Nod for Proposed Biosimilar. FDA Oncologic Drugs Advisory Committee unanimously recommends approval of Mylan and Biocon's proposed biosimilar Trastuzumab.

And here's a note from Profit Hunter:

The Nifty 50 Index ended the week on a strong note. On Monday, it opened with 53-point gap up and continued to trade in an uptrend throughout the week. On Friday, the index witnessed minor profit booking and ended the week with 2.28% gains.

Last week, we mentioned the index was regaining strength as it closed above its 20-day exponential moving average (EMA) and the RSI indicator was again trading in bullish territory above 50. The index also broke above the 9,700 level, which was acting as a strong resistance since early June.

In the coming week, the 9,700 level might offer good support as per the change of polarity principle (previous resistance now support). The 20 EMA (which is also placed at 9,700) might act as a support on reactions if any.

Nifty 50 Index Surged 2.30% for the Week
Nifty 50 Index Surged 2.30% for the Week 


Sensex Down 37 Points; Infosys Up on Q1 Results
01:30 pm

Indian share markets continue to trade near the dotted line during the noon session. Pharma stocks and bank stocks witnessed majority of the buying momentum. Software stocks and FMCG stocks traded in red.

The BSE Sensex is trading lower by 37 points and the NSE Nifty is trading lower by 18 points. Meanwhile, the BSE Mid Cap index is up by 0.2% & the BSE Small Cap index is down by 0.3%. The rupee is trading at 64.43 to the US$.

Infosys share price was trading up by 1.3% in noon session after the company reported 3.33% quarter-on-quarter (QoQ) in June quarter net profit at Rs 34.83 billion, which was above the Rs 34.29 billion street profit estimates.

The company also raised its full-year revenue guidance, halting a streak of three consecutive quarters when the company was forced to slash its revenue growth outlook.

For the 2017-18 financial year, Infosys said it expects to grow revenues at 7.1-9.1%, up from the 6.1-8.1% range it had forecast in April. Infosys maintained its constant-currency revenue forecast of 6.5-8.5%. For the June quarter, Infosys's dollar revenue came in at US$2.65 billion, growing 6% from last year.

Meanwhile, TCS share price was down 2% after the company posted 10% QoQ drop in June quarter net profit at Rs 59.50 billion, which was substantially below the Rs 62.03 billion profit estimate projected. This is the biggest drop in quarterly profit in two years.

As per an article in the Livemint, TCS is in a rut, with growth slowing almost every passing quarter. With market conditions being really unfavourable, the company desperately needs some imaginative leadership to get out of this rut.

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Moving on to news from pharma sector. Biocon share price surged over 8.9% on the reports that the US Food and Drug Administration's (USFDA) oncology drugs advisory committee had recommended approval of their biosimilar trastuzumab, indicated for treatment of breast cancer.

Reportedly, Mylan and Biocon are exclusive partners on a broad portfolio of biosimilar and insulin products. The proposed biosimilar trastuzumab is one of the six biologic products co-developed by Mylan and Biocon for the global marketplace.

Further, no clinically meaningful differences existed between the biosimilar product and Roche Holding AG's innovation drug Herceptin.

The company also sees market opportunity for the biosimilar in emerging markets to be around US$ 1 billion. Herceptin, on the other hand, has an overall market size of US$ 2.6 billion in the US.

Notably, Biosimilars and Biologics are burgeoning sectors in 2017 also major scientific and technological advances, coupled with socio-demographic changes and increasing demand for medicines will revive the pharma industry's fortunes in another 10 to 20 years. But given the complexity of biologics, will Indian companies be able to break some ground in this space? (Subscription Required) One of our premium edition of The 5 Minute Wrapup offers a view on the same.

Moreover, according to a report by The Hindu Business Line, in spite of the prevailing challenges in the Indian pharma sector is expected to grow up to 45% by 2025 and 58,000 additional job opportunities are likely to be created in the industry.

Expediting Drug Approval Process to be a Positive for Industry

USFDA alerts on Indian pharma companies have increased over the past few years. Regulators used to visit the plants every two years. Now they come every eight months. Increasing inspections has led to a total of 41 import alerts in the past eight years - 33 of them (80%) in just the last four years (2013-16). This clearly signifies increased USFDA scrutiny on Indian pharma firms. If that wasn't enough, increasing pricing pressure in the generics segment has dented realizations.

In this dull scenario, there appears to be some respite as the USFDA has expedited the drug approval process. Drug approvals for Indian companies have gone up 50% in the period from January to June 2017 compared to the same period last year.

In the latest issue of The India Letter (subscription required), we have identified a pharma stock which we believe will outlast others in the long run.


Indian Indices Trade Flat; Realty 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 capital goods sector and realty sector witnessing maximum selling pressure. Healthcare stocks are trading in the green.

The BSE Sensex is trading down 93 points (down 0.3%) and the NSE Nifty is trading down by 29 points (down 0.3%). The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading down by 0.7%. The rupee is trading at 64.46 to the US$.

As per a leading financial daily, Prime Minister Narendra Modi is going to hold a high-profile meeting to review India's foreign direct investment (FDI) policy today. The meeting is aimed at boosting fund inflow and job creation in India and also discuss further easing of restrictions.

Earlier, last month, the government had decided to clear all FDI proposals requiring approval. It stated that proposals will be approved within a maximum of 10 weeks after the receipt of an application as per the standard operation procedure which replaces Foreign Investment Promotion Board (FIPB), which is abolished by the government.

The above measures by the government are aimed at improving investment climate in India.

Foreign Direct Investments (FDI) plays an important role in the economic development of a country. It is a source of long term capital that helps build critical infrastructures in the economy. It also aids in technology knowledge transfers, fosters innovation and helps raise productivity too. In short, having a steady flow of FDI inflows would help India to achieve necessary investments that will help accelerate economic growth and development.

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Since 2014, the Modi led government has laid a great emphasis on welcoming global best practices to be employed in India.

The government began this with the launch of 'Make in India' initiative in September 2014. Further, the government has carried out FDI reforms in sectors like rail infrastructure, defence and in financial sector, medical devices and construction sectors etc.

In addition, initiatives such as introduction of composite caps in the FDI policy and raising the FIPB approval limit were also undertaken to promote ease of doing business in the country.

These measures, coupled with the above initiatives, have meant a rise in FDI in India during FY17. This can be seen from the chart below:

Rising Foreign Direct Investments Augurs Well for India

FY17 saw the highest inflows at US $60 billion in the past four years. It will be crucial for the country going forward to maintain this momentum of inflows to help drive the economic development of the Indian economy.

In the news from IPO markets, the initial public offer of Salasar Techno Engineering was oversubscribed 5.07 times yesterday - the second day of bidding.

The issue is going to follow fixed price IPO wherein the issue price is fixed at Rs 108 per share. The company is raising funds to meet the working capital requirements of the company including margin money, for general corporate purpose and to meet the issue expenses.

Apart from the above, SBI Life Insurance Company is also set to come up with an IPO as the insurance regulator IRDA has approved the company's application this week.

The company would be another major insurer to hit the IPO market after ICICI Prudential Life Insurance Co. Ltd.

The company may be looking to raise in the region of Rs 70 billion by selling about a 12% stake, making it the largest such share sale by a life insurer in India. Note that SBI Life is a joint venture between State Bank of India (SBI) and BNP Paribas Cardif with the former owning a majority 70% stake and the later 26%.

It remains to be seen how the issue is priced, more so in light of the market expecting brisk growth from the company. And considering that the insurance business is quite a different beast compared to most other companies, valuation tends to be a tricky affair.

To understand this terrain, you may want to download our report - Handbook of IPO investing, which has a special section on valuation of insurance companies. This will help you demystify the complexities of the industry before you attempt to invest in insurance IPOs.


Sensex Opens Marginally Down; TCS Results Disappoint
09:30 am

Asian equity markets are mixed today. The Nikkei 225 is up 0.22%, while the Hang Seng is up 0.01%. The Shanghai Composite is trading down by 0.20%. US markets ended higher and the Dow another record high close, with financials rising ahead of profit reports due Friday from several big US banks.

Back home, share markets in India have opened the day on a flat note with a negative bias. The BSE Sensex is trading lower by 31 points while the NSE Nifty is trading lower by 8 points. The BSE Mid Cap Index and BSE Small Cap index opened the day up by 0.2% & 0.3% respectively.

Sectoral indices have opened the day on a mixed note with healthcare stocks and consumer durables stocks leading the pack of gainers. While FMCG and realty stocks have opened the day in red. The rupee is trading at 64.44 to the US$.

IT stocks opened the day on a mixed note with Moser Baer India and Mphasis Ltd leading the losses. TCS share price fell over 2.3% after the IT major posted 10% quarter-on-quarter (QoQ) drop in June quarter net profit at Rs 59.50 billion, which was substantially below the Rs 62.03 billion profit estimate projected. This is the biggest drop in quarterly profit in two years.

On a year-on-year (YoY) basis, PAT slipped 5.8% for the quarter in rupee terms. The company said the impact of the wage hike on Q1 profitability was 150 basis points.

The double whammy of wage hike and a stronger rupee shaved off the IT giant's operating margins by 2.3% points to 23.4, missing the 26-28% target.

Revenue from the digital stream grew 26% to constitute 18.9% of the total pie and the company is currently doing US$ 3.5 billion per year on the front.

On the employee front, TCS' headcount came down by over 1,400 to 0.39 million over the past three months, but as per the company, there have not been any layoffs unlike at some of its peers such as Wipro, Tech Mahindra and others.

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However, as per an article in the Livemint, TCS is in a rut, with growth slowing almost every passing quarter. With market conditions being really unfavourable, the company desperately needs some imaginative leadership to get out of this rut.

Moving on to the news from the pharma sector. As per an article in The Economic Times, Cipla and Novartis are in early-stage discussions to jointly market asthma drug Xolair, just months after they ended a legal battle over another respiratory drug.

Xolair (omalizumab) is an injectable prescription medicine used to treat moderate to severe persistent asthma in patients whose symptoms are not controlled by inhaled corticosteroids.

One must note that Cipla lost its battle with Novartis in March, when the Delhi High Court stayed the company's request to sell copies of Novartis respiratory brand Onbrez (indacaterol).

Cipla had been battling Novartis since 2014 over selling its generic version of the drug to cater to what it said was an unmet need.

Novartis has been looking at licensing out its respiratory portfolio, which has lost the sheen globally in the past few years.

Meanwhile, Indian generic drug makers such as Lupin, Cipla, Zydus Cadila and Sun Pharmaceutical Industries are also eyeing the respiratory drug portfolio that the Swiss giant is seeking to divest.

Merger and acquisition activity in India is on a high. The value of M&As that have taken place this year - at US$ 69.75 billion - is the highest on record for the country. This even beats the previous record of US$ 66.96 billion set in 2007.

Indian M&A activity at an All Time High in 2016

Especially, the M&A activity in the Indian pharma space has been on the rise in recent times. At the end of the day, whether the company is able to derive value from the acquisitions and augment the overall performance will be the key thing to watch out for.

To know more about the company's financial performance, subscribers can access to Cipla's latest result analysis and Cipla stock analysis on our website.

Cipla share price opened the day up by 0.1%.


TCS Misses Street Estimates, US Inflation Data & Stocks to Watch Out Today
Pre-Open

The Sensex on Thursday achieved another important peak as it moved above the important psychological level of 32,000 and Nifty moved closer to 9,900.

The recent rally in the stock markets is triggered by forecast of above average monsoon rains, cooling inflation, which fell to its lowest level in over 5 years. Meanwhile, the sentiment was also boosted by a rally in global markets.

The top gaining sectoral indices on the BSE were FMCG sector up by 1.7%, Capital Goods sector up by 1.1%, while Oil & Gas was down by 0.30%, the only losing index on BSE.

TCS Kickstarts the Earnings Season

TCS share price will be in focus today as the IT major announced its June quarter results yesterday. TCS reported the biggest sequential profit decline in the last two years, missing street expectations due to a stronger rupee.

The information technology giant saw profit slid 10% sequentially to Rs 5,945 crore in the April-June period. Revenue growth remained muted as it declined 0.2% quarter-on-quarter to Rs 295.8 billion. Revenue in dollar terms, however, grew 3.1% to $4.6 billion.

Stay tuned to the 9.30 am market commentary to get a detailed view on this story.

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Top Cues in Action Today

Infosys share price will be in focus today as the IT major will announce the results for its first quarter ended 30 June 2017 today.

Cement stocks are expected to open in green today on account of domestic brokerage report that average cement prices are expected to rise by 6% Y-o-Y and 7% on Q-o-Q basis across the country despite volume decline in the southern and central regions.

Meanwhile, NMDC has reported 8.52 million tonnes (MT) of iron ore production and logged sales volume of 9.21 MT up to the month of June 2017. The company's Chhattisgarh mines produced 5.51 MT of iron ore and registered sales volume of 5.81 MT, while Karnataka mines produced 3.01 MT of iron ore and sold 3.40 MT of iron ore up to June 2017.

Blue Star announced the entry into Sri Lanka market by partnering with Comfort Solutions as the official distributor for air conditioners, water coolers, deep freezers, bottled water dispensers and ice cube machines.

Tata steel share price may hog limelight today as the deal was struck to clear its UK pension liabilities. This move helped the company take forward its merger talks with a German-based company.

Meanwhile, Tata Steel has commissioned a mine air cooling system, first of its kind in the Eastern India, at its Digwadih colliery in Dhanbad district to rescue the miners working in a depth of more than 400 meters.

Yellen's Inflation Concern

Asian stock markets mostly surged on Thursday, extending a global rally that saw another record on Wall Street after the head of the Federal Reserve indicated it would take a gradual approach to raising US interest rates.

In closely watched testimony to Congress, Janet Yellen said the central bank would keep lifting borrowing costs as long as the world's top economy showed improvement, taking into account inflation remained below its two percent target.

Meanwhile, economists polled by Reuters expect the June core CPI figure to have risen 0.2% month-on-month, from a gain of 0.1% the previous month.

But, why should we in India be worried about which way the American economy and interest rates are headed? As Vivek writes in The Vivek Kaul Letter:

  • "The answer is simple. The United States still forms around one-fourth of the global gross domestic product(GDP). It remains the largest consumer in the world. And any global recovery isn't going to happen, without the American economy finding its way back to where it was during its heydays or somewhere close to it."

Crude Prices to Be Under Pressure as Global Oil Producers Increase Supply

The latest IEA report on how the oil market performed in June has been released. It found that crude output rose by 720 million barrels a day in June across the world.

Output increased 340 million barrels a day in OPEC countries. Meanwhile, oil prices dropped on average US$3 to US$4 per barrel in June.