Sensex Surges 200 Points; 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 in green. Sectoral indices too ended the day in green, with stocks in the energy sector and stocks in the PSU sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 196 points (up 0.5%) and the NSE Nifty closed up by 71 points (up 0.7%). The BSE Mid Cap index ended the day up 2.1%, while the BSE Small Cap index ended the day up by 1.1%.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was down by 1.3% and the Shanghai Composite was down by 0.6%. The Nikkei 225 was up by 0.4%. Meanwhile, European markets were trading on a positive note. The FTSE 100 was down by 0.2%, The DAX, was down by 0.1% while the CAC 40 was down by 0.2%.

The rupee was trading at Rs 68.41 against the US$ in the afternoon session. Oil prices were trading at US$ 71.6 at the time of writing.

Moving on to news from stocks in the banking sector. IDBI Bank share price is in focus today after the Life Insurance Corporation of India's (LIC) board approved the deal for the buyout of the state-owned IDBI Bank Ltd.

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------------------------------

The LIC board approved the acquisition of up to 51% stake in IDBI Bank.

The government owns over 81% stake in IDBI Bank, while LIC already holds a 7.98% stake in IDBI Bank as of end June this year; the latest approval will enable it to acquire another 43% stake in the bank.

A stake sale of 40-43% in the lender could net the government over Rs 100-110 billion.

Notably, the government had announced that it would bring its stake in IDBI Bank below 50% in the Union Budget 2016.

The IDBI Bank board is scheduled to meet soon to draw capital raising plan for the next five years.

IDBI Bank share price ended the day up by 3.1%.

LIC - The Default Bad Bank?

Ask an average Indian investor about the next best thing after safe bank deposits. I can bet they would tell you about LIC policies. For generations Indians have treasured LIC policies in their safe deposit lockers like their gold and fixed deposit receipts.

Life Insurance Corp. of India (LIC) meanwhile, has been acting like the government's ATM for years. It has bailed out public issues of scores of PSUs. And helped the government milk by buying a majority stake in several state-owned lenders. The latest attempt to bail out the troubled IDBI Bank is a classic case of the state insurer buying toxic assets.

In fact, given the high stakes that LIC owns in the most troubled banks, the government needn't even consider the proposal of setting up a 'Bad Bank'. It could just turn LIC into one. At least then the investors owning investments in LIC policies, would know the real risk they carry.

Moving on to news from stocks in the steel sector. Tata Steel share price was among the top gainers in the market today after it was reported that the company is planning to raise overseas loans.

Tata Steel is planning to raise as much as US$3.1 billion via overseas loans to repay existing high-cost debt ahead of the merger of its European operations with German steel giant Thyssenkrupp.

The new facilities will replace the existing debt held by its European businesses. Once completed, this could be one of the largest refinancing program by a corporate this year to drastically cut down borrowing costs.

According to reports, the new plan will substantially reduce debt burden on Tata Steel's consolidated operations. The new debt will be cheaper by 30-40 basis points from the current level.

Tata Steel, which has about US$8 billion debt under its European operations, has already agreed to transfer two-thirds of the same to the joint venture with Thyssenkrupp. The remaining high-cost debt will be replaced with the new facilities.

Notably, Tata Steel raised US$1.3 billion in January, by selling dollar-denominated bonds to overseas investors.

Tata Steel share price ended the day up by 2.5%


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

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the energy sector and pharma sector witnessing maximum buying interest. FMCG stocks are trading on a negative note.

The BSE Sensex is trading up 48 points (up 0.1%) and the NSE Nifty is up 31 points (up 0.3%). The BSE Mid Cap index is trading up by 1.1%, while the BSE Small Cap index is trading up by 0.4%.

The rupee is trading at 68.33 to the US$.

In the news from pharma sector, Glenmark Pharmaceuticals share price is in focus today.

Gains are seen as the company has received final approval from the US health regulator for Colesevelam Hydrochloride for oral suspension which is used to lower cholesterol levels in the blood.

As per the company filing, the approval has been granted by the United States Food and Drug Administration (USFDA) in the strengths of 1.875 grams/packet and 3.75 grams/packet.

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Rich Investors Will Hate Me For What I am About to Reveal...

Not many people know this…

But not only is it legal to 'steal' stock ideas from big, institutional investors…

A few years ago, the authorities actually made it easier for small investors to do just that!

This regulatory decision started it all off.

Now the average investor can ride along as institutional investors make bets of hundreds of crores…

And claim returns that are just as good - if not better!

Regulation-31 makes this possible - read all about it here.
------------------------------

Colesevelam Hydrochloride is a generic version of Welchol 1 of Daiichi Sankyo Inc. According to IQVIATM sales data for the 12-month period ending May 2018, Welchol for Oral Suspension achieved annual sales of approximately US$ 73 million.

Apart from the above, the company has also completed the formalities for the acquisition of the equity stake and has acquired the 100% equity share holding of Zorg.

At the time of writing, Glenmark Pharmaceuticals share price was trading up by 1.9% on the BSE.

Speaking of pharma stocks, the BSE Healthcare Index has been on a roller coaster ride in the past few years. The period from 2012 to 2015 saw the index go up more than three times. Since then it has been a painful ride downwards, as can be seen in the chart below:

The Roller Coaster Ride of the BSE Healthcare Index

Pre-2015, pharma companies enjoyed a fairytale ride in the US market. Low labor costs, good chemistry skills, along with efficiency, ensured Indian companies could copy innovator drugs to make generic drugs at a fast pace.

The generic business had lucrative margins for all major pharma players. But the party did not last long. In the quest to supply drugs quickly, they compromised on quality at their manufacturing facilities. No wonder, the US regulatory authority (USFDA) took strict action.

Here's what we wrote about the same in one of the editions of The 5 Minute WrapUp:

  • It's important to understand the core issues. Regulatory problems for pharma companies have increased over the past few years. The frequency of visits as well as quality expectations have increased a lot.

    The intensity of competition has also increased. Faster approvals of drugs have led to price erosion for generic players.

    While we expect the pain to continue in the short-term, the long-term picture still looks bright.

    Stricter norms and pricing pressure will ensure only quality players remain. Companies with strong R&D facilities and quality compliant plants will have an edge over the others.

    Those are the only pharma stocks you should be looking at.

The regulatory issues coupled with price erosion in US markets has impacted the business of major pharma players. How the pharma industry handles this situation remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

In the news from global financial markets, US retail sales rose faster than expected in June, suggesting a continued robust performance from the US economy during the second quarter.

Data from Census Bureau showed US retail sales rose by 0.5% during June which, although down from an upwardly-revised 1.4% previously, was ahead of the consensus forecast for sales growth of 0.4%. This leaves consumer spending up by 5.9% when the second quarter is compared with sales for the same period one year ago.

The above rise was boosted by increases in purchases of motor vehicles and a range of other goods.

Further, core retail sales, which remove sales of large ticket items like cars from the numbers, rose by 0.4% during June. Although down from the 0.9% seen back in May, this number is still ahead of the 0.3% average growth seen so far in 2018.

This solid retail sales data coupled with a sharp narrowing trade deficit in April and May has boosted expectations of a strong US GDP reading in the second quarter.


Sensex Opens in Green; Energy & PSU Stocks Witness Buying
09:30 am

Asian stocks sagged today in the early trade, weighed by a sharp decline in crude oil prices as Libyan ports reopened, while the dollar was on the defensive ahead of Federal Reserve Chairman Jerome Powell's first congressional testimony. In the US, major stock indices struggled for gains for most of the session on Monday as other large US companies released their quarterly results.

Back home, India share markets opened the day on a firm note. The BSE Sensex is trading up by 95 points while the NSE Nifty is trading up by 37 points. The BSE Mid Cap index opened up by 0.8% while BSE Small Cap index opened up by 0.5%.

The rupee is currently trading at 68.63 to the US$.

Barring FMCG stocks, all sectoral indices opened the day in green with energy stocks and PSU stocks witnessing maximum buying interest.

In the news from the economy. The International Monetary Fund (IMF) has trimmed India's growth projection by 0.1 percentage point for 2018-19 owing to high oil prices and a tight monetary policy regime.

The effect of the twin headwinds on the IMF's projection for 2019-20 was much sharper - 0.3 percentage points.

Now, the IMF has forecast India will grow by 7.3% in 2018-19 against the earlier estimate of 7.4%. The economy was projected to grow 7.8% by 2019-20 by the Fund earlier, but now the projection stood at 7.5%, according to the World Economic Outlook (WEO) Update.

--- Advertisement ---
Rich Investors Will Hate Me For What I am About to Reveal...

Not many people know this…

But not only is it legal to 'steal' stock ideas from big, institutional investors…

A few years ago, the authorities actually made it easier for small investors to do just that!

This regulatory decision started it all off.

Now the average investor can ride along as institutional investors make bets of hundreds of crores…

And claim returns that are just as good - if not better!

Regulation-31 makes this possible - read all about it here.
------------------------------

Even then, the economy would be the fastest-growing one among large nations in 2018-19 and 2019-20.

India's economy grew at a four-year-low of 6.7% in 2017-18.

Though the IMF had slightly revised downwards India's economic growth rate for FY19, its projections are now in sync with what other agencies - the World Bank and Asian Development Bank - have predicted.

It said central banks in key emerging market economies - including Argentina, Mexico, Turkey, India and Indonesia - have raised policy rates, responding to inflation and exchange rate pressures (coupled with capital flow reversals in some cases).

The RBI had hiked the policy rate by 25 basis points in June 2018, for the first time in four and a half years, citing a major upside risk to inflation on the back of high crude oil prices.

The RBI will now come up with its monetary policy in August amid a five-month-high consumer price index inflation rate at 5% and more than a four-year high wholesale price index inflation rate at 5.8% in June.

The cut in India's growth rates comes even as the IMF maintained the world's growth rate at 3.9% for 2018 and 2019 respectively.

The IMF has scaled down economic growth in Argentina and Brazil, besides India, among emerging market economies.

This has come when India is eyeing the world's third-largest economy tag by 2030 after overtaking France as the sixth-largest economy and coming close to the UK in 2017.

Further, the 8% growth rate will not be possible for at least two more years - 2018-19 and 2019-20 - according to IMF estimates.

However, even if the economy grows by 7% a year, its gross domestic product may cross US$10 trillion by 2030 if inflation remains at least 4% a year and the rupee does not depreciate too much against the dollar.

Note that, the RBI monetary policy statement is one of the most tracked events in the financial world. The chart below shows how India's inflation and policy rates stand in comparison with other Asian economies.

India's Policy Rates Compared to Asian Economies

Rate cut or not, at Equitymaster, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies.

In such an environment, it makes sense for investors to be selective while buying stocks. Focus on value and the underlying fundamentals of the business. Then, they need not worry about the market.

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...

Moving on to the news from FMCG sector. HUL share price opened on a negative note in the opening trade after the company reported net profit for the first quarter of Rs 15.3 billion, missing the street estimates.

The net profit for the company rose 19.2% on a yearly basis.

The company also also reported a rise in revenue to Rs 96.2 billion, up 3.1% on a year-on-year basis.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) also rose 21% to Rs 22.5 billion.

HUL's comparable domestic sales rose 16% during the June quarter.

Rising sales of herbal products and the lower base helped the company to report double-digit growth in volumes in this quarter.

Increasing competition in personal care categories, new product launches and the performance of herbal products were keenly watched by analysts.

Rural growth is still not back to historic growth rates, but rural is growing faster than urban on a low base, the company said.

In the first quarter of financial year 2018, the company had posted a net profit of Rs 12.96 billion.

To get more updates on share market, click here.


Indian Indices Trade in Red, Inflation on an Uptrend, and Top Stocks in Action
Pre-Open

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

The BSE Sensex closed lower by 218 points to end the day at 36,324. While the broader NSE Nifty ended the day down by 40 points to end at 10,696.

Among BSE sectoral indices, metal stocks fell the most by 3.7%, followed by pharma stocks at 3.3%. Tata Steel and Tata Motors were among the top losers.

Top Stocks in Action Today

Dr Reddy's share price is likely to be in focus today after the New Jersey District Court converted a temporary injunction into a preliminary injunction against the company.

This prevents the company from launching generic Suboxone in the US market until patent litigation related to US Patent No. 9,931,305 is concluded.

Tata Motors share price will be in focus today amid reports that ratings agency Moody's has downgraded the corporate family rating of the automobile company.

As per the news, Moody's Investors Service has downgraded the corporate family rating (CFR) for Tata Motors to Ba2 from Ba1 and has also downgraded the company's senior unsecured instrument ratings to Ba2 from Ba1. However, the rating outlook remains stable.

--- Advertisement ---
Rich Investors Will Hate Me For What I am About to Reveal...

Not many people know this…

But not only is it legal to 'steal' stock ideas from big, institutional investors…

A few years ago, the authorities actually made it easier for small investors to do just that!

This regulatory decision started it all off.

Now the average investor can ride along as institutional investors make bets of hundreds of crores…

And claim returns that are just as good - if not better!

Regulation-31 makes this possible - read all about it here.
------------------------------

Wholesale Inflation Gathers Pace

According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Wholesale Price Index (WPI) shot up to 5.77% in June on increasing prices of vegetables and fuel items.

Wholesale inflation rate, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

The index portrays new series of WPI data released by the government earlier this fiscal, with 2011-12 as the base year, replacing existing the base year of 2004-05.

Food articles turned out to be major drivers as the data showed that inflation of wholesale food articles jumped to 8.1% in October, as against a 6% rise in the previous month. Fuel inflation was one of the major drivers for the uptick and was up by 16.2% as compared to a rise of 11.2% in May.

Data released by the Central Statistics Office (CSO) last week showed inflation measured by the Consumer Price Index (CPI) accelerated to a 5-month high at 5% in June from 4.87% a month ago.

Last month, the RBI's Monetary Policy Committee (MPC) upped CPI inflation estimates for 2018-19 and projected it at 4.8-4.9% in April-September, and at 4.7% in the second half of the year, including the house rent allowance (HRA) impact for central government employees.

Factoring in this uptick in inflation, the monetary policy committee raised the central bank's benchmark repo rate by 25 basis points to 6.25%.

Inflation for the month of June keeps the chances alive of a further rate hike in the month August, according to economists. The RBI governor headed Monetary Policy Committee will be meeting later this month to review interest rate regime.