Sensex Ends Lower; Tata Steel & Vedanta Top Losers
Closing

Indian share markets erased early gains to end lower today, as the opposition parties tabled a no-confidence motion against Prime Minister Narendra Modi's government. At the closing bell, the BSE Sensex finished lower by 147 points and the NSE Nifty finished down by 28 points. Meanwhile, the S&P BSE Midcap Index ended down by 1.3% while S&P BSE Small Cap Index ended down by 1%.

Except for oil & gas stocks, all sectoral indices ended the day in red with metal stocks and realty stocks leading the losses.

Irrespective of the market sentiment, the BSE Sensex is scaling new highs. But look around you.

How many investors do you still see getting richer every day? Fewer than what you saw at the start of the year? Very few?

Well, the Sensex has gained Rs 60 trillion in market cap since 2004. That's a huge number. Nearly a third of the country's GDP. But how many investors have really benefitted from this rally? Very very few.

Mainly because most never joined. Even today less than 20% of Indian households invest directly or indirectly in stocks.

Also, because most of those who joined burnt their fingers with bad quality stocks. So, every time there was a sharp correction, these investors were the worst affected.

In the three big crashes since 2004, the Sensex lost about 31 trillion of market cap. And most of the investors who were scarred never bothered returning.

Sensex Gained Rs 60 Trillion and Lost Rs 31 Trillion of Market Cap Since 2004

Globally, Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.4%, while the Shanghai Composite led the Hang Seng lower. They fell 0.4% and 0.2% respectively. European markets are higher today with shares in Germany leading the region. The DAX is up 0.9% while London's FTSE 100 is up 0.7% and France's CAC 40 is up 0.6%.

The rupee was trading at Rs 68.57 against the US$ in the afternoon session.

In the news from the aviation sector. The air travel demand in India continues to be high with the domestic air passenger traffic registering a growth of 18.4% in the month of June 2018.

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

According to the Directorate General of Civil Aviation (DGCA) data, domestic airlines flew 11.3 million passengers in June, over to 9.6 million passengers carried in the same period last year.

The data report also showed that the domestic air passenger count has rose 22% during January-June 2018.

Indian airlines carried 68.5 million passengers during period under review as against 56.2 million during the corresponding period of previous year.

Besides, in terms of passenger load factor (PLF), SpiceJet were leading among all with 93.3% PLF during the month of June 2018, followed by Go Air (88.6%) and IndiGo (88.3%).

In terms of on time performance (OTP), IndiGo has taken again lead from the rest with 84.1% of its flights arriving and departing as per schedule from four metro airports, Mumbai, Delhi, Hyderabad and Bengaluru, followed by SpiceJet (81.2%) and Jet Airways+JetLite (78.8%).

During June 2018, a total of 677 passenger related complaints had been received by the scheduled domestic airlines. The number of complaints per 10,000 passengers carried for the month of June 2018 has been around 0.6.

Moving on to the news from the cement sector. Ultratech Cement share price fell over 1.3% after the company started off the financial year 2018-19 on a weak note as profit during the April-June quarter fell 32.9% to Rs 5.98 billion due to dismal margin performance.

Bottomline numbers for the quarter ended June 2017 stood at Rs 8.9 billion.

The company had acquired cement plants from Jaiprakash Associates and Jaypee Cement Corporation on 29 June 2017. Hence the figures for the three months ended 30 June 2018 are not comparable with the previous corresponding periods.

Revenue from operations grew by 30.6% to Rs 86.6 billion compared to Rs 66.3 billion in same period last fiscal.

Sales volume in Q1 jumped 34% to 16.8 million tonnes YoY.

The company said notwithstanding the hike in fuel prices, it achieved an operating EBITDA of Rs 929 per tonne compared to Rs 922 per tonne in Q4FY18.

EBITDA (earnings before interest, tax, depreciation and amortisation) increased 4% to Rs 16.2 billion but margin contracted 474 basis points to 18.8% due to rise in depreciation expenses (up 57% YoY), finance cost (161%), power & fuel cost (53%) and freight & forwarding expenses (40%).

Key concerns highlighted by the company in its filing are rising cost pressures, likely increase in interest rates and sluggish demand in the Tier-II and III urban housing and commercial segment.

Meanwhile, UltraTech said board has approved a scheme of arrangement amongst Century Textiles and Industries, the company and their respective shareholders and creditors. Century will demerge its cement business into the company.

Century's cement business consists of three integrated cement units in Madhya Pradesh, Chhattisgarh and Maharashtra and a grinding unit in West Bengal.

As per the scheme, UltraTech will issue one equity share for every 8 equity shares of Century to the shareholders of Century.


Indian Indices Trade Marginally Lower; Metal Sector Down 2.7%
12:30 pm

Share markets in India are presently trading marginally lower. Sectoral indices are trading on a negative note with stocks in the metal sector and telecom sector witnessing maximum selling pressure.

The BSE Sensex is trading down by 118 points (down 0.3%), while the NSE Nifty is trading down by 25 points (down 0.2%). The BSE Mid Cap index is trading down by 1.2%, while the BSE Small Cap index is trading down by 0.8%.

The rupee is trading at 68.53 to the US$.

In the news from the telecom sector, Idea Cellular share price is in focus today. Shares of the company are witnessing selling pressure as the Department of Telecommunications (DoT) rejected the company's plea to along with that of Vodafone India to revisit their dues.

The development follows DoT's demand for Rs 72.6 billion upfront payment as dues by Idea Cellular and Vodafone. The sum is split between a bank guarantee of Rs 33 billion on account of one-time spectrum charges claimed from Idea, and cash payment of Rs 39 billion towards market price for non-auctioned airwaves held by Vodafone India.

The DoT has said its numbers are fine and both the companies should pay up the mentioned amount to get a final seal of approval on their merger at the earliest.

Last week, telecom Minister Manoj Sinha said that the government has approved the Idea Cellular and Vodafone India merger.

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Rich Investors Will Hate Us For What We are 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.
------------------------------

Both Idea and Vodafone were expecting the merger deal to create India's largest telecom company to be completed by June 30, 2018. However, the process was stalled due to regulatory approvals.

Notably, Vodafone India and Idea Cellular merger is set to create India's largest telecom operator, surpassing Bharti Airtel Ltd. The top operator will have a revenue market share of around 37% and over 433 million subscribers.

The two companies were set to start operating as one entity from July 1 and for that to happen, the merger proceedings must be completed this month. Idea has called an extraordinary general meeting on June 26 to consider the proposals, including changing the name of the merged entity and raising funds of Rs 150 billion through debentures.

It will be interesting to track the progress of the new telecom leader, and whether it can sustain the pole position, in the hyper-competitive telecom industry.

Speaking of telecom sector, the whole telecom business has been an underwhelming story so far. While the telecom subscriber base has increased from 300 million in 2008 to 1.2 billion in 2017, investors have little to cheer. The BSE Sensex has gone up 3.25 times in nine years, but the BSE Telecom Index has not moved from its levels of 2008, as can be seen from the chart below:

Telecom Sector: A Decade of Underperformance

Here's what we wrote about the struggling telecom sector in one of our issues of The 5 Minute WrapUp:

  • Telecom companies are straddled with high debt, intense competition, and lack of pricing power. High spectrum costs and regulatory issues have hampered the sector. While consumers have benefited from low costs and new players fighting for their share, investors have suffered.

    With the entry of Reliance Jio, the competition has intensified further. Reliance Jio's low cost offerings and strategy of capturing market share will further dent the sector. The sector has been a classic 'valuet trap'. While it always looks cheap compared to other sectors, it has failed to provide any reasonable returns. We also believe the situation is unlikely to change in the near future. For an investor, it's important to differentiate between 'value' and 'value traps'.

In the news from initial public offering (IPO) space, the IPO of TCNS Clothing is set to kick off today. The issue comprises of 15,714,038 shares which will be offered in the Rs 714-716 price band.

The company is engaged in the business of designing, manufacturing, marketing and retailing of branded apparels for women and offers top-wear, bottom-wear, drapes, combo-sets and accessories etc., catering to the varied wardrobe requirements of Indian women. The company's brand portfolio includes 3 brands as follows:

'W' - A premiere brand targeted at women's casual and workwear requirements.

Aurelia - A contemporary ethnic wear brand that grew in revenue at a CAGR of 70.8% during 2013-17.

Wishful - A premium occasion wears brand that grew in revenue at a CAGR of 66.7% during 2013-17.

To know more about the company, you can read our IPO analysis of TCNS Clothing Ltd (requires subscription).

Also, to know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.


Sensex at All-Time High; Energy & IT Stocks Top Gainers
09:30 am

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1% while the Hang Seng is up 0.3%. The Shanghai Composite is trading up by 0.4%. Wall Street stocks rose on Tuesday, with the Dow Jones Industrial Average posting its fourth consecutive session of gains after Federal Reserve Chairman Jerome Powell expressed an optimistic US economic view and solid earnings bolstered the outlook for a robust reporting period.

Back home, India share markets opened the day on a firm note. The BSE Sensex is trading up by 146 points while the NSE Nifty is trading up by 49 points. The BSE Mid Cap index opened up by 0.2% while BSE Small Cap index opened up by 0.4%.

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

All sectoral indices have opened the day in green with energy stocks and IT stocks witnessing maximum buying interest.

PSU Banks opened the day on a mixed note with Indian Overseas Bank & Corporation Bank leading the gainers. In the latest development, the government has announced an infusion of Rs 113.4 billion in five public sector banks as part of its Indradhanush scheme, which was unveiled in 2015.

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Rich Investors Will Hate Us For What We are 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.
------------------------------

This is the last tranche of infusion under the scheme.

The five banks are Punjab National Bank (PNB), Indian Overseas Bank, Andhra Bank, Corporation Bank & Allahabad Bank.

Of the Rs 113.4 billion, Rs 28.2 billion will be infused in PNB, Rs 21.6 billion in IOB, Rs 20.2 billion in Andhra Bank, Rs 25.6 billion in Corporation Bank, and Rs 17.9 billion in Allahabad Bank.

In October last year, the government had announced a Rs 2.11 trillion recapitalisation plan, of which Rs 1.4 trillion was to be raised through recapitalisation bonds, while banks were required to raise the balance through share sales.

The two-year recapitalisation programme was aimed at helping state-run banks to deal with rising bad debts and spur credit growth.

After the euphoria of recapitalisation, bad loans have come to haunt them. Post the Gitanjali Gems fiasco, PSBs are yet to fully recover from its impact.

PSBs have had a difficult year, to put it mildly.

PSBs Struggle Despite Government Help

This underperformance was despite the huge boost they got from the government last year. On 24 October 2017, the government announced a Rs 2.11 trillion PSB capitalisation plan. This move was aimed at reviving the PSBs from the bad loan mess.

The next day was a field day for investors in PSBs. PSB stocks went up between 30% and 47%. Despite this, the return in the year was way below average. PSBs like PNB have crashed more than 45% over the last one year.

Using recapitalisation bonds can only act as a short-term measure to the crisis afflicting Indian public sector banks today. Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Our big picture editor, Vivek Kaul, talks about moral hazard risk arising out of recapitalization. He writes:

  • "If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly."

So, have we reached the bottom? Or there are more Nirav Modi stories waiting to come out?

We, at Equitymaster believe, rather than bottom fishing, one should look at banks run by strong management and a differentiated lending strategy available at reasonable valuations.

Moving on to the news from IPO space. HDFC Asset Management Company, the country's second largest mutual fund firm, has fixed a price band of Rs 1,095-1,100 per share for its initial public offering. The IPO is estimated to garner Rs 28 billion.

The initial share sale offer will be open for public subscription from July 25 to 27.

HDFC AMC operates as a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments.

Reportedly, the proposed IPO will put up to 25.4 million equity shares of the fund house on sale, of which 8.6 million shares will be put up by HDFC and up to 16.8 million shares by Standard Life.

HDFC AMC is selling a 4.1% stake in the IPO, while Standard Life will offload 8%.

Meanwhile, the fifth IPO of FY19 - TCNS Clothing is set to open for subscription from today with a price band of Rs 714-716 per share.

Women's apparel maker TCNS Clothing Company raised over Rs 3.4 billion from the anchor investors, ahead of its IPO today. The firm sells its products under W, Aurelia and Wishful brands.

As on 30 September 2017, TCNS sold its products through 418 exclusive brand outlets, 1,305 large format store outlets and 1,361 multi-brand outlets in different parts of the country. It also sold products through six exclusive brand outlets in Nepal, Mauritius and Sri Lanka.

To know our view on the IPO of TCNS Clothing, you can read our entire IPO analysis here (subscription required).

Speaking of IPOs, a merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

To know more, download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the IPO rush.

To get more updates on share market, click here.


Indian Indices Trade in Green, Global Stock Markets, and Top Stocks in Action Today
Pre-Open

Indian share markets continued their momentum yesterday and ended on a positive note. Gains were largely seen in the energy sector and PSU banking sector.

At the closing bell yesterday, 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%.

Top Stocks in Action Today

In the news from pharma sector, Glenmark Pharmaceuticals share price will be in focus today as the company 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.

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.

--- Advertisement ---
Rich Investors Will Hate Us For What We are 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.
------------------------------

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.

From the banking sector, Federal Bank share price will also be in focus today as the bank reported a rise of 25% in its net profit at Rs 2.6 billion for the quarter ended June 30, 2018 as compared to Rs 2.1 billion for the same quarter in the previous year. Total income of the Bank increased by 10.7% at Rs 29.4 billion for Q1FY19 as compared Rs 26.5 billion for the corresponding quarter previous year.

The Bank's gross NPA for the April-June quarter of the current fiscal increased to 3%, as compared to 2.4% in the same quarter of the previous year. Besides, bank's Net NPA stood at 1.72% in Q1FY19.

Moving on to news from steel sector, Tata Steel share price will be in focus 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.

Global Share Markets Trade on a Mixed Note

Asian stock markets finished mixed yesterday. 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$ at the time of writing. Oil prices were trading at US$ 71.6.

From the IPO Space...

The initial public offering (IPO) of TCNS Clothing will kick off today. The issue will comprise of 15,714,038 shares which will be offered in the Rs 714-716 price band.

The company is engaged in the business of designing, manufacturing, marketing and retailing of branded apparels for women. TCNS offers top-wear, bottom-wear, drapes, combo-sets and accessories etc., catering to the varied wardrobe requirements of Indian women. Company's brand portfolio includes 3 brands:

  1. 'W' - A premiere brand targeted at women's casual and workwear requirements.
  2. Aurelia - A contemporary ethnic wear brand that grew in revenue at a CAGR of 70.8% during 2013-17.
  3. Wishful - A premium occasion wears brand that grew in revenue at a CAGR of 66.7% during 2013-17.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.