Strong Start to the Week; Sensex Breaches 32,500 Level
Closing

Indian share markets began the trading week on a strong note owing to continued buying by DIIs and better-than-expected earnings from some blue-chip companies.

At the closing bell, the BSE Sensex closed higher by 205 points and the NSE Nifty finished up 63 points. The S&P BSE Mid Cap finished up by 0.4% while & S&P BSE Small Cap finished up by 0.2%. Gains were largely seen in consumer durables stocks, metal stocks and PSU stocks.

Meanwhile, the Nifty pharma index declined 2.2%, falling for a seventh session in eight, hitting its lowest level since July 5. Pharmaceutical stocks are likely to recover gradually until evidence comes through that the US health regulator is working to lift sanctions on product launches.

Dr Reddy's Lab share price, Sun Pharma share price and Lupin share price fell 3.4%, 3.6% and 3.1% respectively.

L&T share price surged 2.9% after the company reported a 50.6% jump in consolidated net profit to Rs 10.3 billion for the first quarter ended 30 June. The company had posted a net profit of Rs 6.8 billion in the corresponding period a year ago.

Asian stock markets finished mixed as of the most recent closing prices. The Hang Seng gained 1.28% and the Shanghai Composite rose 0.61%. The Nikkei 225 lost 0.17%. European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.59% while Germany's DAX is up 0.16% and France's CAC 40 is up 0.11%.

The rupee was trading at Rs 64.07 against the US$ in the afternoon session. Oil prices were trading at US$ 49.80 at the time of writing.

Moving on to news from banking sector. SBI share price surged 4.4% after the bank decided to introduce a two-tier savings rate with effect from 31 July 2017.

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While balance above Rs 10 million will continue to attract interest of 4% per annum, accounts with balance below Rs 10 million will have an interest rate of 3.5% per annum. The move comes on the back of decline in the rate of inflation and high real interest rates.

In another development, Central bank of India share price fell 4% before recovering and finishing up by 0.4% after the bank reported a net loss of Rs 5.76 billion for the quarter ended 30 June. The bank had reported a net loss of Rs 5.99 billion in the corresponding quarter a year ago.

Its provisioning and contingencies, however, fell to Rs 12.69 billion during the quarter from Rs 15.43 billion a year ago. Gross non-performing assets (NPA) of the bank rose to 18.23% from 13.52%, while net NPA too jumped to 11.04% from 8.17%.

In another development, the initial public offering (IPO) of Security and Intelligence Services (SIS), received bids for 14% of the total issue size on Day 1 of the bidding process.

The company, which provides security solutions and business support services across India and Australia, has already raised Rs 3.5 billion from 18 anchor investors including ADIA, Reliance Capital Trustee and Birla Sun Life Trustee Company.

The issue comprises of fresh equity shares aggregating up to Rs 3.6 billion and an offer for sale of up to 5,120,619 equity shares by the selling shareholders. The company has fixed Rs 805-815 price band for the three-day issue that closes on Wednesday.

Interestingly, in FY17, the amount of money raised through 25 IPOs nearly doubled to Rs 282 billion. The IPOs were well received, with a majority (15 of them) getting oversubscribed by over 10 times.

IPO Market Buzzing

After a bumper year in FY17, abundant liquidity has fueled expectations that fund raising through IPOs would remain robust in FY18. And may even surpass the amount raised in FY17.

The fiscal started with 26 offerings in the first three months. In fact, India was the most active regional market in the Europe, Middle East, India and Africa (EMEIA) region as per a quarterly report by consultancy firm Ernst and Young.

However, we don't need thousands of IPOs to get rich. That's not how super investors make their fortunes. But a few good IPOs could certainly become the multibaggers in your portfolio in a few years.

We have reviewed each of them and have released their recommendation notes. You can check the same on their IPO page.

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And here's a note from Profit Hunter

The State Bank of India (SBI) is the top gainer in the Nifty 50 Index. Let's have a look at its chart.

In an earlier note, we mentioned the stock breaking below the 282 neckline level of head and shoulder pattern. The 282 level also acted as important support and resistance several times in the past. But we mentioned that if the stock does not sustain below this level, the bulls might be back in action.

In a few trading session, the stock recovered strongly to close above the 282 level. The head and shoulder pattern failed and the stock continued to show strength.

Today, the stock rallied strongly 4.5% with healthy volumes to trade close to its 52-week high after the bank decided to introduce a two-tier savings rate with effect from 31 July 2017.

Does this indicate further strength in the counter? Let's wait and watch.

SBI Rallied 4.5% for the Day
SBI Rallied 4.5% for the Day  


Sensex & Nifty Extend Gains; SBI Up 3.6% on Interest Rate Cut
01:30 pm

After opening the day on a positive note, the share markets in India continued to witness buying interest. Barring healthcare stocks and FMCG stocks, all sectoral indices are trading in green, with stocks in the metal sector & capital goods sector leading the gains.

The BSE Sensex is trading higher by 150 points (up 0.5%) while the NSE Nifty is trading higher by 40 points (up 0.4%). The BSE Mid Cap index and BSE Small Cap index are trading up by 0.2% & 0.1% respectively. Gold prices, per 10 grams, are trading at Rs 28,529 levels. Silver price, per kilogram is trading at Rs 38,450 levels. Crude oil is trading at Rs 3,209 per barrel. The rupee is trading at 64.15 to the US$.

Bank stocks are trading on a mixed note with Bank of Baroda and State Bank of India leading the gains. SBI share price surged 3.6% after the bank decided to introduce a two-tier savings rate with effect from 31 July 2017.

While balance above Rs 10 million will continue to attract interest of 4% per annum, accounts with balance below Rs 10 million will have an interest rate of 3.5% per annum. The move comes on the back of decline in the rate of inflation and high real interest rates.

The revision in savings bank rate would enable the bank to maintain MCLR or key lending rate at the existing rates, benefitting a large segment of retail borrowers in SME, agriculture, and affordable housing segments.

Moreover, other banks are also expected to follow SBI's move and could cut the interest rate on savings bank deposits. The overall impact of this rate cut on stimulating credit growth remains to be seen. However, one important aspect that is over looked by everyone is the impact of chasing growth on the bank's bottom-line.

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An aggressive cut on the lending rates while keeping the deposit rates relatively higher would impact banks profit margins. The present drive though seems firmly towards boosting credit growth and bringing more business to the banks.

In another development, Max Financial Services called off its proposed merger with HDFC Standard Life Insurance Co Ltd. The inordinate time associated with finalisation and approval of several alternate structures by the prospective partners led to the decision.

As per the original plan, Max India was supposed to amalgamate Max Life Insurance with Max Financial Services. Subsequently, the insurance business of the merged entity was to be demerged so that it could be transferred to HDFC Standard Life Insurance Company.

However, the whole scheme did not go down well with the Insurance Regulatory and Development Authority of India (Irdai) as it was in contravention of the Section 35 of the Insurance Act, 1938, that does not allow merger of an insurance business with a non-insurance firm.

The decision to not extend the deadline for negotiations came just days after HDFC Ltd. decided to go ahead with an initial public offer for its life insurance unit.

On 17 July, HDFC Standard Life Insurance Co. Ltd's board approved a proposal to sell as much as 20% of the insurer through an initial public offering (IPO).

The insurance sector in India is set to grow leaps and bounds. 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.

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 do not have access to Vivek Kaul's Letter yet, you can sign up here.

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

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Download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the 2017 IPO rush.


Sensex & Nifty Continue to Trade Higher; Metal Stocks Lead
11:30 am

After opening the trading day on a positive note, Indian share markets continue to trade firm in the morning session. Gains are largely seen in stocks from metal sector and capital goods sector. Meanwhile, FMCG stocks and healthcare stocks are trading in the red.

The BSE Sensex is trading higher by 139 points and the NSE Nifty is trading higher by 33 points. The BSE Mid Cap index is trading up by 0.1% while the BSE Small Cap index is trading up 0.2%. The rupee is trading at 64.15 to the US$.

As per an article in a leading financial daily, Cipla is looking to file more than 20 applications seeking approval for its generic medicines from the US health regulator this fiscal.

One must note that, In the last financial year, the company had filed 32 abbreviated new drug applications (ANDAs) in the US.

An ANDA contains data that provides for review and ultimate approval of a generic drug product by the US Food and Drug Administration (USFDA).

Reportedly, Cipla has identified Respiratory and Central Nervous System (CNS) in specialty segment as its core focus therapy areas with an aim to further accelerate growth in the US market.

Besides, Cipla will also work towards bolstering leadership position in India, South Africa, and key Emerging Markets, the reports noted.

In recent times, pharma companies were bogged down by mounting pressure from US Food and Drug Administration (USFDA) to adhere to quality standards at their manufacturing plants. In the past three years, the USFDA raised numerous regulatory concerns resulting in import bans and suspension of new drug approvals from facilities of Indian pharma companies.

USFDA sweetener for Indian Pharma

But what has come as a breather is a sharp pick-up in new drug approvals in 2017. During the period January-July 2017, 129 approvals for generic drugs were made. This is 45% higher from 89 approvals made in the corresponding period last year.

As per the Indian Pharmaceutical Alliance, the pace of drug approvals has gained momentum after they complained to FDA about delays last year.

The stock of Cipla is presently trading down by 1%.

Moving on to the news from stocks in oil & gas sector... As per an article in The Economic Times, ONGC has won government approval for acquisition of Gujarat State Petroleum Corp's entire 80% holding in a KG basin gas block for Rs 77.38 billion.

ONGC had in December last year agreed to buy entire 80% interest of GSPC along with operatorship rights, in Deen Dayal West (DDW) gas field in Block KG-OSN-2001/3 in the Bay of Bengal for US$ 995 million (Rs 64.43 billion).

The company will also pay part consideration of US$ 200 million (Rs 12.95 billion) to GSPC towards acquisition rights for discoveries other than DDW field in the block.

In another development, as per an article in The Livemint, Oil and Natural Gas Corp (ONGC) has sought pricing and marketing freedom to help bring to production a one-trillion cubic feet gas discovery. This will help in opening up a new sedimentary basin after over three decades.

As per the reports, ONGC, which has opened for commercial production at six out of India's seven producing basins, has made a significant natural gas discovery in the Gulf of Kutch of Gujarat coast that can produce about three million standard cubic meters per day.

ONGC share price is presently trading up by 2.3% on the BSE.


Share Markets in India Open in Green; L&T Gains on Strong Q1 Result
09:30 am

Asian indices are mixed today as investors turned cautious after North Korea conducted another missile test on Friday. The Shanghai Composite is up 0.36%, while the Hang Seng is up 0.66%. The Nikkei 225 is trading down by 0.07%. Over the weekend, most US stocks closed lower on disappointing earnings.

Back home, share markets in India have opened the day on a positive note. The BSE Sensex is trading higher by 124 points, while the NSE Nifty is trading higher by 26 points. The BSE Mid Cap and BSE Small Cap index both opened the day up by 0.2%.

Sectoral indices have opened the day on a mixed note with healthcare stocks and information technology stocks leading the losses. While capital goods stocks and power stocks are trading in green. The rupee is trading at 64.15 to the US$.

L&T share price surged over 3.4% after the company reported a 50.6% jump in consolidated net profit to Rs 10.3 billion for the first quarter ended 30 June. The company had posted a net profit of Rs 6.8 billion in the corresponding period a year ago.

Pharma stocks opened the day on a mixed note with Alembic Pharma and Dishman Pharma leading the gainers. In the latest development, Lupin announced that USFDA has concluded inspection of its Pithampur facility in Madhya Pradesh without any observations.

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The USFDA has successfully completed a good manufacturing practices (GMP) inspection as well as prior approval inspection (PAI) at its Pithampur manufacturing facility without any observations. The inspection started on 24 July 2017.

Notably, Lupin has been facing heat from USFDA for some months now. The US regulator had recently given observations on the company's Goa plant, the most important with respect to imports to the US, in April. In May, the Indore unit of the pharmaceutical manufacturer received six observations from USFDA.

US Remains Key Growth Driver

Lupin derives 43% of its global revenues from the US. The US continues to be a principle growth driver for the company. Lupin enjoys a strong brand equity in the US and is the 5th largest pharmaceuticals company by prescriptions in the country.

However, the pharma sector, once considered a safe haven for investors has been on a steady decline over the past two years.

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Lupin share price opened the day up by 0.2%.

Moving on to the news from IPO space. The latest addition to companies hitting the primary market is Security and Intelligence Services (SIS) India.

The company's initial public offering (IPO) will open today and close on 2 August 2017. At a price band of Rs 805-815 apiece, the funds raised will be used for repayment and pre-payment of a portion of outstanding debt.

The IPO comprises fresh issue of shares worth Rs 3.6 billion and an offer for sale of up to 51,20,619 shares by existing shareholders.

Meanwhile, SIS has raised Rs 3.5 billion from 18 anchor investors ahead of its IPO.

Speaking of IPO space, we don't need thousands of IPOs to get rich. That's not how super investors make their fortunes. But a few good IPOs could certainly become the multibaggers in your portfolio in a few years.

We, at Equitymaster, have always recommended IPOs cautiously. Here's Rahul Shah, co-head of research at Equitymaster, explaining our rationale behind the approach:

  • 'We know what a dirty game the IPO business is. We've seen it over and over again: It's a game where the odds are stacked against investors. So for us, the equation is simple. We'd rather face criticism in the short run than see our subscribers lose money over the longer term. We weren't afraid to do this during the hot IPO days of 2007, and we're not afraid to do it today.'

The Bottomline: You need to evaluate each IPO on its merits by considering its fundamentals, and most importantly, the valuations. And this is particularly important when the hype surrounding IPOs is at its peak.

We have reviewed each of them and have released their recommendation notes. You can check the same on their IPO page.


Markets Under Pressure After a Historic Week for the Nifty, US tech stocks fall & Top Cues in Action Today
Pre-Open

Share markets in India closed lower at the end of last week after corporate earnings of various companies. Pharma companies were the biggest losers on the Nifty led by Dr. Reddys, Lupin and Sun Pharma.

It was a historical week for Nifty which closed above the 10000 mark for the first time ever on Wednesday last week.

Global Markets Muted as US Tech Stocks Fall

Global stock markets fell on Friday as tobacco shares dropped and Amazon earnings disappointed, while oil prices added to recent gains and were on track for their biggest weekly percentage rise this year.

US technology stocks slid abruptly on Thursday after reaching a series of record highs.

The US dollar was broadly lower as a combination of underwhelming US economic data and political uncertainty kept traders biased toward the euro and other world currencies.

Meanwhile, gold prices built on a weekly gain Friday as reports of another missile test by North Korea and continued weakness in the U.S. dollar boosted demand for the precious metal.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

Pharma Stocks Continue to Slide Downwards in the Domestic Market

Pharma stocks pulled domestic markets down last week. Dr. Reddy's share price slumped over 5% after it posted 53.2% year-on-year fall in consolidated net profit at Rs 0.6 billion for the quarter ended 30 June 2017 against Rs 1.3 billion in the corresponding quarter last year.

Another Pharma giant Lupin will come out with its results this week. Lupin share price was down last week after reports that the US health regulator began inspection of Unit 1 of its Pithampur facility last week. The facility's Unit 2 and 3 was inspected earlier this year and was issued 6 and 5 observations respectively.

Biocon came out with a disappointing set of results last week. Revenues were down by 4% year on year. Net profit was down by 51%. The management attributed this decline to a combination of a stronger rupee and GST implementation.

Top Cues in Action Today

Blue Dart Express will be in focus today after Goldman Sachs maintained a bearish stance post weak set of results. With the logistics industry adapting to GST, near term pricing pressures are bound to continue.

ONGC share price is expected to be in news today. As per an article in The Economic Times, ONGC has won government approval for acquisition of Gujarat State Petroleum Corp's entire 80% holding in a KG basin gas block for Rs 77.38 billion.

The company will also pay part consideration of US$ 200 million (Rs 12.95 billion) to GSPC towards acquisition rights for discoveries other than DDW field in the block.

HDFC share price is also expected to be in focus today as HDFC will sell 9.57% stake in HDFC Life through an IPO in the coming months, becoming the third major life insurer to list on stock markets.

The company has approved sale of 19,12,46,050 shares, it said in a notice to BSE. British insurer Standard Life, which owns 35% in the insurance JV, is also expected to sell a portion of its shares.

The announcement follows last week's decision by the HDFC Life board to sell up to 20% of its equity in a public offering. The move casts doubts over whether the HDFC Life and Max Life merger, which is yet to receive the regulator's approval, will go through.

Cochin Shipyard IPO opens tomorrow, 1st August. In terms of dock capacity, it is India's largest public sector shipyard. It is seen as a play on the defence sector in India.

Security and Intelligence Services (SIS) IPO opens today. The company has priced its Rs 7.8 billion IPO in Rs 805-815 range. The initial public offer (IPO) comprises fresh issue of shares worth Rs 3.6 billion and an offer for sale of up to 51,20,619 shares by the existing shareholders.

We, at Equitymaster, have always recommended IPOs cautiously. Here's Rahul Shah, co-head of research at Equitymaster, explaining our rationale behind the approach:

  • 'We know what a dirty game the IPO business is. We've seen it over and over again: It's a game where the odds are stacked against investors. So for us, the equation is simple. We'd rather face criticism in the short run than see our subscribers lose money over the longer term. We weren't afraid to do this during the hot IPO days of 2007, and we're not afraid to do it today.'

The Bottomline: You need to evaluate each IPO on its merits by considering its fundamentals, and most importantly, the valuations. And this is particularly important when the hype surrounding IPOs is at its peak.

We have reviewed each of them and have released their recommendation notes. You can check the same on their IPO page.