Sensex Ends 112 Points Higher; Energy and Realty Stocks Witness Buying

Indian share markets witnessed buying interest during closing hours of trade and ended the day on a positive note. Gains were largely seen in the energy sector and realty sector.

At the closing bell, the BSE Sensex stood higher by 112 points (up 0.3%) and the NSE Nifty closed higher by 37 points (up 0.3%). Both, the BSE Mid Cap index and the BSE Small Cap index, ended the day up by 0.3%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng stood down by 0.5% and the Nikkei was trading flat. The Shanghai Composite stood higher by 0.3%.

European markets were trading on a positive note. The FTSE 100 was up by 0.66%. The DAX, was up by 0.07% while the CAC 40 was up by 0.08%

The rupee was trading at 68.57 to the US$ at the time of writing.

In the news from global financial space, the Bank of Japan (BOJ) took measures to make its massive stimulus programme more flexible and pledged to keep interest rates low for the time being on Tuesday. This is in line with the central bank's forecast that it would take time for inflation to hit its 2% target.

In its two-day rate review that ended on Tuesday, the BOJ decided to maintain its short-term interest rate target at minus 0.1% and pledged to guide 10-year government bond yields around 0% by a 7-2 vote.

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The bank, however, said it would allow long-term rates to fluctuate depending on economic and price developments, and conduct its asset purchases more flexibly.

It also said it will make tweaks to the way it buys assets, such as raising the composition of Topix-indexed exchange traded funds (ETF) to ease distortions created by the central bank's purchases of ETFs.

Avenue Supermarts share price was in focus today after the company reported a 43.4% year on year (YoY) surge in net profit at Rs 2.5 billion for the June quarter. Total revenue for the quarter rose 26.7% YoY to Rs 45.5 billion.

At the closing bell, Avenue Supermarts share price stood up by 3.8% on the BSE.

In the news from commodity space, crude oil prices witnessed selling pressure today after Reuters survey showed that OPEC production reached a 2018 high in the month of July, stoking fears of oversupply.

The survey showed that the Organization of the Petroleum Exporting Countries (OPEC) increased production in July by 70,000 barrels per day (bpd) to 32.64 million bpd, a high for the year.

Also, Russian energy minister Alexander Novak last week said that Russia's output will hit a new 30-year high of 11.02 million bpd in 2018.

Note that, global oil prices have climbed steadily this year, helped by rising demand. Rising crude oil prices doesn't bode well for the Indian economy, as it not only affects fuel prices, but also has many other repercussions on the macroeconomic level.

They can be a big worry for the Modi government as well as it has been a big beneficiary of lower crude oil prices.

Have a look at the chart below. It shows India's total import bill of crude oil and petroleum products on an annual basis during the Manmohan Singh regime and the Narendra Modi regime.

Here's Why Crude Oil Was Modi's Best Friend So Far

As Ankit Shah wrote in one of the editions of The 5 Minute WrapUp...

  • During the UPA II regime, India's average annual oil import bill was US$ 133 billion. In fact, in the last three years of Manmohan Singh's leadership, the oil import bill exceeded US$ 150 billion. Compare that with an average annual oil bill of US$ 95 billion during the four years of Modi's leadership.

    The actual savings would have been even higher, because I believe the consumption of crude oil and petroleum products would have been quite higher in the Modi era than the Manmohan era.

    Last Thursday, Brent crude oil prices shot above US$ 80 a barrel.

    This is the highest level since 2014. In the past one year alone, oil prices have surged more than 50%.

    Now, what if oil prices go back to the levels during the Manmohan Singh regime? What would happen to India's current account and fiscal deficit? What would happen to inflation and RBI's stance on interest rates?

    With the next general elections just a year away, rising crude oil prices are going to be a big worry for the Modi government.

    It should worry you too...

Apart from that, what does rising crude oil prices mean for stock markets?

Richa Agarwal, editor of Hidden Treasure, tracks the oil and gas sector very closely. She believes the rise in crude oil prices is a bearish sign for stock markets globally. At the same time, any market correction, will throw up interesting buying opportunities in small-cap stocks.

This is what she wrote...

  • After hitting a low of US$ 30 per barrel in January 2016, prices have more than doubled to US$ 68 in April 2018.

    While the Hidden Treasure team looks for long-term wealth creators, such macro situations can help to recommend such stocks at a bargain. The ones who keeps calm, when everyone else is losing their heads, will gain the most when the tide turns.

How the above developments influence crude oil prices remain to be seen. Meanwhile, we will keep you posted on all the updates from this space. Stay tuned.

Sensex Trades in Red; Bank Stocks Lead Losses
12:30 pm

After opening the day in red, share markets in India have continued the downtrend and are presently trading below the dotted line. Sectoral indices are trading mixed with stocks in the PSU sector and stocks in the banking sector trading in red. While stocks in the realty sector are trading in green.

The BSE Sensex is down by 103 points (down 0.3%) and the NSE Nifty is trading down by 17 points (down 0.2%). Meanwhile, the BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 68.58 to the US$.

In news from stocks in the aviation sector. Interglobe Aviation (IndiGo) share price is in focus today after the company declared poor results for the June 2018 quarter.

IndiGo's net profit for the quarter in focus, fell over 97% year on year (yoy) to Rs 278 million from Rs 8.1 billion in the same period a year ago.

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The profitability was majorly impacted by the adverse impact of foreign exchange, high fuel prices and a competitive fare environment.

At the time of writing IndiGo share price was trading down by 8.3%.

Indian Aviation Spreading its Wings

Air travel has recorded double-digit growth for 45 consecutive months, thanks to low fares, the addition of new flights/destinations, and overall growth in the economy.

What's foreseeable for India's aviation traffic in 2018 is some pressure on the back of the consistent rise in crude oil prices. Earlier this month, Brent crude oil briefly breached US$80 per barrel and touched its highest level since December 2014. Crude prices have been driven up by production curbs in OPEC nations and Russia, as well as by robust demand on the back of healthy global economic growth.

Oil prices are closely monitored by the Indian air carriers, as aviation turbine fuel is their single largest input cost. A sharp rise in the cost of fuel puts pressure on margins, and consequently an increase in air fares.

Although air travel is becoming the new normal, investors need to understand the industry dynamics before buying up aviation stocks.

Moving on to news from stocks in the pharma sector. Aurobindo Pharma share price is in focus today after the US Food and Drug Administration (USFDA) granted approval to the company to manufacture and market Bivalirudin injection in the US market.

Bivalirudin injection is a generic equivalent of the Angiomax injection and is used as an anti-coagulant in patients with unstable angina undergoing percutaneous transluminal coronary angioplasty among others.

According to market reports, the market size for Bivalirudin injection in the US was US$ 101 million for the year ending May 2018.

At the time of writing, Aurobindo Pharma share price was trading down by 0.7%.

Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

With an aim to lower the overall healthcare costs in the country, the US Food and Drug Administration (FDA) approved a record 763 generic drugs for the financial year ending 30th September. As per Mint Analysis, Indian pharma companies received 295 approvals accounting for 40% of the overall approvals during the year.

Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in the previous year. While, faster approvals expedite the commercialisation of product pipelines of domestic pharma companies spurring growth. At the same time however, it has raised the intensity of competition resulting in pricing pressures. The price erosion has been further compounded by a consolidation among US distributors and the decline in the number of products going off-patent over the past few years.

In other words, acceleration in generic drug approvals is like a double-edged sword. The growth boost can be quickly offset by the ensuing pricing pressures. Pharma companies that invest in creating a pipeline of complex generics or building competencies in alternative dosage forms are better equipped to tackle the changing dynamics in the US generics market.

Therefore, despite a lot of pessimism surrounding pharma stocks on regulatory uncertainty, we have stocks in open positions in StockSelect and have remained bullish on pharma stocks in our long term service, ValuePro.

Sensex Opens Lower; Metal & IT Stocks Drag
09:30 am

Asian stock markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.3% while the Hang Seng is down 0.5%. The Shanghai Composite is trading down by 0.1%. Meanwhile, a broad sell-off of technology stocks pushed the three major US stock indices lower on Monday, with the Nasdaq Composite posting its third consecutive loss of more than 1% for the first time in three years just days after hitting a record high.

Back home, India share markets have opened the day on a lower note. The BSE Sensex is trading down by 82 points while the NSE Nifty is trading down by 28 points. The BSE Mid Cap index opened and BSE Small Cap index opened the day up by 0.3% & 0.1% respectively.

The rupee is currently trading at 68.75 to the US$.

Speaking of small-cap stocks, they seem to be displaying withdrawal symptoms right now.

But as Ankit Shah, Editor of Equitymaster Insider says, such corrections are a healthy part and parcel of the game of investing.

In one of his earlier editorials, he had shown how the BSE Sensex is not a truly representative market barometer. While the Sensex continues to stay steady close to its all-time high levels, the rest of the market has corrected significantly.

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Recently, he carried out a similar study on the BSE Smallcap index.

Here's what he found...

The average (both mean and median) correction of the BSE Smallcap index stocks has been 38% from their respective 52-week highs.

Small-Cap Stocks Are Down 38% from Their 52-Week Highs

Ankit believes that the ongoing market correction could offer some fantastic buying opportunities for disciplined and patient small-cap investors.

Moving on... Sectoral indices have opened the day on a mixed note with realty stocks and power stocks witnessing maximum buying interest. While, metal stocks and IT stocks have opened the day in red.

In the news from the telecom sector. In the latest development, Idea Cellular Ltd on Monday reported its first quarterly net profit after six quarters of losses, on the back of a one-time gain on the sale of its 9,900 standalone telecom towers to ATC Telecom Infrastructure Pvt Ltd in May.

Idea Cellular reported a consolidated net profit of Rs 2.6 billion for the June quarter, compared to a loss of Rs 8.1 billion a year ago.

The company's consolidated revenues from operations fell 27.9% to Rs 58.9 billion on the back of the ongoing tariff war in the telecom sector and a steep reduction in domestic and international mobile termination charges (MTC) settlement rate.

The revenue for the quarter was impacted mainly on account of down-trending of the average revenue per user (ARPU), Idea Cellular said, adding that ARPU for the quarter stood at Rs 100 compared to Rs 105 in the March quarter.

During the June quarter, Idea Cellular's competitors reported subdued ARPUs due to aggressive pricing prevalent in the industry. Bharti Airtel reported an ARPU of Rs 105 for its India operations during the quarter. Reliance Jio, the telephony arm of Reliance Industries Limited reported an ARPU of Rs 134.5 for the June quarter.

Further, Idea Cellular hopes that long-term opportunities in the sector will continue to remain attractive while near term challenges persist.

Idea Cellular share price opened the day down by 1.7%.

Moving on to the news from bank sector. Axis Bank's first-quarter net profit dipped 46.3% to Rs 7 billion, year on year, on the back of higher provisions and lower other income.

The bank's net profit was Rs 13.1 billion in the same quarter last year. The bank had posted a net loss of Rs 21.9 billion in the January-March quarter.

Axis Bank increased provisions by 42.5% during the quarter to Rs 33.4 billion from Rs 23.4 billion in the year-ago quarter. In the January-March quarter, the bank had set aside Rs 71.8 billion as provisions.

Gross non-performing assets (NPAs), as a percentage of total advances, were 6.5% in the June quarter compared with 6.8% in the March quarter and 5% in the year-ago quarter.

Post-provision, the net NPA ratio was 3.1% against 3.4% in the January-March quarter and 2.3% in the year-ago quarter.

Net interest income, or the difference between interest earned on loans and that paid on deposits, increased 11.9% to Rs 51.7 billion from Rs 46.2 billion in the corresponding period last year.

Other income, which includes core fee income, dropped 2.5% to Rs 29.2 billion in the three months ended 30 June from Rs 30 billion a year ago.

Axis Bank share price surged 2.1% in the opening session today.

To get more updates on share market, click here.

Indian Indices Trade in Green, IPO Market Buzzing, and Top Stocks in Action

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

The BSE Sensex closed higher by 158 points to end the day at 37,494. While the broader NSE Nifty ended the day up by 41 points to end at 11,320.

Among BSE sectoral indices, PSU stocks rose the most by 2.2%, followed by bank stocks at 1.3%. Bharti Airtel and ICICI Bank were among the top gainers.

Top Stocks in Action Today

Sun Pharma share price is likely to be in focus today after it was reported that the US arm of Sun Pharmaceutical Industries is recalling over 2,500 bottles of Metformin hydrochloride from Arizona on account of presence of foreign substance in one lot.

The company is recalling bottles of Metformin hydrochloride extended release tablets 500 mg, packaged in a 500-count bottle.

The tablets were manufactured at Sun Pharma's Halol facility.

HDFC Ltd share price will be in focus today the company reported its quarterly earnings yesterday.Notable, the mortgage lender reported a 54% jump in standalone net profit to Rs 21.9 billion in the quarter in focus, up from Rs 14.2 billion in the same period a year ago.

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GST Rate Cuts to be Credit Negative

According to ratings agency Moody's Investor Service, the recent rate cuts in the Goods and Service Tax (GST) regime will exert pressure on India's fiscal consolidation and are therefore credit negative.

Moody's said that the revenue loss from the GST rate cuts would be around 0.04%-0.08% of the GDP annually. Although the proportion of revenue loss is small, the vacillation in tax rates creates uncertainty around government revenue and comes amid persistent upside risks to its expenditures.

GST rates on a number of consumer durable items, such as refrigerators, washing machines and small television sets, were lowered with effect from 27 July.

Notably, Finance Minister Arun Jaitley had said that the total revenue loss to the exchequer from all the rate cuts effected since GST rollout on 1 July 2017 was Rs 700 billion.

Note that GST implementation is spurring on a wave of formalization of the economy.

Since the launch of Goods and Services Tax (GST), there were 9.8 million unique GST registrants, an increase of 50% compared to the previous tax regime. There has also been a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises wanting to avail themselves of input tax credits.

IPO Buzz

HDFC Asset Management Company has fixed final offer price at Rs 1,100 per share.

HDFC AMC and Standard Life Investments in consultation with the book running lead managers have finalised the offer price at Rs 1,100 per share for the IPO.

Accordingly, the company raised Rs 28 billion through the IPO which consisted of 25.5 million equity shares.

The reserved portion of qualified institutional investors oversubscribed by 192.3 times, non-institutional investors 195.2 times and retail 6.7 times. The issue received bids worth Rs 1.7 trillion against the IPO size of Rs 28 billion.

But, do the fundamentals and future growth prospects of HDFC AMC justify the demand for its IPO?

Read our Co-head of Research, Tanushree Banerjee's IPO note here...

With buoyant capital markets and the mutual fund industry on a roll, AMCs are eager to hit the market with their IPOs.

With HDFC AMC's IPO hitting the markets, many are expected to follow HDFC AMC. This opens up an entirely new segment for investors.

The first mover in this race was Anil Ambani promoted Reliance Nippon Life Asset Management Company that came up with a Rs 15.4 billion offering in October last year.

Interestingly, UTI AMC has also announced plans to list this financial year.

The AMCs' plan to go public follows a growing trend where banks and financial services are looking to unlock value in group businesses after the rapid rise in stock markets.

Meanwhile, women's apparel maker TCNS Clothing made a debut on the bourses today.

The final issue price was fixed at higher end of price band of Rs 714-716 per share. The 11.3-billion initial public offer had received good response from institutional investors, subscribing 5.3 times during July 18-20.

The offer received bids for 5.8 million equity shares against the total issue size of 1.1 million shares (excluding anchor portion of 47,14,210 shares).

TCNS Clothing share price ended the day down 8% from its issue price.