Sensex Closes Weak; Metal & Banking Stocks Fall
Closing

Share markets in India extended their losses to finish the day deep in red. At the closing bell, the BSE Sensex closed lower by 239 points while the NSE Nifty finished lower by 68 points. Meanwhile, the S&P BSE Midcap Index and the S&P BSE Small Cap Index ended down by 0.5% & 1% respectively.

Barring energy stocks & consumer durables stocks, all sectoral indices finished the day in red with metal sector and bank sector witnessing maximum selling pressure.

Overseas, Asian equity markets finished lower today with shares in China leading the region. The Shanghai Composite is down 0.37% while Hong Kong's Hang Seng is off 0.28% and Japan's Nikkei 225 is lower by 0.25%. European markets are mixed. The FTSE 100 is higher by 0.02%, while the CAC 40 is leading the DAX lower. They are down 0.30% and 0.16% respectively.

The rupee was trading at Rs 64.63 against the US$ in the afternoon session. Oil prices were trading at US$ 49.76 at the time of writing.

Coal India share price tanked 3.4% on the reports that the company produced 155.4 million tonnes (mt) of coal in April-July of 2017- 18, missing the target by 12.6 mt. The production goal for April-July was 168 mt, as per the reports.

Indian Oil Corporation share price surged 4.6% after it reported a fall of 45% in its net profit at Rs 45.5 billion for the quarter under review as compared to Rs 82.7 billion for the same quarter in the previous year. Analysts on average had expected a net profit of Rs 30.6 billion for the first quarter.

Pharma stocks closed the day on a mixed note with Strides Shasun and Lupin leading the losses. Lupin share price fell over 3.8% after it reported 59.4% decline in consolidated net profit to Rs 3.6 billion for the quarter ended on 30 June 2017, due to price erosion of some products, lower US sales and disruption due to GST implementation in the country. The company had posted a net profit of Rs 8.8 billion for the corresponding period of the previous fiscal.

The company's sales in North America for the first quarter of FY2018 were at Rs 16 billion as against Rs 21.9 billion during corresponding period of the previous fiscal, accounting for 42% of global sales.

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Further, the company's India formulation sales stood at Rs 9.3 billion during Q1 FY2018 accounting for 25% of Lupin's global sales.

On a separate note, Lupin has received final approval for its Rosuvastatin Calcium Tablets 5 mg, 10 mg, 20 mg and 40 mg from the United States Food and Drug Administration (USFDA). Crestor tablets had US sales of US$ 3.4 billion as per IMS MAT March 2017. The tablets are the AB rated generic equivalent of iPR Pharmaceuticals, Inc's Crestor tablets.

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. But what has come as a breather is a sharp pick-up in new drug approvals in 2017.

USFDA sweetener for Indian Pharma

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.

However, as per our research analyst Taha Merchant, the uncertainties make it important to be stock specific in the sector. It is important to look for companies that have the competence and staying power.

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?

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Moving on to the news from the economy. Following similar trend to the contraction in manufacturing sector, activity in India's service sector too contracted in the month of July to its lowest level since September 2013, on the back of the implementation of the goods and services tax (GST).

The seasonally adjusted Nikkei Services Business Activity Index fell to 45.9 in July from 53.1 in June. The Nikkei India Composite PMI Output Index which measures both manufacturing and services also plunged to 46.0 in July from 52.7 in June.

The report also signaled the first downturn in output and new work since January which had an adverse effect on the labour market, with employment contracting over the month. Similarly, factory orders decreased in July and at the quickest pace since February 2009.

On the price front, services charges rose at the sharpest rate in almost four and a half years during July, while manufacturers offered discounts in order to stimulate demand.

However, Indian service providers exhibited optimism towards the 12-month outlook for activity, with hopes of a better understanding around the new tax regime boosting confidence.

And here's a note from Profit Hunter:

While the stock markets are trading near their new life highs, Coal India is hitting new 52-week lows. The stock is the top loser in the Nifty 50 index today - down 3.5%.

The stock got listed in November 2010 and since then it has been traded in a broad range of 240-480. The stock corrected from the upper end of the range in August 2015 to a low of Rs 272 in April 2016. It then bounced to Rs 350, but the down move continued and the stock broke below the 270 level to hit a 52-week low.

It corrected further but bounced strongly after finding support near the bottom end of the broad range near 240 level in June (the level acted as support in August 2013 and February 2014 as well). But the bear continued to dominate. And today, the stock hit a new 52-week low to trade near the 240 level.

So it will be interesting to see if the stock can find support at the 240 level yet again or if it will slip down to break the broad range...

Coal India at a New 52-Week Low
Coal India at a New 52-Week Low 


Indian Indices Trade in Red; Metal Stocks Drag
01:30 pm

After opening the day marginally lower, share markets in India have continued the downtrend and are currently trading below the dotted line. Sectoral indices are trading on a mixed note with stocks in the metal sector and stocks in the banking sector leading the losses, while stocks in the oil and gas sector and stocks in the pharma sector are trading in green.

The BSE Sensex is trading down by 121 points (down 0.4%), and the NSE Nifty is trading down by 30 points (down 0.3%). Meanwhile, the BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading down by 0.1% The rupee is trading at 63.67 to the US$.

In news from stocks in the banking sector. Public sector lender State Bank of India (SBI) announced plans to raise over Rs 20 billion by issuing bonds.

The bank aims to raise funds by allotting Basel-III compliant bonds worth over Rs 20 billion to various investors.

The bank in a statement announced that the bank will allot 20,000 AT1 Basel-III compliant non-convertible, perpetual, subordinated bonds in the nature of debentures. The bonds will carry a coupon rate of 8.15% with a call option after 5 years.

With this development, SBI joins the increasing list of companies opting to raise funds via bond issues.

Increasing Bond Issues by Indian Companies

Indian companies raised a record US$ 46.5 in debt and equity in 2017, the highest amount in the last decade. 64% of these funds are from the financial sector. What is interesting is that the energy and power sector was the second highest in raising funds. Also, amongst the financial sector companies, Power finance corp. Ltd (PFC) which raised US$ 3.5 billion was one of the largest fundraisers.

Recently, the SBI had cut interest rates on savings deposits up to Rs 1 crore by 0.5% to 3.5%, lowest in six years, a decision that will impact 90% of its customers.

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At the time of writing, SBI share price was trading down by 1.5%.

Moving on to news from the pharmaceuticals sector. In an attempt to speed up availability of medicines, the government is mulling a move to abolish clinical trials for drugs already approved in the overseas markets.

According to the proposed rules, the government suggested waiving local clinical trials for drugs that have not had any major adverse effects on patients. These drugs should have been approved and marketed for at least two years in the European Union, UK, US, Australia, Canada and Japan.

The move is expected to reduce the time taken by a company to introduce new drugs in the market from 5-6 years to as few as 45 days. According to the drug regulator, the move will also lower the cost of drugs.

These new rules will make it easier for pharma companies to introduce drugs in India, which are already in use in regulated countries, without going through the lengthy clinical trial process.

This move, once approved stands to improve ease of business for healthcare companies looking to introduce drugs in the Indian market.

At the time of writing, the pharma sector was among the top gainers in the market, up 0.5%.


Indian Indices Extend Losses; Banking Sector Down 1.2%
11:30 am

After opening the day marginally lower, Indian share markets witnessed further losses and went on to trade in the red. Sectoral indices are trading on a negative note with stocks from the metal sector and the banking sector witnessing maximum selling pressure.

The BSE Sensex is trading down 145 points (down 0.5%) and the NSE Nifty is trading down 39 points (down 0.4%). Meanwhile, the BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading down 0.3%. The rupee is trading at 63.68 to the US$.

The RBI, after identifying 12 large accounts for resolution under the bankruptcy code, is likely to take more such steps to tackle the bad loan problem in India.

This comes as the RBI Governor Urjit Patel said that the government and the RBI are working in close coordination to resolve large stressed corporate borrowers and recapitalize PSBs within the fiscal deficit target.

The bad loans at Indian banks have only been rising, as can be seen from the chart below:

Rising Bad Loans at Indian Banks

Gross non-performing assets (GNPA) of Indian banks rose from 9.2% in September 2016 to 9.6% in March 2017. GNPA refers to the total value of loans on which interest and principal income has not been received by the bank for more than ninety days. For some banks, the ratio of GNPAs to total lending is more than 20%. This means more than Rs 20 out of every Rs 100 lent is at the risk of not coming back.

The RBI expects the average GNPA ratio to increase to 10.2% by March 2018. It indicated that if macroeconomic conditions worsen, this number could go up.

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The problem of bad loans is indeed quite severe and when we compare it with other global peers it looks daunting.

Out of the ten major economies facing NPA problems, India is ranked seventh.

The overhang of bad debts has not only hit the bank's profitability, but has also restricted their loan book growth.

However, the ongoing developments by the government and the RBI comes as a significant step in the long overdue process of recovery of loans choking the banking system.

Bad loan recovery has gathered momentum after years of hesitation since the government empowered RBI to direct banks to take big defaulters through the process prescribed under the Insolvency and Bankruptcy Code (IBC) that specifies timebound resolution.

In the news from global financial markets, Japan's service sector expanded at a slower pace in July. This came as the Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to a seasonally adjusted 52.0 from 53.3 in June.

The above fall was seen as new orders eased in the month of July and signaled that Japan's economic activity may be moderating.

Data showed that growth in new business eased, while companies continued to hire new staff but also at a slower pace.

The above data comes shortly after the final manufacturing PMI which showed Japan's factory activity grew at the slowest pace in eight months.

Taken together, the composite PMI, which includes both manufacturing and services, fell to 51.8 in July from 52.9 in June.

One shall note that there remain many issues that can hamper Japan's economic growth. The economy is flooded with excessive money printing, too much debt, too much government intervention, and stock market manipulation.

The BoJ's moves are in line with the easy money policies that central banks have adopted around the world. However, with the changes at central banks in 2016, it seems that the end of easy money is near.

In the news from GST space, Finance minister Arun Jaitley said there is scope to rationalise GST and rolling 12% and 18% slabs into one as the implementation progresses.

Presently, GST has 5%, 12%, 18% and 28% rates, plus one for luxury and sin goods. Besides, there are some goods that are zero rated, or have a nil rate.

The above proposal, if implemented, will lead to further simplification in the taxation process. How the development pans out remain to be seen. Meanwhile, we'll keep you updated on the recent happenings in the GST space.

Speaking of GST, the Goods and Services Tax became the order of the day last month. And all these months we have been subjected to a relentless propaganda by the government and the supporters of the GST, on how it will change our world, only for good.

Our colleague Vivek Kaul, has studied the finer aspects of the GST and predicted what could go right and wrong.

Download his special report - The Good, the Sad and the Terrible (GST).


Sensex & Nifty Open Marginally Lower; Bank Stocks Lead the Losses
09:30 am

Asian indexes were mostly lower on Thursday as the dollar recovered slightly from a two-and-a-half year low touched overnight against the euro. The Nikkei 225 is off 0.38%, while the Hang Seng is down 0.12%. The Shanghai Composite is trading down by 0.24%. Overnight, the US markets closed slightly higher supported by upbeat earnings.

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 40 points while the NSE Nifty is trading lower by 21 points. The BSE Mid Cap and BSE Small Cap index both opened the day on a flat note.

Sectoral indices have opened the day on a mixed note with energy stocks and healthcare stocks leading the gains. While bank stocks and FMCG stocks have opened the day in the red. The rupee is trading at 64.07 to the US$.

Telecom stocks opened the day on a mixed note with Reliance Communications and MTNL leading the losses. As per an article in The Livemint, Bharti Airtel Ltd is considering selling about a 3% stake in its tower unit through an institutional share sale as the company is weighing the sale to cut its net debt.

Bharti Airtel had Rs 878.4 billion of net debt at the end of June, according to company filings.

In March, a consortium of KKR & Co. and Canada Pension Plan Investment Board (CPPIB) bought a 10.3% in its tower unit for Rs 61.93 billion.

Competition has been intensifying in the telecom market, as the entry of Reliance Jio Infocomm Ltd backed Mukesh Ambani has impelled rivals to slash tariffs and consolidate. A planned combination of Vodafone Group Plc's Indian unit with Idea Cellular Ltd will topple Airtel as the dominant mobile-phone operator in the nation.

Bharti Airtel share price opened the trading day up by 0.3%.

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Moving on to the news from IPO space. The initial share sale offer of Cochin Shipyard was oversubscribed 3.16 times on the second day of the three-day bidding today.

The company has set a price band of Rs 424-432 per share for the initial share sale.

The IPO is a fresh issue of 22.65 million shares, which at the upper end of the price band will fetch the company over Rs 9.8 billion. There is also an offer for sale of 11.3 million shares. At the upper end of the price band, the government, which is selling 10% stake, will raise over Rs 4.9 billion.

The funds will be used to fund two major projects and also to improve the existing facilities.

But, do the company's fundamentals justify the price it is asking? Should you subscribe to it? Read on to find out.

Meanwhile, Security and Intelligence Services Limited (SIS) was oversubscribed 7 times on the last day of bidding.

SIS had priced its shares in a band of Rs 805-815. The IPO is a fresh issue of 5.12 million shares, which at the upper end of the price band will fetch Rs 3.6 billion to the company.

According to Livemint, 15 companies have raised Rs 125.8 billion through IPOs in 2017. In 2016, the Indian primary market saw 27 companies raise Rs 264.9 billion through IPOs.

The Bonanza of IPOs in Indian Markets

However, in the big bad world of IPOs, many a management promise turns out to be a mere mirage.

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RBI Rate Cut, Cochin Shipyard IPO and Top Stocks in Action Today
Pre-Open

On Wednesday, the share markets in India traded on a cautious note throughout the day, and declined in the last hour of trade as the Reserve Bank of India's (RBI) monetary policy statement failed to enthuse investor sentiment.

The BSE Sensex closed lower by 98 points to end at 32,476 while the broader NSE Nifty ended the day lower by 33 points to close at 10,082.

IT stocks were among the top losers on Tuesday as Infosys, TCS, Wipro ended the day in red, while NTPC, Lupin and Hero Motor Corp were the major gainers.

RBI Cuts Key Interest Rates

The RBI monetary policy committee (MPC) announced a 25 basis points cut in the policy rate citing a sharp fall in inflation. As per Livemint, RBI noted that there are several uncertainties to the inflation trajectory such as farm loan waiver impact on state finances and maintained the neutral stance of monetary policy. This is the first rate cut since October 2016 and the interest rate is now at a 6-year low.

While a rate cut may lead to some volatility in the share markets today, one would do well to not be affected by the short-term volatility.

At Equitymaster, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus all our energy on understanding the underlying business strength of companies.

In fact, the ValuePro team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles.

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Top Stocks in Action Today

Lupin share price will be in focus again today after the pharma major declared its results for the June quarter. The company posted a 59% drop in consolidated net profits, however it managed to hold on to its earlier gains on the back of approval from US drug regulator for its generic lidex ointment.

Coal India share price is likely to be in focus today after the state-owned coal miner missed its April-July output target. The miner produced 155.4 million tonnes (mt) of coal in the April-July period as against the target of 168 mt. Production in July was 36.6 mt as against the target of 37.6 mt.

Banking sector stocks will be in focus today as the effects of the RBI's decision to cut rates will continue to price in.

Company Earnings That Will Drive Indian Markets Today

Companies which will be reporting June quarter earnings today include Bajaj Electricals, Ceat ltd, ICRA, PNB Housing Finance, Titan among others.

Oil Prices Back to Below US$ 50 per Barrel

Oil prices fell over 1% on Wednesday as a surprise rise in US fuel inventories pulled the US crude back below US$ 50 per barrel, while the ongoing pumping of oil from OPEC weighed on the international prices.

Cochin Shipyard IPO Oversubscribed on Second Day

The initial share sale offer of Cochin Shipyard was oversubscribed 1.4 times on the second day of bidding yesterday.

The IPO received bids for 4,77,48,420 shares against the total issue size of 3,39,84,000, data available with the NSE showed.

Do the company's fundamentals justify the price it is asking? Should you subscribe to it? Read on to find out.

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.

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.