Sensex, Nifty Close at Record Highs; Healthcare and Power Stocks Witness Buying
Closing

Indian share markets continued to trade on a flat during closing hours of trade and ended the day marginally higher to close at fresh record high levels. Gains were largely seen in the healthcare sector and power sector.

Both, the Sensex and Nifty, ended their day at record closing highs. At the closing bell, the BSE Sensex stood higher by 7 points (up 0.02%) and the NSE Nifty closed higher by 19 points (up 0.17%). The BSE Mid Cap index ended the day up by 0.5%, while the BSE Small Cap index ended the day up by 0.3%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 0.56% and the Nikkei was trading up by 0.09%. The Shanghai Composite stood higher by 1.29%.

European markets were trading on a mixed note. The FTSE 100 was down by 0.23%. The DAX was up by 0.63% while the CAC 40 was up by 0.75%.

The rupee was trading at 69.85 to the US$ at the time of writing.

In the news from pharma space, Lupin share price was in focus today as the company said it has received final approval from the United States Food and Drug Administration (USFDA) to market Hydrocortisone Butyrate lotion.

Hydrocortisone Butyrate Lotion is the generic version of PreCision's Locoid Lotion, 0.1%. It is a corticosteroid indicated for the topical treatment of mild to moderate atopic dermatitis in patients 3 months of age and older.

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But the best part is that he has done that with an accuracy of almost 90% Success Rate since inception.

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As per the data, the lotion had annual sales of approximately US$ 13.8 million in the US.

Owing to the above news, Lupin share price witnessed buying interest and ended the day up by 2.2% on the BSE.

Speaking of drug approvals, 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.

Generic Drug Approvals Hit the Roof

Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in FY16. While faster approvals expedite the commercialization 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 our premium safe stocks recommendation service StockSelect and have also remained bullish on pharma stocks in our long term service, ValuePro.

Moving on, airline stocks were also witnessing buying interest today. Gains were seen as official data showed that domestic passenger traffic grew 21% in July on a year-on-year (YoY) basis.

As per the data released by the Directorate General of Civil Aviation (DGCA), domestic airlines carried 11.6 million passengers in July this year.

The country's largest domestic airline, IndiGo increased its monthly passenger count by 31.7% YoY to 4.86 million. Jet Airways reported 0.5% YoY growth with 1.74 million tourists booking its flights. National carrier Air India recorded a 10.7% YoY growth in air traffic, carrying 1.43 million passengers, while SpiceJet carried 1.42 million passengers in July, up 5% YoY.

For GoAir, domestic passenger traffic grew by 38.4% YoY to 1.02 million and the same for AirAsia and Vistara was 0.55 million and 0.45 million passengers, respectively, up by 62% and 29% YoY.

Note that India's aviation industry is on a high-growth trajectory. India's domestic air traffic has seen a prolific growth of 20-25% during 2015 and 2016. And in 2017, it tapered to 17.4%. However, for the first time, domestic air traffic crossed an important landmark of 100 million passengers in a calendar year.

Air travel has recorded double-digit growth for 40 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.

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.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Now you can also listen to our stock market podcast. In the latest edition of our podcast, we have talked about the falling rupee, trade deficit, and the how Turkish crisis can affect your portfolio of stocks. Just visit SoundCloud, iTunes or Stitcher and access our free weekly podcast. Happy listening!


Indian Indices Trade Flat; Energy and Power Stocks Witness Buying
12:30 pm

Share markets in India are presently trading near the dotted line. Sectoral indices are trading on a mixed note with stocks in the energy sector and power sector witnessing maximum buying interest. Stocks from the realty sector are trading in the red.

The BSE Sensex is trading up by 12 points (up 0.03%), while the NSE Nifty is trading up by 15 points (up 0.1%). The BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.3%.

The rupee is trading at 69.69 to the US$.

In the news from global financial markets, US President Donald Trump said that he does not expect much progress from trade talks with China this week.

As per the news, Trump said that he had no time frame for ending the trade dispute with China.

The talks in Washington between the US and China come as new US tariffs on US$ 16 billion of Chinese goods take effect on Thursday this week.

Note that earlier this month, the Trump administration announced to impose 25% tariffs on imports of 279 items from China amounting to US$ 16 billion.

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Rahul Shah's Accelerated Profits Summit…


At 5 PM, on 24th August, Rahul Shah is going to reveal his PROVEN "Accelerated Profits Strategy".

The strategy that has helped him identify 'almost unknown' stocks which went on to generated double and even triple digit returns…in a matter of months!

But the best part is that he has done that with an accuracy of almost 90% Success Rate since inception.

PLUS, overall, his strategy has actually generated Buffett-Beating Returns.

Sounds unbelievable?

Well, join him on the 24th and see the results for yourself…

And find out how you could Instant Access to 6 Immediately Actionable Accelerated Profits opportunities too!

Click Here To Reserve Your Spot…
------------------------------

The US Trade Representative said that the move is a part of the US' response to China's unfair trade practices related to the forced transfer of American technology and intellectual property.

This is the second tranche of such tariffs and is set to come into effect on August 23.

US had already imposed tariffs on US$ 34 billion worth of goods on July 6 but held off on a final US$ 16 billion in goods as a result of concerns from US companies.

How this trade war pans out remains to be seen. Meanwhile, we will keep you updated from all the developments from this space.

From the IT sector, HCL Technologies share price is in focus today. The stock of the company is witnessing buying interest as the company's shareholders approved a Rs 40 billion share buyback proposal.

The buyback is part of the company's strategy to return more than 50% of its net income to the shareholders. As per the company filing, HCL Technologies said that 99.59% shareholders had voted in favour of the proposal.

The board of the company has fixed August 31 as the record date for the buyback offer.

Apart from HCL Technologies, L&T share price is also in focus today following the news of its buyback plan. As per the company filing, the meeting of the board of directors is scheduled on coming Thursday to consider a proposal for buyback of equity shares.

Speaking of buybacks, the number of buyback offers in 2017-18 were at an all-time high. Never, in the last two decades, had Indian markets seen fifty-nine companies announcing buyback plans.

But what is truly surprising is that unlike in the past, the buybacks this time seem skewed in favour of short term investors rather than long term ones.

Who Benefits from Such Buybacks?

Here's what Tanushree Banerjee, Co-head of Research at Equitymaster, wrote about it in The 5 Minute WrapUp...

  • Look at the history of buybacks since 2002. Logically promoters should offer to buyback shares at a premium when the stock is undervalued. And this logic held true until recently. The number of buybacks peaked when market valuations were low. And in times of peak valuations (like 2007 and 2011), promoters refrained from doing so.

    But not this time. The trend of rising buybacks in the last two years, resembles the sentiment of a momentum investor. The appetite to buy shares kept rising with the rising markets. And the latest buybacks of stocks like TCS and MOIL, came at a time, when neither the broader index (Sensex) nor the stocks themselves, are undervalued.

At Equitymaster, we believe, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

  • The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

The topic also brings us to ask: Do buy-backs offer an arbitrage opportunity for retail investors? Ankit Shah has answered this question in one of the editions of Equitymaster Insider. You can access the issue here (requires subscription).

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Now you can also listen to our stock market podcast. In the latest edition of our podcast, we have talked about the falling rupee, trade deficit, and the how Turkish crisis can affect your portfolio of stocks. Just visit SoundCloud, iTunes or Stitcher and access our free weekly podcast. Happy listening!


Indian Share Markets Open Flat; Realty & Metal Stocks Drag
09:30 am

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is flat while the Hang Seng is up 0.4%. The Shanghai Composite is trading up by 1.4%. Wall Street's major indices rose on Monday on optimism over trade talks between the United States and China, though they fell from session highs after President Donald Trump criticized the Federal Reserve's raising interest rates.

Back home, India share markets have opened the day on a flattish note. The BSE Sensex is trading up by 26 points while the NSE Nifty is trading up by 15 points. The BSE Mid Cap index opened up by 0.4% while BSE Small Cap index opened the day up by 0.3%.

The rupee is currently trading at 69.76 to the US$.

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

In the news from the economy. As per Fitch Ratings Ltd, the impact of the sharp fall in the rupee is likely to be limited on India's sovereign ratings.

The fallout is limited courtesy India's strong external finances, especially the low levels of external debt, the rating agency said. However, in a note of caution, Fitch said the currency depreciation could add to existing pressures in the corporate and banking sector.

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Rahul Shah's Accelerated Profits Summit…


At 5 PM, on 24th August, Rahul Shah is going to reveal his PROVEN "Accelerated Profits Strategy".

The strategy that has helped him identify 'almost unknown' stocks which went on to generated double and even triple digit returns…in a matter of months!

But the best part is that he has done that with an accuracy of almost 90% Success Rate since inception.

PLUS, overall, his strategy has actually generated Buffett-Beating Returns.

Sounds unbelievable?

Well, join him on the 24th and see the results for yourself…

And find out how you could Instant Access to 6 Immediately Actionable Accelerated Profits opportunities too!

Click Here To Reserve Your Spot…
------------------------------

The rupee has been one of the worst performers among Asian currencies, having depreciated by around 9% from the beginning of the year and crossed the psychological level of 70 to a dollar earlier this month.

Fitch said the rupee has been among the emerging market currencies affected by pressures from global monetary tightening and, more recently, contagion from the Turkey crisis.

Widening of the trade deficit in July 2018 to its largest gap since May 2013 and net portfolio outflows through mid-August totalling US$5.5 billion for the year, mostly in bonds, compared with inflows of US$27.9 billion over the same period in 2017 have also added to the pressure on the rupee, it said in a note.

However, India's vulnerability to currency risk and capital outflows is unlikely to translate into significant pressure on the sovereign credit profile or pose external financing risks.

The current account deficit has widened as global oil prices have risen, but at 1.9% of GDP in the first quarter of 2018-19 was still well below the 5% of GDP recorded around the time of the 2013 taper tantrum, Fitch said, adding that it expects the full year current account deficit to be below 3% of GDP in the fiscal year ending March 2019.

Further, foreign exchange reserves have declined by US$24 billion since mid-April 2018, but still cover 7.2 months of current account payments, compared with the 'BBB' median of 6.6, providing a buffer should the Reserve Bank of India (RBI) feel it necessary to intervene on a larger scale, it added.

The recent weakness in the rupee versus the US dollar indicates further trouble for the market ahead. As seen from the below chart, when the Sensex corrected to its multi-year lows in March 2009, the rupee had also weakened by 21% in the past 9 months. Similarly, when Sensex hit an all-time high in January 2018, the rupee had been gradually strengthening over the past year.

Change in the Rupee and Sensex in the Past 10 Years

Post January, the rupee has been on a constant decline versus the dollar.

Increase in US bond yields has made it attractive for foreign investors. This has resulted in capital outflows from the Indian market. Past history has shown that any further weakening of the rupee will adversely impact the market.

But for investors, is it a matter of concern? If you have a horizon of 10 or more years, it shouldn't. As we can see from the chart, despite the rupee weakening by over 60% in the past decade, Sensex has also been up in the same period.

By the way, in our latest edition of the stock market podcast, we have talked about the falling rupee, trade deficits and Turkish crisis can affect your portfolio of stocks. Just visit SoundCloud, iTunes or Stitcher and access our free weekly podcast. Happy listening!

Moving on to the news from the aviation sector. As per an article in a leading financial daily, Private equity firm TPG Capital is considering investing in India's Jet Airways. This plan that could raise money for the beleaguered airline.

Reportedly, the investment could be more than US$100 million. Further, TPG is looking to buy a stake in Jet Airways' frequent-flyer loyalty programme and has appointed Morgan Stanley to advise on the potential deal.

The deal with TPG could value the loyalty programme, Jet Privilege Private Ltd, at US$400 million, the reports noted, adding that Jet continues to engage with Blackstone Group for a similar deal.

Meanwhile, the Ministry of Corporate Affairs is probing allegations of fund siphoning at Jet Airways.

The inquiry comes in the backdrop of Jet Airways deferring its first quarter results. While as per the reports, the delay in announcing its result was attributed to differences with auditors, the airline denied any clash between the two. Subsequently, the company said it would declare the first quarter result on August 27.

Jet Airways share price opened the day down by 1.7%.

To know more about the company, you can access to Jet Airways' latest result analysis and Jet Airways' 2017-18 Annual Report Analysis on our website. Meanwhile, you can also check our recently released Q1FY19 result analysis of The Byke hospitality, Ruchi Soya Industries, Tata Steel among others.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.


Indian Indices Scale Record Highs, India's Current Account Deficit, and Top Stocks in Focus Today
Pre-Open

Indian share markets continued their momentum during closing hours of trade yesterday and ended the day at their fresh record high levels. Gains were largely seen in the metal sector and energy sector.

Both, the Sensex and Nifty, ended at record closing highs yesterday. At the closing bell, the BSE Sensex stood higher by 331 points (up 0.9%) and the NSE Nifty closed higher by 81 points (up 0.7%). The BSE Mid Cap index ended the day up by 1.1%, while the BSE Small Cap index ended the day up by 0.1%.

Top Stocks in Focus Today

Gitanjali Gems share price, Panoramic Universal share price, and Amtek Auto share price will be in focus today. The scrips of these stocks hit their lower circuit limits yesterday after NSE and BSE announced that they will suspend trading in these firms from September 10.

From the IT sector, Infosys share price will also be in focus today. The stock of the company witnessed selling pressure yesterday after the news of resignation of Chief Financial Officer (CFO) MD Ranganath. The company has informed stock exchanges that it will immediately commence the search for the next CFO.

From the engineering sector, market participants will also be tracking Larsen & Toubro (L&T) share price. This comes as the company on Saturday said its board would consider a proposal for buyback of equity shares next week. If approved, this would be the first-ever buyback by the firm.

If the above buyback is approved, L&T will join companies such as Tata Consultancy Services (buyback size of Rs 160 billion) and HCL Technologies (Rs 40 billion), which have announced buybacks in the last few months. To know more about the company, you can access to L&T's latest result analysis and L&T's 2017-18 Annual Report Analysis on our website.

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Last 4 Days To Claim Your FREE Spot For
Rahul Shah's Accelerated Profits Summit…


At 5 PM, on 24th August, Rahul Shah is going to reveal his PROVEN "Accelerated Profits Strategy".

The strategy that has helped him identify 'almost unknown' stocks which went on to generated double and even triple digit returns…in a matter of months!

But the best part is that he has done that with an accuracy of almost 90% Success Rate since inception.

PLUS, overall, his strategy has actually generated Buffett-Beating Returns.

Sounds unbelievable?

Well, join him on the 24th and see the results for yourself…

And find out how you could Instant Access to 6 Immediately Actionable Accelerated Profits opportunities too!

Click Here To Reserve Your Spot…
------------------------------

China and the US to Hold Trade Talks This Month

In the news from global financial markets, China and the US will be holding lower-level trade talks this month. The news comes as a welcome breather in that the two nations might resolve the ongoing trade war.

As per the news, a Chinese delegation led by Vice Minister of Commerce Wang Shouwen will meet US representatives led by Treasury Under Secretary for International Affairs David Malpass.

The talks in Washington would take place on August 22 and 23, just as new US tariffs on US$ 16 billion of Chinese goods take effect.

Note that earlier this month, the Trump administration announced to impose 25% tariffs on imports of 279 items from China amounting to US$ 16 billion.

This is the second tranche of such tariffs and is set to come into effect on August 23. US had already imposed tariffs on US$ 34 billion worth of goods on July 6 but held off on a final US$ 16 billion in goods as a result of concerns from US companies.

How this trade war pans out remains to be seen. Meanwhile, we will keep you updated from all the developments from this space.

India's CAD to Widen to 2.8%

In the news from the economy, as per an article in a leading financial daily, India's current account deficit (CAD) is expected to widen to 2.8% of gross domestic product (GDP) in this financial year from 1.9% in 2017-18.

With rising oil prices, a depreciating rupee and outflow of foreign portfolio investments, there are concerns that the current account deficit might rise in the current fiscal year.

The current account deficit, which is the difference between the inflow and outflow of foreign exchange, jumped to US$48.7 billion, or 1.9% of GDP, in 2017-18. This was higher than US$14.4 billion, or 0.6%, in 2016-17.

India's exports rose by 14.3% to US$25.8 billion in July, while imports during the month were valued at US$43.8 billion.

According to report, the downside risks to exports remain due to a weaker global growth outlook though currency depreciation could provide some relief to exporters. On the other hand, import growth, is likely to remain elevated in the near-term due to high oil prices, though a weak rupee and a domestic slowdown could moderate imports in coming quarters.

Note that the rupee has been among the worst-performing currencies against the dollar so far this year and settled below the 70-mark for the first time in history on 16 August on strong demand for the dollar amid the ongoing Turkish crisis.

In our latest edition of the stock market podcast, we have talked about the Turkish crisis and how it can affect your portfolio of stocks. Just visit SoundCloud, iTunes or Stitcher and access our free weekly podcast. Happy listening!

Government to Raise Rs 100-120 bn via Share Buybacks

In other news, as per a leading financial daily, the government is looking to raise Rs 100 to 120 billion through share buybacks in 6 to 8 public sector undertakings (PSUs) in the ongoing financial year.

As per the news, Indian Oil Corporation (IOC), NTPC, ONGC, and Oil India are among the companies that will likely buy back some shares from the government.

Speaking of buybacks, the number of buyback offers in 2017-18 were at an all-time high. Never, in the last two decades, had Indian markets seen fifty-nine companies announcing buyback plans.

But what is truly surprising is that unlike in the past, the buybacks this time seem skewed in favour of short term investors rather than long term ones.

Here's what Tanushree Banerjee, Co-head of Research at Equitymaster, wrote about it in The 5 Minute WrapUp...

  • Look at the history of buybacks since 2002. Logically promoters should offer to buyback shares at a premium when the stock is undervalued. And this logic held true until recently. The number of buybacks peaked when market valuations were low. And in times of peak valuations (like 2007 and 2011), promoters refrained from doing so.

    But not this time. The trend of rising buybacks in the last two years, resembles the sentiment of a momentum investor. The appetite to buy shares kept rising with the rising markets. And the latest buybacks of stocks like TCS and MOIL, came at a time, when neither the broader index (Sensex) nor the stocks themselves, are undervalued.

At Equitymaster, we believe, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

It's a matter of time before you get to use the cash for buying stocks, you've always wanted to, at attractive bargains.