Sensex Finishes on a Strong Note; Bharat Petroleum Rallies 4.3%
Closing

Indian share markets continued to trade strong in the afternoon session ahead of key macroeconomic data to be released later in the day and amid strong Asian markets.

At the closing bell, the BSE Sensex closed higher by 277 points and the NSE Nifty finished up 87 points. The S&P BSE Mid Cap finished up by 1.1% while & S&P BSE Small Cap too finished up by 1%. Gains were largely seen in realty stocks, pharma stocks and energy stocks.

Tata Steel share price surged 3.3% after it was reported that a deal to merge the European steel operations of Tata Steel and ThyssenKrupp could be struck this month, after Tata Steel removed a significant obstacle by offloading its UK retirement fund.

Tata Steel had earlier announced that Britain's pensions regulator has approved a regulated apportionment arrangement in respect of the British Steel Pension Scheme.

Asian stock markets finished broadly higher today with shares in Japan leading the region. The Nikkei 225 is up 1.18% while China's Shanghai Composite is up 0.09% and Hong Kong's Hang Seng is up 0.06%. European markets are mixed today. The DAX is up 0.54% while the CAC 40 gains 0.48%. The FTSE 100 is off 0.15%.

The rupee was trading at Rs 63.94 against the US$ in the afternoon session. Oil prices were trading at US$ 47.84 at the time of writing.

As per a leading financial daily, global rating agency, Fitch ratings in its latest report has said that the public sector banks may need around US$ 65 billion of additional capital by March 2019 to meet the new Basel-III capital norms raising concerns over weak capital positions in Indian banking system.

However, this latest estimated amount of capital requirement is lower than previous estimation done by the rating agency at US$ 90 billion, on account of asset rationalisation and weaker-than-expected loan growth.

Fitch ratings also expressed need to address issue to avoid negative influence of weak capital positions on Indian banks' Viability Ratings, stating that state banks have limited options to raise the capital they still require and are likely to be dependent on the state to meet core capital requirements. The rating agency further noted weak prospects for internal capital generation, pointing that low investor confidence impedes access to the equity capital market.

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PSB stocks finished the day on a strong note with Indian Overseas Bank share price and Vijaya Bank share price leading the gains.

Hindustan Unilever Ltd (HUL) share price finished up by 2.3% on the BSE as the company joined a chorus of foreign consumer packaged goods firms betting on India becoming their largest market in the coming years.

India could become Unilever's biggest market, Paul Polman, chief executive of the company, said in an interview with the Economic Times on Monday but did not specify a timeline. Reportedly, India contributes 9% to Unilever's total sales of €4.5 billion.

Meanwhile, Patanjali seems to have disrupted the FMCG pecking order. The share of Indian households that use the Patanjali brand is estimated at 38%. That's huge for a company barely a decade and a half old. Especially if you consider Patanjali's competition.

Patanjali Disrupts FMCG Pecking Order

In 2016-17, the company posted revenues of more than Rs 100 billion. It has surged past behemoths such as ITC, Nestle India, Britannia Industries, and Dabur to become the second largest pure play FMCG company...second only to HUL.

FMCG stocks finished the day on a firm note with Emami Ltd and Marico Ltd leading the gains.

In news from automobile sector, Force motors share price finished the trading day on an encouraging note (up 3.3%) after the company tied up with Rolls-Royce Power Systems AG to form an Indian joint venture company to produce engines for power generation and rail application.

Under the joint venture, Force Motors will produce complete power generation systems, including associated spare parts for Indian and global markets. Force Motors plans to build a dedicated facility under the joint venture at its existing premises at Chakan.

Moving on to news from energy sector, Bharat Petroleum Corporation Ltd (BPCL) share price surged 4.3% government has conferred Maharatna Status to the company.

Energy companies surged in today's trade as market participants cheered Petronet's successful renegotiation with Australia's Gorgon project for lower LNG prices. Over the weekend, oil minister Dharmendra Pradhan said they renegotiated the pricing of liquefied natural gas (LNG) imported from Australia's Gorgon project to make the imported fuel affordable to price-sensitive domestic customers.

And here's a note from Profit Hunter:

Divis Laboratories is one of the most actively traded stocks on the market today - up 12%.

Last time we reviewed the stock, it had broken out of an inverse head and shoulder pattern on the daily chart. The inverse head and shoulder pattern is a bottom reversal pattern indicating a change in the trend. The RSI indicator had also formed a bullish divergence with the price indicating a change in momentum.

After the breakout, the stock hit a high of Rs 760 and reacted towards the neckline of the pattern, which usually acts as a support post-breakout. The stock broke below this support, but it couldn't sustain down for long and it recovered immediately.

Today, the stock surpassed the intermediate high of Rs 760 and broke out of a bigger inverse head and shoulder pattern as seen in the chart below. It soared 12% with heavy volumes indicating strong buying interest.

Now if the stock is able to sustain above the neckline (black line) of the inverse head and shoulder pattern, it might continue to trade up. But on the flip side, if it breaks below the neckline it will open up lower levels for the stock.

Divis Lab Soared 12% for the Day
Divis Lab Soared 12% for the Day


Sensex Continues Momentum; Pharma Stocks Top Gainers
01:30 pm

After opening the day on a positive note, the Indian share markets have continued the trend and are currently trading comfortably in green. All sectoral indices are trading on a positive note, with stocks in the pharma sector and the realty sector witnessing maximum buying interest.

The BSE Sensex is trading up 160 points (up 0.5%) and the NSE Nifty is trading up 48 points (up 0.5%). Meanwhile, the BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 0.8%. The rupee is trading at 63.95 to the US$.

In news from the pharma sector, Sun Pharma is among the top gainers today.

The uptick came after Sun Pharma, the country's largest drug maker, announced that it received final ANDA (abbreviated new drug application) approval from the US Food and Drug Administration (USFDA) Fenofibrate Oral Tablet. The tablets are used for the treatment cholesterol and related problems.

At the time of writing, Sun Pharma share price was trading up by 2.1%.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

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We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

  • Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, our research analyst thinks there is.

Is the Worst Over for all the Pharma Stocks?

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plants, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

Moving on to news from the IPO space. Online matchmaking service provider Matrimony.com kicked off its initial share sale offer today. The initial public offering of the company was already subscribed by about 67% at the time of writing.

Matrimony.com is looking to raise Rs 1.3 billion through a fresh issue while an offer for sale (OFS) will be made for 3,767,254 equity shares at a price band of Rs 983-985 per share. The OFS is undertaken by the promoters and some of the investors, including private equity firms.

It is evident that the IPO is making a lot of waves, however is it worth your attention? We have analysed and reviewed the IPO and have released a recommendation note. You can check the same on the IPO page.

With multiple offerings lined up, it becomes difficult to evaluate and pick out the best opportunity, if any exists. Not all IPOs will have fortunes like the D-Mart IPO, as the IPO game is inherently rigged against the retail investor.

We don't need to back all the IPOs to get rich. But a few good IPOs could certainly become the multibagger in your portfolio in a few years.

We have come out with a special report titled, How to Get Rich with IPOs. It is a comprehensive report that aims to cut through all the hoopla surrounding IPOs. This guide will show you how to safely profit from the 2017 IPO rush.


Sensex Up Over 170 Points; Realty Stocks Witness Buying
11:30 am

After opening the day firm, stock markets in India maintained their tempo. Sectoral indices are trading on a positive note with stocks in the realty sector and oil & gas sector witnessing maximum buying interest.

The BSE Sensex is trading up 175 points (up 0.6%) and the NSE Nifty is trading up 49 points (up 0.5%). The BSE Mid Cap index is trading up by 0.7%, while the BSE Small Cap index is trading up by 0.9%. The rupee is trading at 63.97 to the US$.

Transport minister Nitin Gadkari said that the National Democratic Alliance (NDA) government is exploring a plan to raise Rs 10 trillion from retirees and provident fund beneficiaries for large infrastructure projects.

The plan aims to raise money in tranches of Rs 100 billion by selling 10-year bonds at a coupon of 7.25-7.75%. Each tranche will be meant for a specific project.

One shall note that the NDA is emphasizing on roads and highways projects lately. Their seriousness was evident in 2017-18 Union Budget's massive Rs 910 billion allocation to road development.

The increased allocation has meant a significant uptick in road construction activity. From a mere nine km/day in 2014, road construction activity has surged to 22.5 km/day in the first quarter of this fiscal. This is evident from the chart below:

Government Has Set a Target of 15,000 kms in the Current Fiscal

The reasons contributing to this above uptick have been a change in the model on the basis of which road projects are now awarded.

As a recent edition of The 5 Minute WrapUp explains...

  • For the past few years, the government has been awarding projects under the 'Build Operate Transfer' (BOT) model. Under this model, the developer had to arrange all of the financing for the project and was also responsible for toll collections, exposing them to the risk of low traffic.

    Because these projects require a huge amount of capital, the debt levels of many companies reached critical levels. To address the issue, the government introduced the 'Hybrid Annuity Model' (HAM). Under this model, the developer arranges 60% of the financing, with the balance 40% coming from the government. Further, the developer has no traffic risk, meaning low passenger traffic will not impact revenues. The icing on the cake is that the developer gets fixed payments from the government every year until the time it operates.

    The developers preferred this model, and in FY17, around 56% of all government projects were HAM projects.

That said, issues pertaining to land acquisition and environmental clearances still remain a roadblock in the road construction sector. Resolution of these issues could provide huge opportunities for road construction companies.

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In other news, as per a recent Reserve Bank of India (RBI) paper, farm loan waiver that amounts to Rs 880 billion and likely to be released in 2017-18 by seven states, including Uttar Pradesh and Maharashtra, may push inflation on permanent basis by 0.2%.

A Mint Street Memo released by RBI said that loan waivers could add to the fiscal burden over the medium term as they're essentially a transfer from taxpayers to borrowers.

Farm loan waivers have been announced intermittently by both the central and state governments in India to provide relief to farmers facing distress due to natural calamities/crop failure.

However, one shall note is that the recent farm loan waivers by government to different states have set a precedent of sorts.

Our big picture expert Vivek Kaul explains it succinctly in his Diary:

  • The economist Alan Blinder in his book After the Music Stopped writes that the "central idea behind moral hazard is that people who are well insured against some risk are less likely to take pains (and incur costs) to avoid it."

    This basically means that once the farmer sees a loan being waived off today, he will wait for elections in the future for the newer loans he takes on to be waived off as well. Essentially, he will see little incentive in repaying loans that he takes on in the future.

And the above situation is evident today. The recent farm loan waiver has also spoilt the credit discipline and set the wrong precedents.

What all of this means is the practice of loan waivers could lead to more serious problems. More so, it would very well hurt the economic growth in the long run.


Sensex Reclaims 32,000-Mark in the Opening Trade; Tata Steel Surges 4.2%
09:30 am

Stock markets across Asia are mostly trading in green after a strong rally on Wall Street in overnight trade. The Japan's Nikkei 225 is up 0.98%. The China's Shanghai Composite added 0.04% and Hong Kong's Hang Seng is trading with marginal losses. The US stocks started the week on a positive note and ended the session with solid gains with the benchmark S&P 500 ending the session at an all-time high.

Back home, share markets in India have opened the day on a positive note tracking Asian peers. Investors are breathing a sigh of relief as North Korean fears eased slightly. The BSE Sensex is trading higher by 122 points while the NSE Nifty is trading higher by 33 points. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.5% & 0.7% respectively.

All sectoral indices have opened the day in green with stocks from metal sector and realty sector witnessing maximum buying interest. The rupee is trading at 63.89 to the US$.

Steel stocks opened the day on a mixed note with Tata Steel & Adhunik Metaliks are the most active stocks on BSE. As per an article in a leading financial daily, a deal to merge the European steel operations of Tata Steel and ThyssenKrupp could be struck this month, after Tata removed a significant obstacle by offloading its UK retirement fund.

Tata Steel had earlier announced that Britain's pensions regulator has approved a regulated apportionment arrangement (RAA) in respect of the British Steel Pension Scheme (BSPS).

Estimated to be worth 15 billion British pounds, the pension fund threatened to drag the company into insolvency, making it less attractive to a potential buyer of its assets.

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As part of the RAA, a payment of 550 million pounds from Tata Steel UK has been made to the BSPS and shares in Tata Steel UK, equivalent to a 33% of economic equity stake in the company, issued to the BSPS Trustee.

Reportedly, both the groups are now close to a memorandum of understanding, paving the way for a detailed look at one another's books and detailed negotiations.

One shall note that, a merger would create Europe's second-largest steelmaker behind only ArcelorMittal and represent a major consolidation move in a sector plagued by overcapacity.

Tata Steel share price began trading up by 4.2% in the opening trade on BSE.

Moving on to the news from aviation sector... As per an article in Livemint, InterGlobe Aviation Ltd., which operates IndiGo airlines, announced an institutional share sale of 33.6 million equity shares to reduce promoter holding and meet minimum public shareholding norms.

The qualified institutional placement (QIP) will include a fresh issue of 22.4 million shares, and an offer for sale of 11.2 million shares by certain promoter entities.

At its Monday closing share price of Rs 1,220.30, the sale could be worth around Rs 40,975 million. The fresh issue of shares could fetch the company around Rs 27,317 million.

According to the rules, companies need to ensure minimum public shareholding of 25% within three years of listing. InterGlobe has to reduce its promoters' holding from 85% to 75% to meet the regulatory norm.

Speaking of QIP route of equity raising, QIPs tend to be a faster way to raise capital as the dealing happens with a few investors - only institutions in this case. And this is why companies prefer this route - because of its convenience and fewer resource requirements compared to other methods of raising equity.

QIPs Poised to Scale Fresh Peak in 2017

Interestingly, QIPs are set to touch a record high in 2017. Since the beginning of 2017, QIPs have crossed Rs 340 billion.

Buoyancy in the market and positive sentiment towards primary issuances are giving confidence to companies and investment bankers to push ahead with their capital-raising plans.

With 17 offerings raising a little over Rs 340 billion in just seven months, fundraising through institutional placements will surpass the QIP record of Rs 346.7 billion set in 2009.

Indigo share price opened the day on a flat note.


Nifty 10K, IndusInd-Bharat Financial Agreement & Other Top Cues in Action Today
Pre-Open

Indian stock markets ended the Friday's session higher as Nifty reclaimed its 10,000 level. The BSE Sensex closed higher by 195 points while the NSE Nifty finished higher by 71 points. The S&P BSE Mid Cap finished up by 0.7% while & S&P BSE Small Cap too finished up by 0.8%. Gains were largely seen in capital goods stocks, power stocks and bank stocks.

L&T (up 3.8%), Asian Paints (up 2.8%), Tata Motors (DVR) (up 2.5%), were among the major gainers on Sensex. However, M&M, Infosys, Sun Pharma, witnessed maximum selling pressure.

Top Stocks in Focus

IndusInd Bank and Bharat Financial Inclusion are expected to be in focus today after it was reported that the companies signed a confidentiality agreement for the proposed merger between them. Reportedly, Bharat Financial will be run as a subsidiary of IndusInd for a year and then it may be merged with the bank.

Lupin share price is likely to be in focus today after it was reported that the company has received final approval for its Doxycycline Hyclate Tablet USP, 100 mg from the United States Food and Drug Administration (USFDA) to market a generic version of Pfizer Inc.'s Vibra-Tabs 100 mg.

Doxycycline Hyclate Tablet USP, 100 mg had US sales of US$149.9 million as per IMS MAT June 2017. It is indicated in the treatment of infections caused by various microorganisms and as an adjunctive therapy in severe acne.

In another development, Glenmark Pharma has received final approval from the US health regulator for generic version of Rythmol SR capsules. The capsules are used in treatment for illness associated with rapid heartbeats.

According to IMS Health sales data for the 12 months to July 2017, Rythmol SR capsules achieved annual sales of approximately US$ 69.2 million. The company's current portfolio consists of 123 products authorised for distribution in the US marketplace and 63 Abbreviated New Drug Applications pending approval with the USFDA.

Automobile Sector is likely to be in focus after the GST Council raised the vehicle cess by less than the maximum possible limit last week.

The GST Council on Saturday left untouched the rates on small cars and hybrid vehicles. But midsized cars will now attract a cess that's 2% higher, larger sedans 5% higher, and SUVs 7% higher. Initially, the cess was proposed to be raised by a maximum of 10%.

The above increase on mid and high segment cars approved by the GST Council will come into effect from today.

As per the news, the revised rates mean a partial reversal of the price benefits buyers enjoyed after the GST rollout.

The total tax incidence on vehicles in the midsized, large and SUV categories will be lower by 1.6%, 3.8% and 5.3%, respectively, as compared to pre-GST levels. However, luxury carmakers such as Audi, Mercedes-Benz and BMW will be more affected by the increase in the cess, as these companies had benefitted the most from the initial decline in total levies.

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IPO Buzz

In the news from IPO sector, three public offerings are slated to hit D-Street this week.

They are Matrimony.com, Capacit'e Infraprojects and ICICI Lombard. Together, these companies will raise Rs 66 billion.

Reportedly, Matrimony.com is expected to raise over Rs 5 billion which opened yesterday. The company has raised nearly Rs 2.3 billion from anchor investors ahead of its initial share sale.

Meanwhile, Capacit'e Infraprojects' Rs 4 billion IPO will be launched on 13 September. ICICI Lombard has set Rs 651-661 as the price band for its IPO, which will make it a Rs 57 billion issue opening from 15 September.

So, do these companies have sound business models? Are they leaving enough money on the table for investors?

To know more about our views on these companies, you can access the same in our IPO section.

Hurricane Irma Threat in US

US stock markets breathed a sigh of relief as Hurricane Irma hit Florida with a lesser than expected force. US stocks had ended in the negative last week ahead of the hurricane threat. Hurricane Irma which was downgraded to a Category 1 storm early on Monday, is expected to hit Tampa and Orlando early Monday and Tallahassee later in the afternoon.

The geo-political threat has also subsided for the moment as there were no nuclear tests conducted by North Korea over the weekend. The respite might be short lived as the UN Security Council met yesterday to discuss on further and tougher sanctions on North Korea. The Korean nation threatened to retaliate in case any further harsh resolutions imposed on them.