The Week That Was: Of Macro Events and Auto Sector Blues
Podcast

In yet again holiday shortened week, stock market sentiments were swayed by the macro events such as release of index of industrial production and consumer price index data.

Besides, global cues, movement of the crude and currency market trend were on radar as well.

China and the US announced they were resuming trade talks in early October.

Right on cue, the stock market rallied, bonds and gold fell, and the euro came roaring back from interim lows.

Now, the question is whether the stock market rally was justified and whether anything really changed in the China-US trade wars as a result of these new talks.

Back home, slowdown blues continued for the beaten down automobiles sector.

Finance minister's statement that millennials preferring Ola and Uber could be one of the reasons for the crisis in the auto sector created quite a buzz in the market.

However, Maruti Suzuki had contrasting views over the auto sector crisis.

So, the question here is whom to blame for the slowdown? Is the millennial to be blamed?

Tune in...


Sensex Ends 281 Points Higher; Oil & Gas and Banking Stocks Witness Buying
Closing

Indian share markets witnessed buying interest during closing hours and ended on a strong note.

Barring healthcare sector and telecom sector, all sectoral indices ended on a positive note with stocks in the oil & gas sector, consumer durables sector and metal sector witnessing maximum buying interest.

At the closing bell, the BSE Sensex stood higher by 281 points (up 0.8%) and the NSE Nifty closed higher by 93 points (up 0.9%). The BSE Mid Cap index ended the day up by 0.4%, while the BSE Small Cap index ended up by 0.8%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 0.8% and the Nikkei was up by 1.1%. The Shanghai Composite stood higher by 0.8%.

The rupee was trading at 71.06 to the US$ at the time of writing.

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In news from the commodity space, oil witnessed selling pressure today. Prices slipped to around US$ 60 a barrel as concerns about a slowdown in the global economy and oil demand outweighed hints of progress in the US-China trade dispute.

The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) both issued reports this week pointing to an oil surplus next year, despite an OPEC-led pact to cut supply that runs until March.

An OPEC+ monitoring committee met earlier this week and secured pledges from OPEC members Nigeria and Iraq to deliver their share of the cut, something they have failed to do so far, but made no progress on possibly deepening the supply cut.

To know more about crude oil and the recent developments in this space, you can read Vijay Bhambwani's article here: Message of the Markets - What is Crude Oil Indicating?

In news from the banking sector, Yes Capital and Morgan Credits, the two promoter shareholders of Yes Bank have written to the surveillance departments of stock exchanges alleging that short sellers are hammering the stock by spreading negative messages about the private lender.

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Yes Capital and Morgan Credit are facing heat from investors and stake holders over multiple rating downgrade and stakes in fraud-hit CG Power.

The letter said, "we continue to witness unabated speculation in Yes Bank stock, particularly by short sellers who appear to be speculating on the back of unpublished information led by the countless highly negative messages circulated on WhatsApp chat group banking institution - Yes Bank. We request you to kindly (look into) this highly serious matter."

Note that the two shareholders had sent a similar letter to the stock exchanges last month as well.

Last month, global rating agency Moody's Investors Service had downgraded the lender's long-term foreign currency issuer rating, citing the bank's capital raise that fell short of its expectations.

Yes Bank share price ended the day down by 0.2%.

Moving on to news from the finance sector, Dewan Housing Finance Corporation (DHFL) has defaulted Rs 1966.5 million on bond repayment obligation.

The default by the company is towards principal and interest on non-convertible debentures (NCDs) worth Rs 3500 million issued by it.

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In other news, foreign private equity backed Altico Capital, a lender to real estate companies said it has defaulted on interest payments to Mashreq Bank of Dubai.

As per the regulatory filing with the exchanges, an interest payment of Rs 199.7 million was due on September 12. The gross principal amount for the external commercial borrowing on which Altico Capital has defaulted stands at Rs 3.4 billion.

The company further said that its failure to repay the amounts may result in an acceleration of interest repayment / redemption obligations in respect of non-convertible debt securities issued by the company and may trigger a default in their timely repayments.

Reports state that the company has borrowed Rs 43.6 billion from banks and financial institutions.

The default by Altico comes after a rating downgrade by India Ratings and the resignation of its chairperson and independent director Naina Lal Kidwai, earlier this month.

On September 3, India Ratings and Research downgraded Altico Capital's long-term issuer rating to "IND A+" from "IND AA-" and short-term issuer rating to "IND A1" from "IND A1+", with a negative outlook.

The ratings agency added that Altico's loan book is concentrated, given the high single party exposures. The top ten individual exposures accounted for 39% of the loan book and the top 10 group exposures accounted for 60% of the loan book as on Q4FY19.

Shares of non-banking financial companies (NBFCs) witnessed selling pressure today on back of the above news. LIC Housing Finance, M&M Financial Services, and Power Finance Corporation (PFC) fell over 3% in early trade today.

Speaking of NBFC space, the liquidity crisis, a slew of corporate defaults, and the bloodbath in many stocks from this sector has left investors in deep fear and panic.

However, it is not that all NBFCs have fared badly.

In a recent edition of The 5 Minute WrapUp, Ankit Shah has picked the top three NBFC gainers and losers (in terms of market capitalisation) over the last one year.

As can be seen in the chart below, while several NBFCs have suffered badly and destroyed investor wealth, there have also been quality NBFC stocks that have been wealth creators.

NBFC Crisis - Top Gainers and Losers

NBFC Crisis - Top Gainers and Losers

So, the key takeaway here is to never write off an entire sector and to always stay on the lookout for quality stocks in sectors going through temporary headwinds.

In fact, in Ankit's premium newsletter Insider, one of his cherry-picked housing finance stock has performed quite well despite the NBFC crisis.

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


Indian Indices Trade Rangebound; Yes Bank Tanks 5%
12:30 pm

Share markets in India are presently trading on a volatile note. The BSE Sensex is trading up by 33 points while the NSE Nifty is trading up by 12 points.

The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading up by 0.3%.

Sectoral indices are trading mixed with stocks in the telecom sector and healthcare sector witnessing selling pressure, while consumer durable stocks and automobile stocks are witnessing buying interest.

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The rupee is currently trading at 70.94 against the US$.

The domestic currency opened 18 paise higher at 70.96, its one-month high, amid positive global cues. The rupee on Thursday climbed 52 paise to end at 71.14 as signs of easing trade tensions between the US and China buoyed global markets.

In the previous six trading sessions, the Indian currency has appreciated by 125 paise.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

  • Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.

    It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.

    Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

In news from the banking sector, latest RBI data showed that the credit and deposits growth slowed to 10.2% and 9.7% to Rs 96.8 trillion and Rs 127.8 trillion respectively, in the fortnight to August 30.

In the year-ago fortnight, advances were at Rs 87.8 trillion while deposits stood at Rs 116.5 trillion.

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In the previous fortnight to August 16, advances grew 11.6% to Rs 96.82 trillion and deposits by 10.2% to Rs 126.8 trillion.

In July, the non-food bank credit rose 11.4% on year-on-year basis from 10.6% in July 2018.

Credit to agriculture & allied activities rose 6.8% compared with an increase of 6.6% in the same month last year.

Loans to industry rose 6.1% in July from 0.3% a year ago. Meanwhile, personal loans rose 17% in July compared to an increase of 16.7% in July 2018.

Speaking of credit growth, co-head of Research at Equitymaster, Tanushree Banerjee believes retail and corporate credit are expected to grow by multi-fold over the next few years.

Rising Credit Growth in India

Here's what she wrote about it in one of the editions of The 5 Minute WrapUp...

  • One theme I strongly believe will play out over the next decade is the credit growth in India.

    The growth I foresee will be due to two reasons. Expanding GDP and credit penetration.

    Recent reforms like Jan Dhan, Mudra Yojna have helped Small and Medium Enterprises (SME's) and self-employed professionals to gain access to loans.

    Credit penetration is also expected to increase in this segment from current levels.

    Over the past few years, a lot of banks and NBFCs have started lending to this segment.

So look out for strong well-established financial services players which will benefit the most from this trend.

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Moving on to news from the automobile sector, Tata Motors has introduced Pentacare Warranty, an extended 5-year warranty package for customers of its flagship SUV- the Tata Harrier.

As compared to the initial 2-year warranty package, this product extends the timeline of the warranty package on the Harrier up to 5 years for unlimited kilometers mileage to provide complete peace of mind. This product is available for purchase at a special price of Rs 25,960 within 90 days of the purchase of the SUV.

The announcement of this exciting package comes soon after the launch of the Dark Edition Harrier earlier this month.

To know more about the company, you can read Tata Motors' latest result analysis and Tata Motors' 2018-19 annual report analysis on our website.

Meanwhile, Mahindra & Mahindra (M&M) has introduced an innovative subscription-based initiative in partnership with Revv, for retail customers.

This ownership experience for customers of Mahindra's personal range of vehicles is an all new way of using a brand-new vehicle, without actually having to buy or own one.

The offer begins at a subscription price starting from Rs 19,720 per month, inclusive of insurance and routine maintenance charges.

Tata Motors share price and M&M share price are presently trading up by 0.6% and 1.6%, respectively.

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


Sensex Opens Flat; Automobiles and Consumer Durables Stocks Gain
09:30 am

Asian share markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.9% while the Hang Seng is up 0.2%. The Shanghai Composite is trading up by 0.8%. Wall Street advanced on Thursday, and the S&P 500 ended the session within striking distance of its all-time closing high, buoyed by positive developments on the US-China trade front and a promise of continued stimulus from the European Central Bank.

Back home, India share markets opened the day on a flat note. The BSE Sensex is trading down by 14 points while the NSE Nifty is trading up by 31 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.1% and 0.3% respectively.

Except bank stocks, healthcare and telecom stocks, all sectoral indices have opened the day on a positive note with automobiles stocks and consumer durables stocks witnessing maximum buying interest.

The rupee is currently trading at 70.89 against the US$.

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In the news from the economy. India's consumer Price Index-based retail inflation reached 3.21% in August, as opposed to 3.15% in the previous month.

This is the highest level recorded in the past ten months since October 2018. Retail inflation during August 2018 stood at 3.69%. During August, inflation in rural areas was at 2.18%, whereas it was 4.49% in the urban areas.

This is the thirteenth month that retail inflation has stayed under the target of 4% set by the Reserve Bank of India. The central bank factors in CPI-based retail inflation while planning its monetary policy.

Overall inflation in the food basket, measured on the basis of consumer food price index (CFPI), rose to 2.99% in August 2019, in comparison to 2.36% in July 2019.

Note that, India has been battling an economic slowdown, with most macroeconomic parameters showing signs of decline.

The GDP growth rate during the April-June quarter fell to a 6-year low of 5%. Over the past few weeks, the government has announced a host of measures to revive the Indian economy. Even RBI has handed over Rs 1.76 trillion from its reserves to help the government achieve its fiscal target.

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With inflation in check, RBI could focus its monetary policy to rejuvenate the economy. The central bank has reduced the repo rate by 110 basis points over the last four bi-monthly monetary policy meets in a row. The reduction leads to cheaper EMIs on loans granted by banks.

Meanwhile, India's factory output growth, measured by the Index of Industrial Production, grew 4.3% in July 2019 as compared to the level in the month of July 2018. Factory output had grown 6.53% in the year-ago period.

The slowdown in industrial output was primarily due to slump in the manufacturing sector, which grew at 4.2% in July 2019 as compared to 7% a year ago.

Moving on to the news from the . As per an article in a leading financial daily, Biocon signed a license and supply agreement with a subsidiary of China Medical System Holdings (CMS) for three generic formulation products in Greater China.

Under the terms of the agreement, Biocon will be responsible for the development, manufacturing and supply of the products while CMS will be responsible for registration and commercialisation of the products in China.

The initial term of the agreement shall be for 10 years from the date of commercialisation, extendable by two years on a product basis by mutual consent.

This collaboration can be extended to a broader portfolio in future, the company stated.

The total addressable market size for these three products in Mainland China is about US$800 million, as per recent IQVIA data.

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This development is in line with Biocon's long term generic formulations strategy and expands our generic formulations business footprint to the Chinese pharmaceuticals market, which is the second largest pharmaceutical market in the world.

Note that, Indian companies are lining up partnerships with local Chinese firms to launch products in that market, as drug regulator there speeds up approvals, especially for drugs approved by USFDA.

Earlier, Sun Pharma entered into a similar deal with CMS to commercialise eight products in China.

Biocon share price opened up by 0.4%.

In another development, Dr. Reddy's Laboratories received establishment inspection report from the US health regulator for its Visakhapatnam facility in Andhra Pradesh.

Reportedly, the inspection of the two facilities were completed by the USFDA on June 21 this year.

The USFDA gives EIR on closure of inspection of an establishment that is the subject of an USFDA-contracted inspection.

Dr. Reddy's share price opened up by 0.5%.

Here's an interesting data on Dr. Reddy's Lab, investing just Rs 100,000 in Dr. Reddy's Labs in 1992, it would have given a whopping Rs 4.89 crores in 2014!

Profit Opportunities in the Rebirth of India

Profit Opportunities in the Rebirth of India

Co-head of Research, Tanushree Banerjee believes, the opportunities in the Rebirth of India are not only more profitable than the ones in 1991 but the gains could come faster too.

Tanushree has explained this historic opportunity in detail at the Rebirth of India summit.

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


Rising Rupee, Global Stock Market Drivers, and Top Cues in Focus Today
Pre-Open

India share markets ended their day in the red yesterday.

At the closing bell yesterday, the BSE Sensex stood lower by 164 points (down 0.4%) and the NSE Nifty closed down by 54 points (down 0.5%).

The BSE Mid Cap index ended the day down 0.2%, while the BSE Small Cap index ended the day up 0.1%.

Sectoral indices ended on a mixed note with stocks in the auto sector and telecom sector witnessing most of the selling pressure.

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Top Stocks in Action Today

Allahabad Bank share price will be in focus today as its Board is going to consider amalgamation of the bank with Indian Bank. The meeting of Board of Directors of the Bank is scheduled to be held on September 16, 2019, to consider the same.

Meanwhile, State Bank of India (SBI) has received approval for divestment of 45 million equity shares constituting 3.5% of its stake in SBI Life Insurance to achieve Minimum Public Shareholding of 25% (Part of Bank's share for MPS) through offer for sale process.

MSTC share price will also be in focus today as Adani Group has appointed MSTC as the selling agent to sell all surplus inventory and other equipment (excluding scrap) of entire Adani Group of Companies. The agreement will remain valid till either party terminates the agreement by giving advance notice of 3 months to the other party.

Market participants will also track ITC share price. The company's hospitality arm - ITC Hotels is going to eliminate single-use plastic products for front of the house areas by October 2019, as part of adopting sustainable practices.

To know more about the company, you can read ITC's latest result analysis and ITC's 2018-19 annual report analysis on our website.

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Global Stock Market Drivers

Asian stocks advanced to a six-week high on Thursday amid hopes of a slowdown in the US-China trade war and expectations that the European Central Bank (ECB) would kick off another wave of monetary easing by global central banks.

Chinese stocks rose and the yuan hit a three-week high after US President Donald Trump agreed to delay an additional increase in tariffs on Chinese goods by two weeks at the request of China's Vice Premier Liu He "as a gesture of good will."

The yen had rocketed towards a 2019 high in August as investors fretted about recession and market selloffs.

Trump's delay of additional tariffs on Chinese goods comes one day after China said it would exempt 16 types of US products from import tariffs.

Here are the important events to look forward to this week:

  • Japan's Industrial Production for July M-o-M
  • USA's Retail Sales for August and July Business Inventory
  • New Zealand's August PMI data.
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Rupee Continues Momentum

On Thursday, the rupee continued its rebound against the US dollar after the Indian currency fell to its year's low of 72.40 against the greenback last week.

The domestic currency rose to one-month high of Rs 71.23, after opening at Rs 71.43.

On Wednesday, the rupee recovered from initial losses to settle higher by 5 paise at 71.66 against the US currency, extending gains for a fifth straight session on the back of firm domestic equities and Asian currencies like the Chinese yuan.

Reportedly, the uptick in domestic stocks enthused investors, following which the domestic unit gained strength and recovered from early losses.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

  • Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.

    It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.

    Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

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