Dull End to the Week; Coal India Climbs 2%
Closing

Indian share markets continued to trade range bound in afternoon session as geopolitical tensions escalated in far east following another missile launch by North Korea that dampened the sentiment.

At the closing bell, the BSE Sensex closed higher by 31 points and the NSE Nifty finished flat. The S&P BSE Mid Cap finished down by 0.3% while S&P BSE Small Cap finished up by 0.4%. Power stocks and capital goods stocks witnessed majority of the selling pressure. Meanwhile, gains were seen in software stocks and energy stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.52% and the Hang Seng rose 0.11%. The Shanghai Composite lost 0.53%. European markets are mixed. The DAX is higher by 0.04%, while London's FTSE 100 is off 0.87%. Shares in France are unchanged.

The rupee was trading at Rs 64.07 against the US$ in the afternoon session. Oil prices were trading at US$ 49.99 at the time of writing.

As per a leading financial daily, a UN report has lowered India's GDP growth forecast for the year 2017 to 6.7% from 7% in 2016. The report has said that the informal sector which still accounts for at least one-third of the country's GDP and more than four-fifths of employment, was badly affected by the government's 'demonetisation' move, and it may be further affected by the rollout of the Goods and Services Tax (GST) regime.

Referring to India and China, UNCTAD's Trade and Development 2017 report noted that at the current levels of growth, the countries are unlikely to serve as growth polls for the global economy in near future.

It pointed out that India's growth performance depends to a large extent on reforms to its banking sector, which is burdened with large volumes of stressed and non-performing assets (NPAs), and there are already signs of a reduction in the pace of credit creation. It added that banking sector in India is saddled with NPAs of over Rs 8 trillion.

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It also said that the gradual slowdown of China is expected to continue as it moves ahead with rebalancing its economy, towards domestic markets. Thus, it noted that the dependence on debt makes the boom in China and India difficult to sustain and raises the possibility that when the downturn occurs in these countries, deleveraging will accelerate the fall and make recovery difficult.

In news from mining sector, Vedanta share price slipped 0.2% in today's trade after the Odisha State Pollution Control Board (OSPCB) directed the company for partial closure of its power plants over ash pond breach at Katikela in Jharsuguda district where the company's aluminium smelter as well as power generation facilities are located.

Vedanta has been directed to shut down five units of its captive as well as independent power plants (IPP) for at least seven days.

The company expects to be able to sustain the smelter capacity without affecting its production volume. The company is working towards the lifting of the SPCB closure orders at the earliest, to ensure that aluminium production is not affected.

In another development, Coal India share price finished up by 2% on the back of the news that the company is likely to diversify its core business of coal extraction.

The company is planning to become a full-fledged mining company in a bid to mitigate the growing pressure from renewable energy. Betting on the core competence in mining, the company is planning to foray into mining of iron ore, bauxite, copper and nickel.

Previously, CIL was given a target of scaling up coal production to 1 billion tonne by 2020, but in an unprecedented move, the Union government cut its production target for the current year from 660 million tonnes to 600 million tonnes in view of tepid demand. The company expects renewable energy pressure to increase and there may not be growth in demand for coal in the future.

In news from automobile sector, Maruti Suzuki share price finished on an encouraging note (up 0.4%) after the company said that its joint venture partnership with Toshiba Corp. and Denso Corp. will start making lithium ion batteries for India and international markets from 2020.

As per an article in The Livemint, the lithium battery plant of Suzuki in Gujarat would see an investment of Rs 11.51 billion (US$180 million). The company will invest an additional US$600 million for setting up its third car manufacturing unit in Gujarat's Hansalpur area, taking its overall investment in the factory to US$2.1 billion. With the third unit in place, the company's overall production capacity in the Gujarat would go up to 750,000 vehicles.

S&P BSE Auto index is the best performing sectoral index since the global financial crisis. Auto index has surged by a mammoth 823% since November 2008. This is way ahead as compared to the benchmark index returns of 230% during the same period.

BSE Auto Index Witnessed the Highest Gains Since Financial Crisis

Within the auto index, Tata Motor's share price has appreciated the most since November 2008. The stock has posted a gain of 1180% since November 2008. Other stocks too such as Maruti Suzuki, Bajaj Auto, Mahindra and Mahindra have gained more than 1000% since then.

The main reason leading to this surge is the booming consumption story. Driving aspirations of the rising middle class have pushed up car sales in the world's second most populous country. Further, benign interest rates and lower oil prices too have supported this consumption boom.

And here's a note from Profit Hunter:

The Nifty 50 Index traded on a positive note during the week. The index set the week with 37 point gap up and continued to trade up until mid-week almost hitting a new life high. The index traded sideways for the next two sessions. On Friday, the index dropped a bit as North Korea fired another ballistic missile over Japan. But it couldn't sustain the dip for long and recovered immediately. It finally ended the weekly session with 1.48% gains.

We mentioned last week, the index is finding support from the channel's support line. The index bounced strongly from this support and traded higher. But it couldn't overhaul its previous life high of 10,138 which is acting as a resistance. If the index closes above this level, it might open up further upside. On the flip side, if it finds selling from this resistance, it might as well slip back to the channel's support line.

Nifty 50 Index Traded on a Strong Note
Nifty 50 Index Traded on a Strong Note 


Indian Indices Trade in Red; IT Stocks Witness Buying
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 power sector and stocks in the realty sector leading the losses, while stocks in the oil and gas sector and stocks in the IT sector are trading in green.

The BSE Sensex is trading down by 52 points (down 0.2%), and the NSE Nifty is trading down by 26 points (down 0.3%). Meanwhile, the BSE Mid Cap index is trading down by 0.4%, while the BSE Small Cap index is trading down by 0.1% The rupee is trading at 64.07 to the US$.

In news from stocks in the IT sector. Wipro share price edged higher in morning trade today afte the IT major announced that it was awarded a seven-year contract by European energy company, Innogy SE.

The contract is to manage Innogy SE's data center and cloud services. Innogy SE is an established European energy company. With its three business areas of renewables, grid and infrastructure and retail, it is well equipped for the work ahead in a modern, decarbonised, decentralised and digital energy world.

Wipro said that it will leverage its BoundaryLess Data Center offering to help Innogy drive a transformation program to rationalise, virtualise and consolidate their IT infrastructure.

As part of agreement signed in November 2016, Innogy transferred its twin data centers in Neurath und Niederaussen in Germany to Wipro on February 1, 2017.

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Separately, Wipro also announced that it has joined The Linux Foundation as a Silver Member. The Linux Foundation is a nonprofit organization enabling mass innovation through open source technologies. Wipro has identified open source technologies as one of the strategic client themes to drive transformation across the enterprise.

One must note that Indian IT companies are currently reeling under the protectionism trend that has gripped major global markets. The most recent scenario is the H1-B visa issue which has potential to put pressure on Indian IT companies' margins.

An overall protectionism trend is expected to hit the Indian IT firms' bottom line. Especially in the US which accounts for more than 50% of revenues of India's IT majors.

However, we believe that it is unlikely that the companies will substantially bring down their focus on the US. Instead companies may look out for other means to reduce costs or protect margins.

At the time of writing, Wipro share price was trading up by 0.4%.

Moving on to news from stocks in the telecom sector. In the ongoing inter-connect usage charges (IUCs) saga between the incumbents and the new entrants in the telecom sector, Idea Celluar warned the Telecom Regulatory Authority of India (TRAI) that any move to lower the IUCs would turn the entire telecom industry sick barring Reliance Jio.

IUC is levied by a telecom operator on incoming calls from other networks and the charges are passed on to subscribers.

Incumbent telecom operators have been demanding higher IUC with reasoning that every call on the network incurs a cost and expenses of an incoming call on their network should be borne by the operator from whose network the call has originated.

The telecom giant urged TRAI to put industry call minutes into two buckets for a "correct" assessment of costs and then decide on the merits of reducing IUCs.

Idea Cellular in a written communication said that TRAI should bifurcate current industry minutes into those terminating on the voice over long-term evolution (VoLTE) networks used by Jio, and other networks like 2G/3G and 4G used by Idea, Vodafone and Bharti Airtel.

Idea Cellular estimated that over 95% of its calls terminate on the networks other than VoLTE

The letter said the regulator must review the weight of voice traffic volume between the two types of networks for a year and take the previous three months' traffic data as the basis and be reviewed in a frequency of 36 months.

Debt Levels of Telecom Players on an Uptrend

Idea's communication to the regulator comes after reports that TRAI plans to reduce IUC to seven paise per minute and then to zero from the current 14 paise per minute. The earlier move to reduce IUC to 14 paise per minute has already been challenged by Idea in Gujarat High Court and by Airtel in Delhi High Court. Both cases remain pending.

If the charges are cut down to the proposed levels, it will lead to additional burden for incumbents like Idea Cellular and Bharti Airtel, which are already reeling under significant amounts of debt.

At the time of writing, Idea share price was trading down by 1.9%.


Sensex Trades Marginally Lower; Power Stocks Witness Losses
11:30 am

Share markets in India are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the power sector and realty sector witnessing maximum selling pressure.

The BSE Sensex is trading down 90 points (down 0.3%) and the NSE Nifty is trading down by 39 points (down 0.4%). The BSE Mid Cap index is trading down by 0.7%, while the BSE Small Cap index is trading down by 0.3%. The rupee is trading at 64.09 to the US$.

In the news from GST space, as per an article in the Economic Times, the tax department is planning to conduct searches and surveys across India to bring more companies under the tax regime.

The searches could start as early as next week and would have focus on checking if any company was purposely avoiding to come under the Goods and Services Tax (GST) umbrella or if there was a genuine problem.

As per the news, tax officers would conduct physical verification of premises in several areas and check the GST certificates in cases where they have been issued.

This marks a positive development and will benefit the economy as well as the organized players who have been facing competition from unorganized markets.

Speaking of GST, the Goods and Services Tax became the order of the day in July at the start of this 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.

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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).

In other news, a report by SBI stated that the country's gross domestic product (GDP) is likely to remain below 6% in the second quarter of FY18. This, as per the report, is because of muted agriculture growth and sluggish performance of manufacturing and mining sector.

One shall note that Indian GDP growth hit a three-year low of 5.7% in the June quarter, as can be seen from the chart below. The after effects of Notebandi and the Goods and Service Tax (GST) were mainly responsible for this slowdown.

GDP at 3-year Low Post Notebandi and GST

While actual GDP figures for the upcoming few quarters are said to be critical, growth is expected to normalise as businesses start aligning themselves to the post-GST regime. But only growth will determine how well the Indian economy has adapted to GST.

In the news from commodity markets, gold is witnessing buying interest today. Gains are seen as market participants sought safe-haven bets after North Korea's latest missile launch.

Gains, however, were limited as strong US inflation data raised the hopes for another interest rate hike.

To keep a tab on the movements in gold and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency and commodity markets.


Sensex Opens Marginally Down amid North Korea Tensions
09:30 am

Majority of Asian stock markets are lower today amid geopolitical concerns. The Shanghai Composite is off 0.35% while the Hang Seng is down 0.52%. The Nikkei 225 is trading up by 0.1%. The US stock indices finished Thursday's trading session mixed, the Dow climbed to a new record closing high, while the Nasdaq and S&P 500 ended lower.

Back home, share markets in India have opened the day on a flattish note with negative bias after North Korea fired another missile over Japan into the Pacific Ocean. The BSE Sensex is trading lower by 23 points while the NSE Nifty is trading lower by 14 points. The BSE Mid Cap and BSE Small Cap index opened the day down by 0.2% & 0.1% respectively.

Except, information technology sector, all sectoral indices have opened the day in red with stocks from power sector and metal sector witnessing maximum selling pressure. The rupee is trading at 64.07 to the US$.

Coal India share price surged on BSE in the opening trade after it was reported that the company is looking to diversify from its core business of coal extraction and become a full-fledged mining company in a bid to mitigate the growing pressure from renewable energy.

Fertilizer stocks opened the day on a mixed note with Deepak Fertilisers & Southern Petrochemicals leading the losses. As per an article in a leading financial daily, Tata Chemicals is in advanced stages of discussions with Indorama Holdings BV, Netherlands (subsidiary of Indorama Corporation, Singapore), for the potential sale of its phosphatic fertiliser business located at Haldia and the trading business comprising of bulk and non-bulk fertilisers.

The two companies have signed a mutually agreed exclusivity agreement in this regard which expires on 31 October 2017.

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The transaction, if materialised, would involve the transfer of Haldia plant, trading Business along with immovable, movable properties, working capital and product brands but excluding outstanding subsidy amounts.

Further, if the deal goes through, Tata Chemicals will exit the fertiliser business completely. The company is expected to receive consideration in the range of Rs 4 billion to Rs 5 billion.

In August last year, Tata Chemicals sold its urea plant in Babrala, Uttar Pradesh, to the Indian unit of Norway-based Yara International for Rs 26.7 billion. The company is awaiting final NCLT approval for the deal.

Tata Chemicals share price opened the day down by 0.4%.

Moving on to the news from IPO space. ICICI Lombard General Insurance Company, India's largest private sector non-life insurer in India (in terms of gross direct premium income (GDPI), is launching the initial public offer of its shares today, the first of its kind by any general insurance company in India.

The Rs 57 billion public issue of ICICI Lombard will give the company a valuation of Rs 300 billion post the issue. The issue will be open for three days through September 19.

Priced in a band of Rs 651-661, the issue can be subscribed in lot sizes of 22 shares.

Meanwhile, the company has raised Rs 16.3 billion by allotting 25 million shares to 64 anchor investors at the upper band of Rs 661 apiece.

We have released our IPO note on ICICI Lombard IPO. You can access the same in our IPO section.

Interestingly, five insurance company offerings are expected to raise a whopping Rs 400 billion collectively by the end of the year. With life and general insurers queuing for the IPO route, it would be interesting to see how quickly HDFC Life progresses on this.

The insurance sector in India is set to grow leaps and bounds. It is only a matter of time that this sector will witness a flurry of M&A activities which will require the regulator to act swiftly and proactively as far as matters such as approval are concerned.

Our big-picture editor, Vivek Kaul, recently penned a pertinent report on entire insurance industry. We strongly recommend you go through the full report on what's really happening in the insurance industry in India...and how it affects you. If you have not accessed Vivek Kaul's Letter yet, sign up here.

By the way, we have also prepared a guide to help you understand the valuation of insurance businesses.

One space which tests the investor's contrarian philosophy is the IPO space. The demand for IPO's has reached sky-high levels. Avenue was the first company this year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies lately.

The market euphoria is something similar to what was seen in 2007-08. Avenue was the first company this year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies lately.

IPO Back in Demand

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space.

Here's what Richa Agarwal wrote in the recent edition of The 5 Minute WrapUp:

  • "A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not."

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.


Indian Indices Continue Uptrend, WPI at Four Month High, and Top Stocks in Action
Pre-Open

On Thursday, share markets in India witnessed positive momentum throughout the day and ended on a flat note with a positive bias.

The BSE Sensex closed higher by 56 points to end at 32,242 while the broader NSE Nifty ended the day higher by 7 points to close at 10,087.

Among BSE sectoral indices, pharma index rose the most by 2.1%, followed by power stocks 0.8%. BHEL, Sun Pharma, and Tata Motors were among the top gainers.

Top Stocks in Action Today

Interglobe Aviation (Indigo) share price is likely to be in focus today after the company plans to conduct a share sale to institutional investors on today that will raise for the company and its founders as much as Rs 39.4 billion (US$616 million).

The company set a price range of Rs 1,125 to 1,175 a share for the sale of up to 33.6 million shares, comprising of 22.4 million new shares and 11.2 million existing shares. The share sale is aimed at helping the company meet minimum public holding rules.

But the funds raised will also help the airline in its significantly capital-intensive plans. IndiGo has proposed to buy national carrier Air India earlier this year. Reportedly, Indigo also recently expressed its interest in buying Jet Airways if its acquisition of Air India falls through.

Software company, Cyient Ltd will be among the stocks to watch today after the company said it will divest its 49% equity ownership in joint venture firm Infotech Aerospace Services to its partner Pratt & Whitney.

The consideration received from the transaction is US$1.8 million, post additional dividend disbursement of US$9.1 million from the cash reserves. Infotech Aerospace Services Inc (IASI), a 51:49 joint venture between Pratt & Whitney and Cyient, was set up in 2013 in Isabela, Puerto Rico.

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WPI Inflation at Four Month High

According to data released by the Central Statistics Office (CSO), retail inflation as measured by the Wholesale Price Index (WPI) rose sharply to 3.2% in August, as compared to steady rise from 1.8% in July 2017. Wholesale inflation rate, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

The index portrays new series of WPI data released by the government earlier this fiscal, with 2011-12 as the base year, replacing existing the base year of 2004-05.

Food articles turned out to be major drivers as the data showed that prices of food articles rose by 4.4% in August on a yearly basis. Vegetable inflation stood at 44.9%.

Fuel and power segment, too rose by 9.9%, from 4.4% in July.

Global Markets Flat ahead of Economic Data

Global stock markets were more or less flat as market participants awaited US inflation data. European markets were mixed Thursday as investors assessed geopolitical developments and the Bank of England 's latest policy decision. The Bank of England held interest rates steady Thursday but said that a hike is likely to be needed in the coming months.

IPO Buzz

ICICI Lombard General Insurance Company (ILGIC) is set to offer a portion of existing paid-up equity shares worth up to Rs 57 billion in the primary market starting today.

The private insurer is among at least five insurers looking to go public, riding on a stock market rally and an increasing demand for financial assets in Asia's third largest economy. State-run general insurers - General Insurance Corp of India and New India Assurance Company - and private life insurance firms SBI Life and HDFC Standard Life have also lined up primary market offers.

ICICI Lombard is the largest private-sector non-life insurer in India, a position the company has maintained since FY04 after being one of the first few private-sector companies to commence operations in the sector in FY02. 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.

IPOs are all the rage in the share markets these days. With new companies listing by the day, all with promises of superior returns.

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.