Sensex Ends 170 Points Lower, Realty and FMCG Stocks Witness Selling
Closing

After opening the day on a positive note, share markets in India witnessed volatile trading activity and ended in red. Sectoral indices traded in red, with stocks in the realty sector, and FMCG sector leading the losses.

At the closing bell, the BSE Sensex stood lower by 170 points (down 0.5%) and the NSE Nifty closed down by 45 points (down 0.4 %). The BSE Mid Cap index ended the day down 0.5%, while the BSE Small Cap index ended the day down 1.3%.

The rupee was trading at Rs 72.46 against the US$ in the afternoon session.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 1.2% and the Shanghai Composite was up by 1.1%. The Nikkei 225 was up by 1%.

Shares of asset management companies (AMCs) were in focus today and witnessed selling pressure on fears of the impact on their revenue and profitability after the market regulator reduced the total expense ratio (TER)- the fee funds collect from investors every year.

The development came as the regulator on Tuesday capped the total expense ratio for equity oriented mutual fund schemes (close ended and interval schemes) at 1.25% and for other schemes at 1%. The cap for fund of funds was capped at 2.25% for equity-oriented schemes and 2% for other schemes.

The regulator said that all the mutual fund commissions and expenses must be paid from the scheme itself and that the industry must adopt a full trail mode of commission in all schemes without paying any upfront commission.

The above development will mean lower revenue yields for most AMCs and will further affect their profitability.

On the other hand, it will benefit investors in equity mutual funds from the cut of TER.

The above news sent HDFC AMC and Reliance Nippon AMC trade on a negative note. Stocks of both the companies hit their lowest levels since their trading debut with HDFC AMC share price closing its session down by 8.6% and Reliance Nippon share price closing down by 11.3%.

Metal stocks were also in focus today and were witnessing buying interest after reports stated that the US is likely to exempt Indian steel and aluminium from higher tariff regime announced by Trump administration this March. Stocks such as SAIL and JSW Steel gained the most today on the back of the above news.

Moving on to the news from the IPO space, the state-owned engineering and construction company IRCON International which opened its issue for subscription yesterday was subscribed around 8 times by noon hours today.

The issue has a price band of Rs 470-475 per share and the equity shares are proposed to be listed on BSE and NSE. The public issue comprises an offer for sale of 9.9 million equity shares by its promoter, The President of India, acting through the Ministry of Railways, Government of India.

The net issue proceeds from the IPO will be utilised towards repayment of certain borrowings and for general corporate purposes.

IRCON International Limited is a Mini Ratna government company incorporated by Central Government (Ministry of Railways) under the Companies Act, 1956 on 28th April 1976. It is an integrated engineering and construction company specializing in major infrastructure projects, including railways, highways, bridges, flyovers, tunnels, aircraft maintenance hangars, runways, EHV sub-stations, electrical and mechanical works, commercial and residential properties, development of industrial areas, and other infrastructure activities.

To know more about the company, you can read our IPO analysis of IRCON International Ltd (requires subscription).

Speaking of IPOs, the stock market is gearing up for a burst of IPO activity.

According to EY India IPO Readlines survey report, globally, Indian exchanges recorded the highest IPO activity as the country saw 90 IPO launches that raised US$ 3.9 billion in the first half of this year.

Meanwhile the amount raised by SME IPOs in 2017 stood at Rs 17.9 billion. This is more than three times the amount raised in 2016. The number of SME IPOs launched also doubled from 66 to 132. This is evident from the chart below:

SME IPO Boom in 2017

We believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs. 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.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.


Sensex Remains Rangebound; HDFC AMC & Reliance Nippon Tumble Over 8%
12:30 pm

Stock markets in India are trading in a range with positive bias in the afternoon session amid firm cues in the Asian markets and a recovery in rupee. Gains are largely seen in metal stocks and energy stocks.

The BSE Sensex is trading up by 66 points and the NSE Nifty is trading up by 26 points. Meanwhile, the BSE Mid Cap index and the BSE Small Cap index are trading down by 0.5% & 0.1% respectively.

In the latest development, shares of asset management companies slumped on fears of the impact on their revenue and profitability after the markets regulator reduced the total expense ratio. HDFC AMC and Reliance Nippon AMC were trading at their lowest levels since their trading debut.

The regulator on Tuesday capped the total expense ratio for equity-oriented mutual fund schemes (close-ended and interval schemes) at 1.25% and for other schemes at 1%. The cap for fund of funds will be 2.25% for equity-oriented schemes and 2% for other schemes.

Oil & gas stocks are trading on a mixed note with ONGC & GAIL being among the top gainers. As per an article in a leading financial daily, ONGC Videsh Ltd, the overseas investment arm of Oil and Natural Gas Corp (ONGC) is planning to exit Kazakhstan's Satpayev block after it could not find commercially exploitable oil.

OVL had in April 2011 bought 25% of Satpayev oil block. It paid US$13 million as a signing amount to Kazakhstan and an additional US$80 million as a one-time assignment fee to JSC NC KazMunaiGas (KMG), the national oil company of Central Asian nation.

Satpayev was OVL's entry into hydrocarbon-rich Kazakhstan. But its exploration campaign hasn't met with much success, the reports noted.

Reportedly, OVL drilled the committed two exploration wells on the block without any commercial hydrocarbon success.

The company had sent almost US$300 million (about Rs 17.3 billion) on the block so far.

With its exit from Satpayev block, OVL would now have stakes in 40 projects in 19 countries like Vietnam, Myanmar, Russia, Syria, Egypt, Libya, Nigeria, Sudan, Brazil, Colombia, Venezuela and Cuba.

At the time of writing, ONGC share price was trading up by 2.3%.

To know more about the company, you can access to ONGC's Q1FY19 result analysis and ONGC's Stock Analysis on our website.

Moving on to the news from the currencies space. The rupee strengthened marginally against the US dollar today tracking mixed Asian market. In the early trade today, the rupee was trading at 72.78 to a dollar, up 0.23% from its Tuesday's close of 72.97. The home currency opened at 72.70 per dollar.

The US decision to impose 10% tariffs on US$200 billion of Chinese goods from 24 September saw Beijing retaliate with tariffs on US$60 billion of US imports. US President Donald Trump is expected to carry out his threat of further tariffs on about US$267 billion of Chinese imports.

On Tuesday, the rupee touched an all-time low of 72.97 to a dollar.

The 10-year gilt yield stood at 8.127% on Wednesday, below its previous close of 8.14%. Bond yields and prices move in opposite directions.

The rupee has weakened 12.2% in 2018, while foreign investors have sold US$771.3 million and US$6.5 billion in the equity and debt markets, respectively.

Since January, the Sensex has gained 9.5%.

Asian currencies were trading mixed. The Indonesian rupiah was down 0.32% and the South Korean won 0.1%. The Taiwan dollar was up 0.08% and the Thai Baht 0.07%.

The dollar index, which measures the US currency's strength against major currencies, was trading at 94.635, down 0.01% from its previous close of 94.64.

Talking about currency wars and the falling rupee, Kunal Thanvi, editor of Smart Money Secrets did a small exercise to understand the impact of the weak rupee on the markets.

Should You Be Worried About the Rising Dollar?

India is a net importer. This means if the rupee is weak, the cost of imports increases and value of the export decreases - resulting in a widening current account deficit.

A high current account deficit also impacts the government's spending power.

Also, companies which import raw material witness pressure on their margins and profitably. Here's an excerpt of what Kunal wrote in the recent edition of The 5 Minute WrapUp:

  • "So, this looks quite negative on the face of it. So, it's not surprising that markets get volatile when the currency depreciates.

    Look at Indian rupee against the dollar from 1990. It has deprecated at a compounded annual rate of 5%.

    Yes, the dollar has been on a winning streak from the beginning.

    And despite that... the BSE Sensex has returned 14% compounded annually since 1990.

    Thus, the falling rupee can bring volatility to the market in the short-term. But in the long-term, our market should be fine.

    This is exactly what I keep in mind when picking stocks for Smart Money Secrets subscribers. I cut out the noise of short-term disruptions and look at the long-term picture beyond."

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


Sensex Opens Flat; Healthcare & Metal Stocks Gain
09:30 am

Asian share markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1.5% while the Hang Seng is up 1.2%. The Shanghai Composite is trading up by 0.9%. Wall Street rebounded on Tuesday in a broad-based rally as investors brushed aside intensifying trade rhetoric between the United States and China. All three major US indices closed higher following Monday's sell-off.

Back home, India share markets have opened the day on a flattish note. The BSE Sensex is trading up by 54 points while the NSE Nifty is trading up by 27 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.4%.

Sectoral indices have opened the day on a mixed note with healthcare stocks and metal stocks witnessing maximum buying interest. While, consumer durables stocks and power stocks opened the day in red.

The rupee is trading at Rs 72.76 against the US$.

Noe that, the rupee is the worst performer in Asia in 2018. It has fallen by around 12% against the US dollar this year.

Indian Rupee is the Worst Performing Currency in Asia

The rupee is under pressure due to a strong dollar and high oil prices. Similarly, the spill-over from the emerging-market turmoil in Argentina and Turkey is weighing on the rupee.

The falling rupee is also triggering sales of bonds and stocks, which in turn is further pressuring the rupee.

Nevertheless, last week, the government announced several measures. This includes cutting down non-necessary imports, removal of withholding tax on rupee-denominated bonds, and easing overseas borrowing norms.

That said, in the near term, the rupee being under pressure could benefit export-oriented businesses.

The recent Smart Money Secrets recommendation will benefit from the rupee depreciation.

The company derives around 65% of the revenue from exports. The icing on the cake is the company's focused entry into the B2C segment, which provides it a long runway for future growth.

If you're a Smart Money Secrets subscriber, read the detailed report here.

If not... you can get the report by signing up here.

Moving on to the news from the pharma sector. In the latest development, Sun Pharma said Spanish firm Almirall has received approval from the European Commission (EC) for Tildrakizumab (brand name Ilumetri in Europe). It is a drug used for treating psoriasis.

In July 2016, Sun Pharma out-licensed Ilumetri to Almirall, for the development and commercialisation of the product in Europe.

Psoriasis is a chronic immune disease that appears on the skin. It affects an estimated 7.8 million adults in Europe and around 125 million people worldwide.

This European approval for Sun Pharma comes just few days after the company received the approval for its eye care drug Xelpros, giving markets the confidence that despite the inspections by regulators of its plants in the last few weeks, there is no cause for worry.

Tildra branded as Ilumia in the US is a biologic drug administered subcutaneously and is used to treat moderate-to-severe psoriasis. Sun will be vying for its share in the US$9 billion market, competing with drug makers like J&J, Novartis and Eli Lilly. Sun said that its partner will roll out this drug in Europe in the next few weeks.

In the last two months Sun Pharma has received approval for four drugs from its pipeline after a dry spell of nearly 2 years.

Note that, Sun Pharma has been betting big on its specialty portfolio.

Meanwhile, Sun's finances too have been turning around, giving much relief to markets that was waiting for nearly two years for the company to clean up its issues with the US drug regulator.

For the first quarter ending July, India's largest drug maker Sun pharma posted a consolidated net profit to the tune of Rs 9.5 billion beating street estimates.

To know more about the company, you can access to Sun Pharma's Q1FY19 result analysis and Sun Pharma stock analysis on our website.

Sun Pharma share price opened the day up by 1.4%.

Moving on to the news from the global economy. In the latest development, China will levy tariffs on about US$60 billion worth of US goods in retaliation for new US tariffs, as previously planned, but has reduced the volume of tariffs that it will collect on the products.

The tariff rates will be levied at 5 and 10%, instead of the previously proposed rates of 5, 10, 20 and 25%, the reports noted.

China will impose a 10% tariff on US products it previously designated for a rate of 20 and 25%. Liquefied natural gas (LNG), for example, was previously under the 25% tariff category but now will be subject to a tariff of 10%.

The new tariff measures will take effect on September 24, the date when the Trump administration says it will begin to levy new tariffs of 10% on US$200 billion of Chinese products.

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

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. Just visit SoundCloudiTunes or Stitcher and access our free weekly podcast. Happy listening!


Indian Indices Continue Downtrend, BOB-Vijaya-Dena Merger, and Top Stocks in Action Today
Pre-Open

Share markets in India continued their momentum and ended in red yesterday. Sectoral indices traded in red, with stocks in the realty sector, power sector and PSU sector leading the losses.

At the closing bell yesterday, the BSE Sensex stood lower by 295 points (down 0.8%) and the NSE Nifty closed down by 99 points (down 0.9 %). TheBSE Mid Cap index ended down 1.4%, while the BSE Small Cap index ended down 1.6%.

Top Stocks in Focus Today

Adani ports share price will be in focus today as the company's wholly owned subsidiary, Adani Logistics has incorporated a Joint Venture (JV) company namely 'Adani NYK Auto Logistics Solutions'.

The object of incorporation is to provide logistic services i.e. rail transportation by auto wagons to the person engaged in automotive industry.

From the pharma space, Aurobindo pharma share price will also be in focus today as the company received approval from the South African Health Products Regulatory Authority (SAHPRA) for its Dolutegravir, Lamivudine and Tenofovir Disoproxil Fumarate (DLT) tablets.

Market participants will also be tracking L&T share price.

As per an article in a leading financial daily, the company's construction arm- L&T Construction has won orders worth Rs 20.5 billion across two business segments.

To know more about the company, you can access to L&T Q1FY19 result analysis and L&T 2017-18 Annual Report Analysis on our website.

In News from the Bank Sector...

In the latest development, the government proposed the merger of three banks, Bank of Baroda, Vijaya Bank and Dena Bank, aimed at creating the country's third-biggest lender.

That's seen as preparing the ground for consolidation among the remaining 17 state-owned lenders that have been a drain on the exchequer and marking the next big move in banking reforms.

The boards of the three banks will now consider the proposal.

Reportedly, the combined entity will have a strong presence across the nation with more than 34% of low-cost deposits, a capital buffer of nearly 12% and a business book of Rs 14.8 trillion. Bank of Baroda is the biggest of the three with Rs 10.3 trillion of total business, followed by Vijaya Bank at Rs 2.8 trillion and Dena Bank at Rs 1.7 trillion.

The finance ministry said in a release that the envisaged amalgamation will be first ever three-way consolidation of banks in India.

Previously, the government had pushed through consolidation of the State Bank of India group, with SBI absorbing five associate banks and Bharatiya Mahila Bank. That process was completed last year.

The finance ministry stated that the provision coverage ratio (PCR) of the proposed amalgamated entity will be 67.5%, well above the average of public sector banks (PSBs) at 63.7%.

The capital adequacy ratio of the combined entity would be at 12.3%, significantly above the regulatory norm of 10.875%, the finance ministry said, adding that it would be better positioned to tap capital markets.

From the IPO Space...

In the news from the IPO space, the state-owned engineering and construction company IRCON International was subscribed 49% by noon hours yesterday.

The offer for sale (OFS) received bids for 48.15 lakh equity shares compared with the total issue of 9,905,157 shares.

The issue has received strong demand from retail investors whose reserved portion was subscribed around 1.4 times.

The issue has a price band of Rs 470-475 per share and the equity shares are proposed to be listed on BSE and NSE. The public issue comprises an offer for sale of 9.9 million equity shares by its promoter, The President of India, acting through the Ministry of Railways, Government of India.

The net issue proceeds from the IPO will be utilised towards repayment of certain borrowings and for general corporate purposes.

IRCON International Limited is a Mini Ratna government company incorporated by Central Government (Ministry of Railways) under the Companies Act, 1956 on 28th April 1976. It is an integrated engineering and construction company specializing in major infrastructure projects, including railways, highways, bridges, flyovers, tunnels, aircraft maintenance hangars, runways, EHV sub-stations, electrical and mechanical works, commercial and residential properties, development of industrial areas, and other infrastructure activities.

To know more about the company, you can read our IPO analysis of IRCON International Ltd (requires subscription).

Also, with so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs. 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.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.