Sensex Ends 732 Points Higher; Realty and Metal Stocks Gain the Most
Closing

Indian share markets continued their momentum seen during the day and ended their session on a positive note today. Gains were largely seen in the stocks from the realty sector and metal sector.

At the closing bell, the BSE Sensex stood higher by 732 points (up 2.2%) and the NSE Nifty closed higher by 237 points (up 2.3%). The BSE Mid Cap index ended the day up by 2.4%, while the BSE Small Cap index ended the day up by 2.6%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 2.1% and the Nikkei was trading up by 0.5%. The Shanghai Composite stood higher by 0.9%.

The rupee was trading at 73.66 to the US$ at the time of writing.

In the news from the banking space, as per a leading financial daily, the recent correction in stock markets has given a blow to the government as the value of government holdings in listed PSUs has reduced by Rs 6 trillion from their one-year highs.

Also, it's interesting to compare how these stocks performed compared to the frontline index - BSE Sensex.

The BSE-PSU index, which includes many companies from the PSU space, considerably underperformed the BSE Sensex.

Underperformance of BSE PSU Index

For three out of five years, the BSE-PSU index considerably underperformed the BSE Sensex. From 2014 till date, the BSE-PSU index gave a meagre annualised return of 3%. Whereas, the BSE Sensex delivered 14%.

This underperformance can be attributed to sector specific events such as non-performing assets (NPAs) in the banking space and rising oil prices that impacted OMCs, among others.

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------------------------------

In the news from pharma space, as per a leading financial daily, drug firm Zydus Cadila said it has received tentative approval from the US health regulator to market Linagliptin and Metformin Hydrochloride tablets, used to control of blood sugar levels in diabetic patients.

The company said the drug will be produced at the group's formulations manufacturing facility at special economic zone (SEZ), Ahmedabad.

The group has more than 221 approvals, and so far has filed over 330 abbreviated new drug applications (ANDAs) since it started filings in 2003-04.

Speaking of drug approvals, note that 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.

Even the total filings of abbreviated new drug applications (ANDAs) for generic drugs rose to 1,292 in FY17 from 852 in the previous year. Faster approvals expedite the commercialisation 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.

Moving on, stocks from the power sector were in focus today on news that the Supreme Court agreed to hear plea on tariff hike after two weeks and will examine them for Adani Power and Tata Power.

As per the news, hopes are that the Gujarat government's panel may bring Rs 1.29 trillion relief to state's three stranded power projects.

Following the above news, shares of Tata Power and Adani Power witnessed buying interest and soared as much as 16% in today's trade.

In the news from the commodity space, gold continued its uptrend and witnessed buying interest for the third day today. Gains were seen on the back of increased buying by jewelers to meet the festive demand and positive cues from the global financial markets.

Also, the weakness in the US dollar also meant gold prices trade on a positive note.

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

You can listen to this week's stock market updates in our brand new podcast below. Tune in!


Sensex Surges 680 Points; Auto, Realty Stocks Rally
12:30 pm

After opening the day flat share markets in India are trading on a positive note and are presently trading above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the auto sector and stocks in the realty sector witnessing maximum buying interest.

The BSE Sensex is trading up by 680 points (up 2%) and the NSE Nifty is trading up by 213 points (up 2.1%). Meanwhile, the BSE Mid Cap index is trading up by 2.5%, while the BSE Small Cap index is trading up by 2.3%. The rupee is trading at 73.8 to the US$.

In news from stocks in the IT sector. TCS share price is in focus today after the company declared quarterly results.

India's largest software exporter Tata Consultancy Services (TCS) reported a 22.6% rise in its net profit for the quarter ended September 30 to Rs 79 billion, largely backed by the rupee depreciation and improved business sentiment.

TCS' second-quarter revenue rose 20% on YoY basis to Rs 368 billion. This is the first time in eight consecutive quarters that TCS has reported double-digit growth in revenues in constant currency terms.

Large client wins (in retail and banking sectors), especially in the over-US$100 million category, helped TCS grow rapidly during the quarter. Overall, It TCS saw client additions across all the key bands: four in the US$100 million and above band, seven in US$20 million and above, 10 in US$10 million and above band and 11 got added in the US$1 million and above category.

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…it also reveals the exact strategies behind our most successful stock picks!

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If you want a copy for yourself, just let us know, and we'll have a hardbound copy sent over wherever you like (as long as it is within India) – virtually for free.

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We have very few copies of this book left, however – and we have no plans of printing any more. Please claim your copy ASAP if you don't want to miss out.
------------------------------

Digital revenues grew 60% YoY. These accounted for 28% of the overall revenues in Q2, against 25% in Q1.

At the time of writing, TCS share price was trading down by 2%.

Speaking of IT stocks. The IT index seems to have weathered the storm in the Indian markets.

Pharma and IT Outshine Their Peers

Here's what Kunal Thanvi, Research Analyst, had to say about IT stocks in a recent edition of the 5 Minute Wrapup:

  • 2018 has been an eventful year, to say the least. The Sensex touched all-time high of 38,990 last month.

    The rupee is touching all time lows and crude is going up and gained around 13% in 2018.

    The midcap and smallcap indices are feeling the heat.

    I thought it would be an interesting exercise to see how sectorial indices are performing in 2018.

    Here's the result.

    BSE IT index is up whopping 41% in 2018. The BSE Healthcare index also did well and is up 8.5%.

    Over the last three months, the BSE Healthcare index rose by 24%.

    Whereas, the BSE Auto and the BSE Oil & Gas indices were down 8.6% and 9.1% respectively.

    With the rupee breaching the 72 mark, IT and pharma are outperforming all other indices.

    In the near term, the rupee being under pressure could benefit export-oriented businesses.

    My last month's 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.

    I believe, the potential upside in this stock is 79%.

    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 news from stocks in the banking sector. Yes Bank share price is in focus today after the bank appointed a third-party firm to help select its new CEO.

Yes bank appointed US-based headhunter Korn Ferry to assist an expert panel searching for a successor to outgoing MD and CEO Rana Kapoor.

The bank had invited a proposal from four global leadership advisory firms specialising in banking and finance sector to assist its five-member expert committee in identifying a new chief executive.

Kapoor, the founder and promoter of the bank, has been asked by the Reserve Bank of India (RBI) to step down after January 2019.

The Search and Selection Committee is headed by Independent Director Brahm Dutt.

Other members include Lt General Mukesh Sabharwal (Retd) -Independent Director, Subhash Chander Kalia, Non-Executive Non-Independent Director, T S Vijayan, former chairman of IRDAI and LIC and O P Bhatt, former chairman, SBI.

At the time of writing, Yes Bank share price was trading up by 3.1%.


Indian Indices Open on a Positive Note; Sensex Up Over 490 Points
09:30 am

Asian shares are trading on a mixed note today. The Nikkei 225 is down 0.2%, while the Hang Seng is up 1.1%. The Shanghai Composite is trading down by 0.1%.

Back home, India share markets opened the day on a positive note. The BSE Sensex is trading up by 492 points (up 1.5%) while the NSE Nifty is trading up by 116 points (up 1.2%). The BSE Mid Cap index is trading up by 1.9%, while the BSE Small Cap index has opened the day up by 1.5%.

Sectoral indices have opened the day on a positive note with auto stocks, metal stocks, and energy stocks witnessing maximum buying interest.

The rupee is trading at 73.78 to the US dollar.

Market participants will be tracking Hindustan Unilever share price, Karnataka Bank share price, Tata Sponge share price, and 3I Infotech share price as these companies are scheduled to announce their second quarter financial results today.

In news from the commodity space... After witnessing selling pressure yesterday, crude oil prices steadied today. This was seen on the back of sharp fall in equity market overseas and also because of indications that supply concerns have been overblown.

The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast of global demand growth for oil next year for a third straight month, citing headwinds facing the broader economy from trade disputes and volatile emerging markets.

The OPEC sees the oil market as well supplied and is wary of creating a glut next year, the group's secretary-general said yesterday.

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The No. 1 Book on Investing That May Never Be Printed Again…

Equitymaster's Secrets :: Our Biggest Lessons From Over Two Decades Of Investing Journey
Equitymaster's Secrets is the No. 1 book on investing you'll find anywhere – if you ask us.

Not only does it contain investing wisdom and secrets no one else will ever tell you…

…it also reveals the exact strategies behind our most successful stock picks!

This is a book no serious investor can do without!

If you want a copy for yourself, just let us know, and we'll have a hardbound copy sent over wherever you like (as long as it is within India) – virtually for free.

Click here for details.

We have very few copies of this book left, however – and we have no plans of printing any more. Please claim your copy ASAP if you don't want to miss out.
------------------------------

Note that oil prices fell to two-week lows yesterday as it extended big losses from the previous session amid a rout in global stock markets, with prices also hit by an industry report showing US crude inventories rose more than expected.

Speaking of crude oil, almost every time a rise or fall in the stock markets is invariably linked to crude oil prices.

Logically, it seems right too. Rise in crude oil increases input costs for dependent firms. It also means rising inflation. Rising inflation means rising interest rates.

It also puts pressure on the government to cut excise duty, thereby impacting its revenues. We have already seen that happening. After all, there is an election year coming up.

But has it really affected the stock markets?

Are Stock Market Returns Really Linked to Crude Oil Prices?


Here's what Girish Shetty wrote about it on one of the recent editions of The 5 Minute WrapUp...

  • In the short-term: Yes.

    But in the long run, as we can see, Sensex returns have been independent of crude oil prices or even positively co-related!

    Crude oil prices doubled from US$ 41 in December 2008 to US$84 in April 2010. In the same time, Sensex also doubled from 8,800 levels to 17,600 levels.

    So, please don't fret unnecessarily about crude oil.

    Check if your business has a moat that helps it pass on input price increases to its customers. In the long run, they will survive and also gain market share from those that can't pass on prices. Short term pessimism due to rising crude oil prices provides a buying opportunity in these stocks.

As per him, focusing on quality stocks rather than crude oil will matter more in the long run.

In the news from currencies space, as per a leading financial daily, India is considering a proposal to increase import duties on a range of products from plastic to steel as it seeks to curb a ballooning current-account deficit (CAD) and revive the falling rupee.

Note that the rupee has been witnessing selling pressure against the US dollar since the start of this calendar year.

A fall in the rupee has many repercussions for the Indian economy. It means importers buying goods and services at a higher rate that earlier. This doesn't bode well for a developing economy that relies heavily on imports.

Also, India imports most of its oil requirements. So, a fall in rupee leads to a consequent rise in the import bill. The depreciation of the rupee will also add to crude oil's rising cost.

On the corporate side, companies who have taken foreign loans from abroad will be impacted. The repayment obligations in terms of principal and interest will rise, leading to a dent in the cash flows and financials.

Further, companies who import a majority of their raw material requirements will get impacted provided they have not hedged their foreign currency exposure.

Looking at the brighter side, rupee depreciation brings a cheer on the exports front.

A depreciating rupee will provide a much-needed cushion to falling exports. However, a falling rupee will not be the only factor to boost exports. There are certain structural issues too which the government needs to address.

Ankit Shah has explained how the depreciation in rupee is linked to foreign investor outflows and forex reserves in one of his editions of Equitymaster Insider. You can read the entire article here (requires subscription).


Of Crude Oil, MF Investment in Domestic Equities, and Top Cues in Focus Today
Pre-Open

Indian share markets ended over 2% lower yesterday following a sharp selloff in the global markets. At the closing bell yesterday, BSE Sensex ended down by 760 points, while, NSE Nifty ended down by 225 points.

Except oil & gas stocks, all sectoral indices ended the day in red with realty sector, IT sector and metal sector plunging over 3%.

Top Stocks in Focus Today

From the pharma sector, Aurobindo Pharma share price will be in focus today as the company has received final approval from the US Food & Drug Administration (USFDA) to manufacture and market Azithromycin Oral Suspension 100 mg /5 mL and 200 mg/5 mL.

To know more about the company, you can access to Aurobindo Pharma's Q1FY19 result analysis and Aurobindo Pharma FY18 annual report analysis on our website.

From the banking space, IDBI Bank share price will be in focus today as the bank said that Life Insurance Corporation of India's (LIC) open offer to purchase shares from the minority shareholders of IDBI Bank will kickstart from December 3. The open offer is at Rs 61.73 per equity share and will close on December 14. It is in connection with the LIC's acquisition of 51% controlling stake in the state-owned IDBI Bank.

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The No. 1 Book on Investing That May Never Be Printed Again…

Equitymaster's Secrets :: Our Biggest Lessons From Over Two Decades Of Investing Journey
Equitymaster's Secrets is the No. 1 book on investing you'll find anywhere – if you ask us.

Not only does it contain investing wisdom and secrets no one else will ever tell you…

…it also reveals the exact strategies behind our most successful stock picks!

This is a book no serious investor can do without!

If you want a copy for yourself, just let us know, and we'll have a hardbound copy sent over wherever you like (as long as it is within India) – virtually for free.

Click here for details.

We have very few copies of this book left, however – and we have no plans of printing any more. Please claim your copy ASAP if you don't want to miss out.
------------------------------

OPEC Sees Oil Market Well Supplied

In the news from commodity space, the Organisation of the Petroleum Exporting Countries (OPEC) is seeing the oil market as well supplied an is cautious of creating a glut next year.

Also, it was reported that producers are in no rush to expand a June agreement that raises oil output.

Note that oil prices are rising on expectations that US sanctions on Iran will strain supplies by lowering shipments from OPEC's third largest oil producer - Iran.

Oil prices have also climbed steadily this year, helped by rising demand. However, rising crude oil prices doesn't bode well for the Indian economy, as it not only affects fuel prices, but also has many other repercussions on the macroeconomic level.

They can be a big worry for the Modi government as well as it has been a big beneficiary of lower crude oil prices.

Apart from that, what does rising crude oil prices mean for stock markets?

Richa Agarwal, editor of Hidden Treasure, tracks the oil and gas sector very closely. She believes the rise in crude oil prices is a bearish sign for stock markets globally. At the same time, any market correction, will throw up interesting buying opportunities in small-cap stocks.

This is what she wrote...

  • After hitting a low of US$ 30 per barrel in January 2016, prices have more than doubled this year.

    While the Hidden Treasure team looks for long-term wealth creators, such macro situations can help to recommend such stocks at a bargain. The ones who keeps calm, when everyone else is losing their heads, will gain the most when the tide turns.

Also, it's interesting to note that whenever oil prices have surpassed US$ 100/barrel, they didn't stay there for very long. In technical term, it is sort of 'resistance level'.

This is what we wrote about this in one of the editions of The 5 Minute WrapUp...

  • Oil prices have collapsed thrice because of demand destruction: in 1979, 2008, and 2014.

    In 1979, the trigger for oil price increase was the Iranian Revolution and the Iran-Iraq war. Due to this, oil prices rose from US$ 50/barrel to above US$ 100/barrel between January 1979 and April 1981.

    Then, new production from the North Sea, Mexico, Alaska, and Siberia flooded the market. By March 1986, prices had fallen to US$ 27/barrel.

    In 2008, when oil touched US$ 150/barrel, it was quickly followed by the financial crisis and recession.

    Then, between 2011 and 2014, when oil was above of US$ 100/barrel, several years of triple-digit oil prices led to a near doubling of shale production in the US, a volume that helped trigger the crash in 2014.

In fact, as per the media reports, even Saudi officials think US$ 60 is a reasonable price for oil in the long term.

It would be interesting to see how Iranian sanctions will influence crude oil prices. Meanwhile, we will keep you posted on all the updates from this space.

Bandhan Bank to Bring Down its Promoter Holding

From the banking sector, Bandhan Bank share price will also be in focus today after its CEO and MD said that the bank will soon submit its plan to bring down its promoter holding to comply with the Reserve Bank of India's (RBI) directions.

Last month, the RBI had barred Bandhan Bank from opening new branches without its approval and had ordered it to freeze the MD's salary over its failure to meet shareholding rules.

The RBI took the decision as the bank was not able to bring down the shareholding of non-operative financial holding company to 40%, as required under the licensing condition.

According to RBI's new licensing guidelines, the bank's promoter, Bandhan Financial Holdings Ltd, has to reduce its stake from 82% to 40% within three years of commencing the business.

Thereafter, banks are required to reduce their shareholding to 20% and 15% within 10 years and 12 years, respectively. Bandhan Bank's deadline for the same ended on 23 August.

MFs Invest Over Rs 116 Billion in Domestic Equities in September

Mutual fund houses have made investments of over Rs 116 billion in domestic equities in September despite volatility in stock markets. This was seen even as foreign investors pulled out a massive Rs 108.3 billion.

As per an article in The Economic Times, investment in domestic equities by fund managers could be largely attributed to retail investors who continue to invest through systematic investment plan (SIP).

Note that, the Sensex slumped 6.2% last month owing to sharp fall in the rupee and boiling crude oil prices, turning FPIs into net sellers.

Reportedly, for domestic equity mutual funds, the recent market correction has provided a good buying opportunity for investors, and mutual funds are trying to capitalise on the same.

While there is a legitimate fear about the bleak macro environment along with the liquidity in the NBFC space, Kunal Thanvi, Editor of Smart Money Secrets & Research Analyst, believes this fear is being extended too far... to some very strong business. Here's an excerpt of what he wrote:

  • These corrections are a clear sign of fear across sectors and individual stocks.

    While considering stocks for Smart Money Secrets, I believe these deep corrections are a buying signal for select quality companies.

    And for strong business you've already bought, this can be a good time to add more.

More Share Market Updates...

Speaking of falling markets, amid uncertainty, panic and despair, we have talked to Tanushree Banerjee, Co-head of Research about finding safe stocks in our latest edition of the stock market podcast. Listen in... visit SoundCloud, iTunes or Stitcher.

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