Sensex Ends 383 Points Lower; Realty and Auto Stocks Drag
Closing

After trading on a volatile note throughout the day, share markets in India witnessed selling pressure during the closing hours and ended the day in red. All sectoral indices traded in red, with stocks in the auto sector and realty sector leading the losses.

At the closing bell, the BSE Sensex stood lower by 383 points (down 1.1%) and the NSE Nifty closed down by 132 points (down 1.2%). The BSE Mid Cap index ended the day down 2.2%, while the BSE Small Cap index ended the day down by 2.1%.

The rupee was trading at Rs 73.57 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.1% and the Shanghai Composite was up by 0.6%. The Nikkei 225 was up by 1.3%. Meanwhile, European markets were trading on a mixed note. The FTSE 100 was trading flat. The DAX was down by 0.2%, while the CAC 40 was down by 0.6%

IIFL Holdings share price witnessed selling pressure today as the company yesterday said that its subsidiary IIFL Wealth Management acquired Wealth Advisors India, a Chennai-based wealth management firm for a total consideration of Rs 2.35 billion.

From the IT sector, Infosys share price was in focus today as the company posted a surprise 3.2% dollar revenue growth in the September quarter (Q2FY19) as compared to the preceding three months.

This was the fastest sequential growth by India's second-largest information technology (IT) services company in more than a year.

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In constant currency terms, Infosys's Q2 revenue rose 4.2% from the preceding three months.

Currency fluctuations, however, took some sheen off the company's growth as dollar revenue increased at a slower pace to US$2.92 billion in the quarter ended 30 September.

Net profit rose 0.5% to US$ 581 million in the September quarter from US$ 578 million in the preceding quarter. Operating margin was 23.7%, same as in the June quarter.

The above better-than-expected performance was largely helped by a 4.7% sequential growth from clients in the financial services space, which contributed to 32.2% of revenue.

Also, a 4.9% increase in business from retail clients, accounting for about 17% of revenue, also helped the company's performance.

In the news from commodity space, crude oil was witnessing buying interest today as industry data showed a surprise decline in US crude inventories.

As per the data from American Petroleum Institute (API), US crude inventories fell by 2.1 million barrels last week, compared with analyst expectations for a build of 2.2 million barrels.

US gasoline stocks dropped by a larger-than-expected 3.4 million barrels, while distillate fuel stockpiles declined by a smaller-than-expected 246,000 barrels.

Also, in another news around crude oil... As per a leading financial daily, the Organisation of the Petroleum Exporting Countries (OPEC) has urged its members not to mention oil prices when discussing policy in a break from the past, as the oil producing group seeks to avoid the risk of US legal action for manipulating the market.

The decision underlines how Trump's aggressive stance on the oil market is unsettling OPEC and testing ties between allies Riyadh and Washington.

Apart from the above, OPEC officials are also advised to explore diplomatic lobbying channels to try and prevent the NOPEC bill from becoming law.

Note that Donald Trump has been a vocal critic of the OPEC and has blamed it for high oil prices. He has been urging it to increase output to relieve rising prices for the market which is hovering around four-year highs.

This has made OPEC and its unofficial leader, Saudi Arabia, nervous about what it might mean for NOPEC, or No Oil Producing and Exporting Cartels Act.

It would be interesting to see how this decision pans out. Meanwhile, we will keep you updated on all the developments from this space.

Also, 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.

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

By the way, in our latest edition of the stock market podcast, we have our Research Analyst, Radhika Pandit present a contrary view on PSU sector. She talks about good PSU stocks that you must look at. Listen in... visit SoundCloud, iTunes or Stitcher.


Sensex Trades on a Volatile Note; Auto, Realty Stocks Drag
12:30 pm

After opening the day in green share markets in India are trading on a dull note and are presently trading marginally above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the FMCG sector and stocks in the pharma sector witnessing maximum buying interest.

The BSE Sensex is trading up by 70 points (up 0.2%) and the NSE Nifty is trading up by 4 points (up 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.8%, while the BSE Small Cap index is trading down by 0.8%. The rupee is trading at 73.45 to the US$.

In news from stocks in the auto sector. Tata Motors share price is in focus today after it was reported that the company created a separate division to explore ways to tap its entire range of passenger and commercial vehicles for offering shared mobility solutions.

The new department will also look at collaborating with startups such as Ola, Uber and other freight aggregators. Tata Motors is the first auto maker in India to create a separate division exclusively for shared mobility as the company manufactures an entire gamut of vehicles needed for last mile connectivity ranging from small cars to trucks and buses.

The division will also work on new technologies like augmented reality, virtual reality and big data to help create certain mobility solutions.

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Shared mobility as a concept has different facets to it and ride-sharing is probably one of the main aspects that has become popular in India with companies like Ola and Uber.

At the time of writing, Tata Motors share price was trading down by 0.4%

Speaking of auto stocks. Stocks like Tata Motors have taken a beating over the past few months.

One out of every three household in India is a buyer of their products. They own some of the cult brands in Indian automobile space. They have formidable R&D teams. They have been through several economic cycles over decades. Few have even visited near-bankruptcy in the past and come out successful.

Bluechip Auto Are Stocks Way Off Their Valuation Peaks

Yet, some of the biggest passenger car, commercial vehicle, and two-wheeler companies in India have seen a huge dent in valuations in recent times.

This could be the opportunity long term investors were waiting for

Moving on to news from stocks in the retail sector. Future Retail share price is in focus after it was reported that Amazon is set to pick up a stake in the retailer.

Leading financial dailies reported that the American e-commerce giant is set to pick up a stake of just under 10% in Future Retail.

Amazon is expected to pick up shares - through the foreign portfolio investors route - at a hefty premium to the prevailing share price for gaining business exclusivity and future shareholding rights

Future retail shares were abuzz after the news. This gives Future Retail, which operates Big Bazaar and Easy Day supermarkets, a Rs 25,000-crore market value, though its 52-week record level is significantly higher.

Amazon, which is looking to expand its presence in India, already has stake in Shoppers Stop and More. Last year, retail major Shoppers Stop had announced raising Rs 1.8 billion from Amazon through an issue of equity shares on preferential basis. The deal with Amazon.com Investment Holdings LLC translated into just over 5 per cent shareholding for Amazon in Shoppers Stop.

In September this year, Amazon said it has co-invested in Witzig Advisory Services, the entity that is acquiring Aditya Birla Retail's 'more' chain of stores in India.


Sensex Opens Over 300 Points Up; Infosys Rallies on Strong Q2 Result
09:30 am

Asian stocks are higher today. Japan's Nikkei rose 1.3%. MSCI's broadest index of Asia-Pacific shares outside Japan added 0.5% and South Korea 1.5%. The US stocks surged more than 2% on Tuesday after upbeat earnings reports from major companies including UnitedHealth and Goldman Sachs and solid economic data, as equities rebounded from a recent sharp sell-off.

Back home, India share markets have opened the day on strong note. The BSE Sensex is trading up by 313 points while the NSE Nifty is trading up by 88 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.9% & 1% respectively.

All sectoral indices are trading in green with information technology stocks and bank stocks witnessing maximum buying interest.

The rupee is trading at Rs 73.47 against the US$.

Speaking of the recent sell off in the stock markets, many good companies have corrected quite a bit.

The chart below shows the current mood of the market. Headline indices have corrected significantly from their peaks in 2018.

Are These Deep Corrections a Buying Signal?

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

As per Research analyst, Ankit Shah, the correction could last longer.

But looking at the history of equity returns, he believes this would be just a passing correction phase.

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Despite all the volatility and periodic crashes, equities are still one of the most rewarding and safe asset classes over the long run.

In the news from the IT sector. Infosys Ltd posted a surprise 3.2%-dollar revenue growth in the September quarter (Q2) from the preceding three months, the fastest sequential growth by India's second-largest information technology (IT) services company in more than a year.

In constant currency terms, Infosys's Q2 revenue rose 4.2% from the preceding three months. Currency fluctuations, however, took some sheen off the company's growth as dollar revenue increased at a slower pace to US$2.92 billion in the quarter ended 30 September.

Infosys last posted a 3.2% sequential dollar revenue growth in the June quarter of 2017.

Net profit rose 0.5% to US$581 million in the September quarter from US$578 million in the preceding three months. Operating margin was 23.7%, same as in the June quarter.

Infosys's better-than-expected performance was largely helped by a 4.7% sequential growth from clients in the financial services space, which contributed to 32.2% of revenue.

A 4.9% increase in business from retail clients, accounting for about 17% of revenue, also helped the company. For the first time in its history, Infosys won over US$2 billion in new deals in a quarter.

Infosys still faces challenges. Despite its performance in the second quarter and a weakening rupee, it has maintained its full-year operating margin between 22% and 24% and expects revenue to grow between 6% and 8% in constant currency terms.

The company does not give a dollar revenue outlook, but it runs the risk of growing at the slowest pace in three years. Infosys reported a 0.9% sequential dollar revenue growth in the first quarter.

Infosys's year-on-year growth continues to be sluggish. In contrast, TCS, which last week posted a 3.2% sequential dollar revenue increase in the second quarter, has managed a double-digit year-on-year growth for three straight quarters.

Infosys share price opened the day up by 2.7%.

Moving on to the news from automobiles sector. Hero MotoCorp Ltd reported a 3.4% year-on-year decline in net profit to Rs 9.8 billion during the September quarter (Q2) due to higher raw material costs and other expenses amid subdued demand in key markets of Kerala and West Bengal.

Hero MotoCorp witnessed 5.4% y-o-y increase in two-wheeler sales to 2,134,051 units during Q2FY19 due to reduced sales in West Bengal after that state's government made it mandatory to have a driving licence to buy a two-wheeler.

Sales in Kerala took a hit due to the floods. Recovery in rural markets in the rest of the country offset the sales slump, thanks to yet another year of normal monsoon.

Revenue, or net sales, during Q2FY19 increased by 8.5% y-o-y to Rs 90.9 billion.

As a consequence of increasing oil and other commodity prices like steel, Hero MotoCorp's raw material expenses for the September quarter rose 13.6% to Rs 64 billion. Other expenses went up 18.6% to Rs 9.8 billion due to higher advertisement costs. A depreciating rupee that made imports of certain materials expensive did not help either.

Consequently, Earnings before Interest, Tax, Depreciation and Amortization (Ebitda), a measure of operating profit of a company, declined 5.2% y-o-y to Rs 13.8 billion while operating margins contracted 220 basis points to 15.2%.

Hero MotoCorp share price opened the day down by 0.5%.

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

By the way, in our latest edition of the stock market podcast, we have our Research Analyst, Radhika Pandit present a contrary view on PSU sector. She talks about good PSU stocks that you must look at. Listen in... visit SoundCloud, iTunes or Stitcher.


Indian Indices Continue Momentum, Oil Prices, and Top Stocks in Action Today
Pre-Open

Share markets in India continued their momentum during closing hours yesterday and ended on a positive note. Sectoral indices were trading on a positive note, with stocks in the energy sector and realty sector leading the gains.

At the closing bell yesterday, the BSE Sensex stood higher by 297 points (up 0.9%) and the NSE Nifty closed up by 72 points (up 0.7%). The BSE Mid Cap index ended up 1.1%, while the BSE Small Cap index ended up by 1.7%.

Top Stocks in Action Today

From the pharma space Alembic pharma share price will also be in focus today as the company has received tentative approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Alogliptin Tablets, 6.25 mg, 12.5 mg and 25mg.

The tentatively approved ANDA is therapeutically equivalent to the reference listed drug product (RLD), NESINA Tablets, 6.25 mg, 12.5 mg and 25mg of Takeda Pharms USA.

Market participants will also be tracking Lupin share price.

As per an article in a leading financial daily, the company's' wholly owned subsidiary in US - Lupin Pharmaceuticals has partnered with the National Association of Nurse Practitioners in Women's Health (NPWH) to conduct a two-pronged national online survey among women who have been diagnosed with bacterial vaginosis (BV) and healthcare providers (HCPs) who treat women with the condition.

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Results Corner

From the IT sector, Infosys share price has reported 10% rise in its profit at Rs 41 billion for the quarter ended September 30, 2018 as compared to Rs 36.1 billion for the quarter ended June 30, 2018.

From the banking sector IndusInd bank share price has reported 4.6% rise in its net profit at Rs 9.2 billion for the quarter ended September 30, 2018 as compared to Rs 8.8 billion for the same quarter in the previous year.

To know more about the company, you can access IndusInd bank Q2FY19 result analysis and IndusInd bank 2017-18 Annual Report on our website.

Federal bank share price has reported a rise of 0.9% in its net profit at Rs 2.66 billion for the quarter under review as compared to Rs 2.64 billion for the same quarter in the previous year. Total income of the Bank increased by 15.8% at Rs 30.8 billion for Q2FY19 as compared Rs 26.6 billion for the corresponding quarter previous year.

From the IPO Space...

In news from the IPO space. Emami Cement has filed with capital markets regulator to raise Rs 10 billion through an initial public offering (IPO).

The IPO comprises fresh issuance of shares worth Rs 5 billion, besides, an offer of sale of the same size by the company's existing promoters and shareholders, according to the draft red herring prospectus (DRHP).

The company said net proceeds raised through the issue will be used for re-payment of certain indebtedness and for other general corporate purposes.

Emami Cement established an installed manufacturing capacity of 5.60 million metric tonne per annum (MMTPA) in its two years of commercial operations.

The company said it currently operates three manufacturing plants and is in the process of setting up another plant, which subject to receipt of necessary approvals, is expected to result in an aggregate installed capacity of 9.30 MMTPA of cement and 3.2 MMTPA of clinker by April 2019.

The shares of the company will be listed on both the BSE and NSE.

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.

Oil Prices Ease Up...

Oil prices fell yesterday on evidence of higher US oil production and expectations of increase in US crude inventories but reports of a fall in Iranian oil exports helped to limit losses.

Shares of most aviation companies were trading higher yesterday amid a fresh fall in oil prices.

In the past one year alone, oil prices have surged more than 50%.

Also note that rising crude oil prices not only affect fuel prices, but also has many other repercussions for the Indian economy.

They can be a big worry for the Modi government as well.

As Ankit Shah wrote in a recent edition of The 5 Minute WrapUp...

  • During the UPA II regime, India's average annual oil import bill was US$ 133 billion. In fact, in the last three years of Manmohan Singh's leadership, the oil import bill exceeded US$ 150 billion. Compare that with an average annual oil bill of US$ 95 billion during the four years of Modi's leadership.

    The actual savings would have been even higher, because I believe the consumption of crude oil and petroleum products would have been quite higher in the Modi era than the Manmohan era.

    Last Thursday, Brent crude oil prices shot above US$ 80 a barrel.

    This is the highest level since 2014. In the past one year alone, oil prices have surged more than 50%.

    Now, what if oil prices go back to the levels during the Manmohan Singh regime? What would happen to India's current account and fiscal deficit? What would happen to inflation and RBI's stance on interest rates?

    With the next general elections just a year away, rising crude oil prices are going to be a big worry for the Modi government.

    It should worry you too.