Indian Indices End Marginally Lower; FMCG Stocks Witness Losses
Closing

Indian share markets witnessed some losses at the end of the day and ended their session marginally lower. Losses were largely seen in the FMCG sector and auto sector, while pharma stocks ended the day higher.

At the closing bell, the BSE Sensex stood lower by 27 points (down 0.1%) and the NSE Nifty closed lower by 17 points (down 0.2%). The BSE Mid Cap index ended the day up by 0.5%, while the BSE Small Cap index ended the day up by 0.4%.

Asian stock markets finished mixed as of the most recent closing prices. The Hang Seng was down 0.26% and the Nikkei was trading higher by 0.53%. The Shanghai Composite stood lower by 0.38%. The rupee was trading at 64.63 to the US$ at the time of writing.

In the news from pharmaceuticals space, as per an article in the Economic Times, five Indian companies are named in a new lawsuit over alleged price cartelisation in the US.

As per the news, Sun Pharma, Dr Reddy's Labs, Emcure Pharma, Zydus Cadila and Glenmark Pharmaceuticals are among 12 generic drug manufacturers sued jointly by 45 US states over charges of colliding with each other to fix prices of nearly 15 drugs.

The lawsuit has also named global pharma majors such as Teva, Sandoz, and Activis among other drug companies in the above probe, which is an extension of a 2014 investigation where six companies were under the scanner.

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The development adds to the existing regulations and price pressures the pharma industry has been facing from the US lately. Note that USFDA alerts on Indian pharma companies have increased over the past few years. Earlier, regulators used to visit the plants every two years. Now they come every eight months.

Increasing inspections have led to a total of 41 import alerts in the past eight years - 33 of them (80%) in just the last four years (2013-16). This clearly signifies increased USFDA scrutiny on Indian pharma firms. If that wasn't enough, increasing pricing pressure in the generics segment has dented realisations.

However, the recent development of USFDA expediting the drug approval process can bring some respite for Indian pharma companies. This comes as drug approvals for Indian companies have gone up 50% in the period from January to June 2017 compared to the same period last year, as can be seen from the chart below:

Expediting Drug Approval Process to be a Positive for Industry

While short-term pain is expected for the above named companies, companies with strong R&D capabilities and compliant plants will do well over the long term. The uncertainties make it important to be stock specific in the sector. It is important to look for companies that have the competence and staying power to overcome the challenges.

In other news, as per an article in the Economic Times, the assets under management of five equity mutual funds has crossed Rs 150 billion. Cumulatively, these five mutual funds manage assets worth Rs 890 billion.

Further, with buoyant capital markets and the mutual fund industry on a roll, asset management companies are also seeming eager to unlock value through initial public offerings. And the first mover in this race is Anil Ambani promoted Reliance Nippon Life Asset Management Company which concluded its Rs 15.4 billion offering recently.

In the news from the macroeconomic space, India has lined up 90 specific reforms for various ministries.

The reforms covering seven ministries are to be implemented by May next year with a focus on reducing the number of processes and moving them online.

Maximum improvements are targeted in the areas of construction permits and registering property, where India still has a low rank.

Also, a dozen reforms have been proposed in the area of starting businesses, where India is still ranked 156th.

The above developments come at a time when India witnessed a jump in the World Bank's Ease of Doing Business rankings and broke into the top 100. The improvement was seen on the back of big gains on a number of measures.

The above development makes India one of the top 10 best-improved countries.

Note that India was ranked at the 130th position in the last recording and the government has set itself a target of breaking into the top 50. However, India had risen only one position in the 2017 ranking.

For further improvement, what the business environment in India needs is to foster an environment that is more supportive of private sector activity. While this could take time, if efforts are sustained over the next several years, they could lead to substantial benefits for Indian entrepreneurs - along with potential gains in economic growth.

And here's a note from Profit Hunter:

Divis Laboratories share prices soared 16% after USDFA plans to lift the import alert on its Visakhapatnam unit.

In September, we reviewed the stock and we observed its break-out of the inverse head and shoulder pattern on the daily chart. The inverse head-and-shoulder pattern is a bottom reversal pattern indicating a change in the trend. We mentioned that if the stock sustains above the neckline (black line) of the pattern, it might continue to trade up.

And this is what the stock did. Post break out, it rallied nearly 35% to a high of 1,004 in less than ten trading sessions. It corrected for a while, near 840 level, and held fort there for almost a month.

Yesterday, the stock broke out of the consolidation with strong volumes. And today, the stock opened gap up and rallied 16% to touch a high of 1,117.

After such a sharp rally, it will be interesting to see if the stock can maintain the momentum or find some selling from the current level.

Divis Lab Soared 16% for the Day
Divis Lab Soared 16% for the Day 

Sensex Trades on a Volatile Note; Metals Stocks Top Losers
01:30 pm

After opening the day in green, Share markets in India have remained rangebound and are presently trading flat. Sectoral indices are trading on a mixed note, with stocks in the pharma sector and stocks in the consumer durables sector witnessing maximum buying interest. While stocks in the metals sector are leading the losses.

The BSE Sensex is trading down by 20 points (down 0.1%) and the NSE Nifty is trading down by 9 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.2%. The rupee is trading at 64.59 to the US$.

In news from stocks in the IPO space. According to an article in Livemint, Life Insurance Corporation of India (LIC) has put in a bid of US$ 1 billion (approx. Rs 65 billion) for shares of the New India Assurance Co. Ltd (NIA).

The initial public offering (IPO) of NIA was fully subscribed on day one itself on the back of this development.

The Rs 96 billion NIA IPO was subscribed by 1.04 times on the first day of the share sale itself. The IPO is the second largest this year after state-owned General Insurance Corp of India Ltd's (GIC Re) Rs 113 billion share sale.

The portion of shares reserved for institutional investors in the NIA IPO saw a subscription of 2.13 times on Wednesday, while those reserved for retail investors and high net-worth individuals (HNIs) were subscribed 2% or 0.02 time each.

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The NIA IPO includes a fresh issue of Rs 19.2 billion. NIA plans to use the proceeds from the fresh issue for augmenting its capital base to support growth and expansion of business, improving solvency margin and solvency ratio. The insurance firm has set a price band of Rs 770-800 for the IPO. The offer will close on 3 November and will see a total stake dilution of 14.3%.

To know our view on the NIA IPO, click here.

This is the second straight state-owned enterprise IPO, in which the largest insurance firm in the country has made a substantial bid.

Last month, LIC had bid for shares worth Rs 70-80 billion in the GIC Re IPO.

Centre Gets Cracking on Divestment

After three years of underachieving its disinvestment targets, the government is back with a bangThis time, it wants to focus on strategic stake sales of non-public sector units (PSUs) and areas where disinvestment has so far been poor. FY15-16 saw no disinvestment through this route.

The government, in an offer for sale, plans to sell a total of 96 million shares, which at the upper end of the price band will fetch Rs 76.8 billion.

NIA's initial share sale is part of the Union government's divestment plan, under which the Department of Investment and Public Asset Management (DIPAM) plans to sell government stakes in several central public-sector enterprises through various routes such as IPOs, offers for sale and strategic sales.

Moving on to news from stocks in the metals sector, Coal India share price is among the top gainers on the bourses today after the company reported production and offtake numbers for October 2017.

The state-owned miner achieved 93% of the targeted coal production at 46 million tonnes in October 2017. For the period April- October 2017, actual coal production was 95% of the targeted at 278 million tonnes.

Offtake figures were 100% for the month of October, while those for the period between April-October 2017 stood at 97%.

Meanwhile, the Odisha government slapped a penalty of Rs 201.7 billion on Coal India's subsidiary, Mahanadi Coalfields Ltd. (MCL) for flouting environment and mining plant norms.

The Odisha government issued a show cause notice on why the penalty should not be imposed on the company and has given 30 days for the miner to respond.

The Odisha government is also assessing forest norms violation in the state and the amount of penalty for it. Another penalty could likely be levied for it on the company.

At the time of writing, Coal India share price was trading up by 1.8%.


Sensex Trades Marginally Up; Healthcare & PSU Stocks Gain
11:30 am

Indian share markets continue to trade flat with a positive bias during the morning trade. Gains are largely seen in stocks from healthcare sector and PSU sector. Meanwhile, metal stocks and FMCG stocks are trading in the red.

The BSE Sensex is trading higher by 46 points and the NSE Nifty is trading higher by 6 points. The BSE Mid Cap index and the BSE Small Cap index are trading up by 1% & 0.8% respectively. The rupee is trading at 64.77 to the US$.

In the news from IPO space, Khadim India has hit the primary markets with its Rs 5.4-billion initial public offering for subscription with a price band of Rs 745-750 per share.

The IPO comprises of fresh issue of aggregating up to Rs 0.5 billion and an offer for sale of up to 6.6 million equity shares. Khadim India has allocated shares worth Rs 1.6 billion to 13 anchor investors at the upper end of the Rs 745 - 750 price band set for the IPO.

The offer for sale comprises of up to 0.7 million shares by promoter Siddhartha Roy Burman and 5.9 million shares by Fairwinds Trustees Services Private Limited.

Meanwhile, IPO of New India Assurance Company was oversubscribed 1.03 times so far on the first day of the three-day bidding on Wednesday.

The IPO, which aims to raise Rs 96 billion, received bids for 123.1 million shares against the total issue size of 120 million shares.

Further, IPO of Mahindra Logistics was subscribed 1.32 times on the second day of offer on Wednesday. The IPO, which aims to raise Rs 8.3 billion, received bids for 18 million shares against the total issue size of 13.6 million shares.

So, are these companies leaving enough money on the table for investors? We've released our IPO notes for the above IPOs. You can access the same in our IPO section.

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.

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Moving on to the news from pharma sector. Five Indian generic drugmakers have been reportedly named in a lawsuit by 45 US states over price-fixing conspiracy, adding to their existing woes like regulator inspections and pricing pressures in their largest market.

The five companies which are charged mainly for keeping prices of the generic drugs exceptionally high include -- Dr Reddy's Laboratories, Sun Pharmaceuticals, Emcure Pharmaceuticals, Zydus Cadila Pharmaceuticals and Glenmark Pharmaceuticals, the reports noted.

Reportedly, the drugmakers and executives divided customers for their drugs among themselves, agreeing that each company would have a certain percentage of the market. The companies sometimes agreed on price increases in advance.

In the expanded complaint, the states allege multiple illegal agreements to fix prices, artificially inflated and/or maintained prices, and reduced competition in the generic drug industry, involving certain diabetes, hypertension, antibiotics and asthma drugs.

The generic drug market was conceived as a way to help bring down the cost of prescription medications for American consumers. For years, though, those saving have not been realised, and instead the prices of many generic drugs have sky-rocketed.

Speaking of blips, the BSE Healthcare Index has been going through more than a blip.

Price to Earnings Ratio (PE) of Top Pharma Companies

Domestic and export markets have both been challenging. Government regulations on branded generics have proved a roadblock in domestic markets. In developed markets, stringent USFDA checks on manufacturing plants along with price erosion in generics have eroded profitability.

There is a structural change taking place in the sector overall as to how business is done and will be done in the future. The pharma sector always traded at premium valuations in the past. It was labeled an 'evergreen' sector. Any small blip was considered an opportunity to buy.

It's important to understand every business has its ups and downs. This is where valuations can help. Here's what Kunal Thanvi, our research analyst, recently wrote about the sector:

  • "Pharma companies which can adapt to these changes will thrive in the long run. The uncertainties highlight it important to be stock specific in the sector. It is crucial to look for companies with the competence and staying power to overcome the challenges."

So, what is key to identifying potential multibagger stocks? How does one pick them at the right time and ride them to their full potential? How many multibaggers do you really need to achieve the big riches that you desire?

Most importantly, are there any stocks right now that could turn out to be multibaggers? Click here to know everything that you need to know right now about mutlibagger stocks...


Sensex Opens Flat; Divis Lab Rallies 17%
09:30 am

Asian stock markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.17% while the Hang Seng is down 0.04%. The Shanghai Composite is trading down by 0.52%. US equities closed mostly higher on Wednesday after the US Federal Reserve kept interest rates unchanged.

Back home, India share markets have opened the day on a flattish note. The BSE Sensex is trading higher by 30 points while the NSE Nifty is trading higher by 6 points. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.6% & 0.3% respectively.

All sectoral indices have opened the day in green with banking sector and realty sector leading the pack of gainers. The rupee is trading at 64.77 to the US$.

Divis Lab share price rallied 17.7% in the early trade on the reports that USFDA will be lifting the Import Alert 66-40 and moving to close out the Warning letter issued to the company's Unit-II at Visakhapatnam.

Automobile stocks are witnessing buying interest today with only GTL Ltd trading in red. Automobile sales of most manufacturers cooled in October as dispatches to dealers moderated after the festive season ended. Auto firms in India count dispatches to dealerships as sales.

The top five passenger vehicles makers-Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra and Mahindra Ltd, Honda Cars India Ltd, and Tata Motors Ltd sold a cumulative 238,838 units in the month, up 3.7% from a year ago.

Sales Lose Momentum

Market leader Maruti Suzuki India Ltd led sales in the month. The local arm of the company sold 135,128 units, up 9.3% over a year ago.

While Tata Motors and Toyota Kirloskar Motor saw modest improvement in volume, Hyundai Motor posted a 0.9% fall in sales and Honda Cars sold 8.6% fewer cars than a year earlier.

At Ford Motor, sales fell as much as 43.8%, but the American automaker said this was because of a production rejig ahead of the launch of the new EcoSport which affected wholesale numbers.

Among two-wheeler makers, Royal Enfield continued to enjoy a good run with sales (domestic and exports) growing 18% to 69,492 units in October. Meanwhile, TVS Motor reported a 1.5% increase in two-wheeler sales at 3,08,364 units last month.

In another development, the Federal Reserve kept interest rates unchanged on Wednesday and pointed to solid US economic growth and a strengthening labor market while playing down the impact of recent hurricanes, a sign it is on track to lift borrowing costs again in December.

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In keeping with that encouraging tone, the central bank's policymakers acknowledged that inflation remained soft but did not downgrade their assessment of pricing expectations.

Further, US Treasury yields were largely unchanged after the release of the statement.

Notably, the Fed has raised rates twice this year and currently forecasts another nudge upwards in its benchmark lending rate from its current target range of 1% to 1.25% by the end of 2017.

In its statement, the central bank reiterated it expects inflation to rise back to its target over the medium term and emphasized that the unemployment rate has declined further.

US financial conditions remain loose, strengthening the argument that another rate rise would not slow the current brisk growth. The government reported last week that the economy grew at a 3% annual rate in the third quarter.

A decline in hiring in September has largely been dismissed as a blip caused by the temporary displacement of workers due to Hurricanes Harvey and Irma.

One shall note that, the central bank is scheduled to hold its final policy meeting of the year on 12-13 December.

But, why should we in India be worried about which way the American economy and interest rates are headed? As Vivek writes in The Vivek Kaul Letter:

  • "The answer is simple. The United States still forms around one-fourth of the global gross domestic product(GDP). It remains the largest consumer in the world. And any global recovery isn't going to happen, without the American economy finding its way back to where it was during its heydays or somewhere close to it."

Indian Indices Trade Strong, PMI Declines in October, and Top Stocks in Action
Pre-Open

On Wednesday, share markets in India opened in green and traded strong throughout the day and ended the day at a record close.

The BSE Sensex closed higher by 387 points to end at 33,600 while the broader NSE Nifty ended the day higher by 105 points to close at 10,441.

Among BSE sectoral indices, realty index rose the most by 2.9%, followed by bank stocks at 2%. State Bank of India and Bharti Airtel, were among the top gainers.

Top Stocks in Action Today

Hindustan Petroleum Corp. (HPCL) share price is likely to be in focus today after an article in a leading financial daily stated that HPCL is likely to acquire Mangalore Refinery and Petrochemicals (MRPL) in a share-swap deal.

The merger is likely to take place after Oil & Natural Gas Corporation (ONGC), the country's biggest oil and gas explorer, completes acquisition of HPCL in an all-cash deal by December or January.

The above development will make HPCL the second-largest oil refiner in India.

Maruti Suzuki India Ltd will be among the stocks to watch today after the company reported 9.3% increase in wholesale at 135,128 units for October. Passenger cars sales increased 6.7% , backed by compact cars segment (Dzire, Swift, Ritz, Baleno) that showed a growth of 24.7% while mini car division (Alto, WagonR) registered a 4.2% degrowth YoY.

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Manufacturing Activity Declines in October

Indian manufacturing activity lost momentum in October. The sector which showed signs of rebounding in September grew sluggishly in response to subdued demand conditions. Previously, manufacturing activity had contracted sharply in July following the launch of the Goods and Services Tax (GST).

According to the Nikkei Purchasing Managers' Index (PMI) survey by Markit, India's manufacturing lost steam in October after a sustained recovery in August and September. The PMI had contracted sharply in July. Introduction of the GST weighed heavily on the Indian manufacturing industry in July.

The PMI is the reading of the country's manufacturing sector output and is updated monthly. A reading above 50 indicates expansion, while any score below the mark denotes contraction.

PMI in October stood at 50.3, declining from the 51.2 reading in September. Both purchasing activity and pre-production inventories decreased due to subdued demand.

The report said that the downward movement in the headline index was partly driven by a stagnation in new business. The report linked subdued demand conditions to negative impacts of GST. Meanwhile, new export orders for Indian goods reduced in October. Moreover, the rate of contraction was the fastest since September 2013.

The data comes as the Reserve Bank of India's (RBI's) Monetary Policy Committee kept interest rates unchanged last month because it anticipates upside risks to retail inflation. It also slashed its growth projections for the current fiscal and raised its inflation projections.

Global Markets Upbeat on Economic Data

Asian shares scaled a 10-year high on Wednesday on the back of solid economic growth globally. European shares too were trading in green. Market participants in the US are focused on the progress of a U.S. tax-cut plan being developed by President Donald Trump and on Trump's announcement of the next head of the Federal Reserve. The White House said he will reveal his Fed pick on Thursday.

IPO Buzz

New India Assurance's initial public offer (IPO) got fully subscribed on the first day itself. According to data available on the bourses, the IPO received bids for 1.03 times the total issue size.

The general insurer's IPO will remain open till November 3. The fully government owned company is selling 120 million shares with a face value of Rs 5 each of which 24 million shares are fresh issue and 96 million shares are an offer for sale.

We had analysed and reviewed the IPO and released a recommendation note. You can check the same on the IPO page.

Meanwhile, Mahindra Logistics' IPO too got fully subscribed on day 2 of the offer. The IPO was subscribed by 1.3 times as of yesterday's close.

The portion reserved for qualified institutional buyers (QIBs) was subscribed over 75%, non-institutional investors over 10% and retail investors by more than 215%.

The company on Monday raised a little over Rs 247 crore from anchor investors. The initial share sale of Mahindra Logistics will close on November 2. The company has fixed price band of Rs 425 to 429 for the ongoing public offer. You can read about our view of the IPO, here.

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.