Sensex Finishes Marginally Higher; SBI Surges 6.2%
Closing

Indian share markets finished the trading week marginally higher amid mixed international indices and rising oil prices. At the closing bell, the BSE Sensex closed higher by 64 points and the NSE Nifty finished up by 13 points. The S&P BSE Mid Cap finished down by 0.1% while S&P BSE Small Cap finished up by 0.1%. Gains were largely seen in consumer durable stocks, capital good stocks and bank stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.14%, while the Nikkei 225 & the Hang Seng fell 0.82% and 0.05% respectively. European markets are lower today with shares in France off the most. The CAC 40 is down 0.35% while Germany's DAX is off 0.28% and London's FTSE 100 is lower by 0.25%.

Rupee was trading at Rs 65.01 against the US$ in the afternoon session. Oil prices were trading at US$ 57.30 at the time of writing.

Oil prices rose nearly 1% on Thursday, supported by supply cuts from major exporters as well as continuing concerns over political developments in Saudi Arabia. Oil prices has increased nearly 130% since January 2016. This is a typical capital cycle. And it gets interesting every time.

The expectation in the market is that prices could remain elevated owing to several reasons, such as drawdown in inventories, especially in the US, better compliance with the voluntary production cut by the Organization of the Petroleum Exporting Countries (OPEC), slower pickup in US shale oil and continued geopolitical risk in West Asia.

The OPEC is expected to extend a cut of around 1.8 million barrels per day into the whole of 2018. Since June 2017 onwards, prices of Brent have been on the rise, on the back of a drop in US crude inventories, geopolitical tension between OPEC countries, and disruption in production caused by the hurricane activity in the US.

Crude Oil Hits 28-Month High

From India's perspective, rising oil prices warrant close attention. This could lead to rising risks of fiscal slippage, greater inflationary pressures, and lower likelihood of a rate cut by the Reserve Bank of India (RBI) in December prompt investors to review their positions.

In news from the economy, Moody's Investors Service in its latest Global Macroeconomic Update (2018-19) has stated that India is the only G20 emerging market country where growth has slowed sharply for six consecutive quarters.

But it expects economic growth in 2017 to average 6.2% before accelerating to around 7.5% in 2018 and 2019. It said that the slowdown in economy was due to the temporary negative impact of last year's demonetization, temporary disruption related to the rollout of the Goods and Service Tax (GST) and weak bank lending for investment-related activity due to a high proportion of delinquent loans on bank balance sheets. It added that the effects of demonetization and GST implementation will fade.

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It also said that despite progress on economic reforms and monetary policy easing, the flow of bank credit for investment activities has been hampered by both the inability of the banking sector to lend and weak demand for credit.

Moody's further noted that the reforms, including liberalization of foreign direct investment in key sectors and the GST, will increase efficiency, boosting trend growth.

Moving on to news from banking sector. State Bank of India (SBI) reported a second-quarter net profit of Rs 15.82 billion (US$243.3 million), missing estimates, on higher provisions for bad loans. The bank had reported a profit of Rs 25.38 billion in the corresponding quarter last year.

Net Interest Income NII was up 5.57% sequentially and 2.58% on yearly basis. On the other hand, the bank saw a 101% QoQ and 58% YoY growth in non-interest income at Rs 160.16 billion.

Asset quality though remained stable. Gross non-performing assets (GNPA) as percentage of gross advances stood inched lower to 9.83% at the end of second quarter from 9.97% in June quarter but rose on year-on-year basis.

SBI share price finished the day up by 6.2% on the BSE.

In news from engineering sector, L&T share price surged 4.4% in today's trade after the company's construction arm -- L&T Construction won orders worth Rs 40.23 billion across various business segments.

Under Heavy Civil Infrastructure Business, it has bagged orders cumulatively worth Rs 1.906 billion including a major government order worth Rs 18.24 billion in a joint venture with an international partner - Seaport Dredging, for the construction of various marine facilities.

Under Buildings & Factories Business, it has bagged an order worth Rs 8.3 billion from a reputed client for the construction of a cancer hospital, while under Water & Effluent Treatment Business, it has received engineering, procurement & construction orders worth Rs 7.88 billion.

Besides, under Power Transmission & Distribution Business, it has bagged orders worth Rs 3.42 billion, while under Smart World Communication Business, it has bagged an order worth Rs 1.57 billion.

And here's a note from Profit Hunter:

The Nifty 50 Index traded on a negative note during the week. On Monday, it opened the session gap down, but recovered to hit a new life high of 10,490. The euphoria did not last as the index slipped 102 points the next day. It continued to trade dull throughout the week. Finally, on Friday, the index recovered a bit, before ending the weekly session 1.25% down.

Last week, we mentioned that the index formed a hanging man candlestick pattern on the daily chart, which is a short term reversal pattern. And a negative open-and-close in the next trading session will validate the pattern, which could mean a short-term correction on cards. As a result, the index corrected 131 points.

This week, the index formed a bearish engulfing pattern at the start of the week, indicating a short-term top reversal pattern. The RSI indicator also formed a negative divergence. Another sign of correction.

So will the index continue to correct or will it resume its uptrend?

Nifty 50 Index Off its Life High
Nifty 50 Index Off its Life High 

Sensex Trades on a Volatile Note; Capital Goods Stocks Top Gainers
01:30 pm

After opening the day marginally lower, share markets in India witnessed volatile trading activity and are presently trading in red. Sectoral indices are trading on a mixed note, with stocks in the capital goods sector and stocks in the consumer durables sector witnessing maximum buying interest. While stocks in the auto sector are leading the losses.

The BSE Sensex is trading down by 33 points (down 0.1%) and the NSE Nifty is trading down by 13 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading up by 0.4%. The rupee is trading at 65.04 to the US$.

In news from stocks in the pharma sector. Divi's Lab share price witnessed buying interest in early trade today after the company said that the US Food and Drug Administration (USFDA) has closed out a warning letter issued to the company's unit at Visakhapatanam.

The company said that the US health regulator completed the inspection of the corrective action and measures initiated by the company and closed out the warning letter.

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Last week, Divi's Labs had announced that the US health regulator would lift an import alert imposed on the company's Unit-II in Visakhapatnam and was moving to close out the warning letter issued to the unit.

The USFDA in March had issued import alert, and a warning letter later for the Visakhapatnam facility for non-compliance of good manufacturing practice (GMP) norms, the company had informed bourses earlier.

The company in July announced that USFDA had moved to lift import alert imposed on the unit.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, our research analyst thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

USFDA sweetener for Indian Pharma

In recent times, pharma companies were bogged down by mounting pressure from US Food and Drug Administration (USFDA) to adhere to quality standards at their manufacturing plants. In the past three years, the USFDA raised numerous regulatory concerns resulting in import bans and suspension of new drug approvals from facilities of Indian pharma companies. But what has come as a breather is a sharp pick-up in new drug approvals in 2017. During the period January-July 2017, 129 approvals for generic drugs were made. This is 45% higher from 89 approvals made in the corresponding period last year.

As per the Indian Pharmaceutical Alliance, the pace of drug approvals has gained momentum after they complained to FDA about delays last year. Approvals for drugs have also picked up after USFDA concerns at some of the manufacturing units were addressed.

At the time of writing, Divi's Lab share price was trading up by 1.7%.

Moving on to news from stocks in the capital goods sector. Larsen & Toubro (L&T) share price is among the top gainers on the bourses today after the company has received an order from Mumbai Metropolitan Region Development Authority to construct two sections of the Rs 178 billion Mumbai Trans Harbour Link project.A consortium led by L&T-IHI Corp, a joint venture between L&T and Japan's IHI Corp, will construct the Sewri side of the sea-bridge, which is the first section, while L&T alone will construct bridge portion on land towards Chirle, which is the third section of the project.

Additionally, the company's construction arm bagged orders worth RS 40 billion.

L&T said its heavy civil infrastructure business has bagged orders worth Rs 19 billion in the domestic market, while its building and factories business received an order worth Rs 8.3 billion in the international front.

Besides, the company also orders worth 7.8 billion in water & effluent treatment business, Rs 3.4 billion worth orders in power transmission & distribution business.

The company's smart world communication business also bagged Rs 1.6 billion worth orders from Raipur Smart City for implementation of intelligent traffic management services.

Consequently, the stock surged and L&T share price hit a 52-week high.

At the time of writing, L&T share price was trading up by 3.9%.


Indian Indices Trade Marginally Lower; Auto Stocks Witness Losses
11:30 am

After opening the day on a negative note, share markets in India witnessed some buying interest and are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the energy sector and auto sector witnessing maximum selling pressure. Capital goods sector is trading in the green.

The BSE Sensex is trading down 8 points (down 0.02%) and the NSE Nifty is trading down by 7 points (down 0.1%). The BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading up by 0.4%. The rupee is trading at 65.01 to the US$.

Just Dial share price is witnessing buying interest today. The stock of the company is trading nearly 18% up presently. Most of these gains are seen as reports showed that the US internet giant Google is in talks with the local search engine provider to acquire its business.

In the news from IPO space, Mahindra Logistics, the 3rd party logistics (3PL) solutions provider, has made a tepid stock market debut today after having concluded its initial public offer (IPO) last week.

The stock of the company got listed at a marginal discount to its issue price of Rs 429 per share.

Mahindra Logistics is one of India's largest 3PL (third-party logistics) solutions providers in the Indian logistics industry which was estimated at Rs 6.4 trillion in Fiscal 2017, according to the CRISIL Report.

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The company follows an asset-light business model in which assets necessary for its operations such as vehicles and warehouses are owned or provided by a large network of business partners. The technology enabled asset-light business model allows for scalability of services as well as the flexibility to develop and offer customized logistics solutions across a diverse set of industries.

To know more about the company, you can read our IPO note on Mahindra Logistics Ltd (requires subscription).

Speaking of IPOs, 2017 is set to be a record year for initial public offerings. However, is it worth investing in IPOs?

If past record is anything to go by, barring a few names that have quality, most IPO companies fail to live up to the hype. Also, the BSE IPO index has underperformed the Sensex over the past decade, as can be seen from the chart below:

BSE IPO Index vis-a-vis Sensex

So, an investor blindly following the IPO hype might have done better following the Sensex.

But does that mean that we should completely ignore IPOs? Here's a snip from a recent issue of The 5 Minute WrapUp answering the same...

  • While it's necessary to be cautious on IPOs, you don't need to completely ignore them either.

    For every Reliance Power - like issue, there have been issues like MarutiTCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have made investors rich.

    The percentage of such issues, unfortunately, is very low (Check this IPO performance snapshot). The odds are stacked against a retail investor.

    careful evaluation of each IPO on its merits - its fundamentals, and most importantly, valuations - is the only way to spot future multi-baggers.

To learn how to navigate the treacherous world of IPOs, do read our special report on finding money-spinning IPOs.

In the news from the GST space, The 23rd meeting of the goods and services tax (GST) council will be held in Guwahati. As per the news, finance ministers of 24 states have confirmed their participation.

Tax rates on 100 items are likely to be cut from 28%, with the GST council set to approve sweeping changes including simpler procedures and a single return filing form for small firms.

In today's meeting, the GST Council will also discuss the inclusion of real estate in the new indirect tax regime. It would also discuss ways of reducing the compliance burden on taxpayers.

Notably, the GST Council in the last three or four meetings has reduced rates on over 100 items, bringing them down either from 28% to 18% or from 18% to 12%.

Notably, a wider tax base will also allow the government to lower its tax rates in future.

After studying these and other finer aspects of GST, our colleague Vivek Kaul, has penned his views on what could go right and wrong. Get a balanced perspective on the entire GST saga from Vivek. The report is titled The Good, the Sad and the Terrible (GST). Claim your own copy of his special report now.


Sensex Opens Marginally Down; Tata Motors & Axis Bank Top Losers
09:30 am

Asian stock markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 1.38% while the Hang Seng is down 0.15%. The Shanghai Composite is trading down by 0.12%. Wall Street stocks dropped on Thursday, weighed down by losses in Microsoft and other technology issues.

Back home, India share markets have opened the day on a flat note with negative bias. The BSE Sensex is trading lower by 38 points while the NSE Nifty is trading lower by 20 points. The BSE Mid Cap index and BSE Small Cap index both opened the day on a flat note.

Sectoral indices have opened the day on a mixed note with banking sector and capital goods sector leading the gains. While, oil & gas stocks and automobile stocks are witnessing selling pressure. The rupee is trading at 64.90 to the US$.

Divi's Laboratories share price surged 3.3% on the reports that USFDA completed evaluation of company's corrective actions in response to FDA's warning letter dated 13 April.

In the latest development, foreign institutional investors (FIIs) are returning after recent government announcements such as the Rs 2.11 trillion PSU bank recapitalisation plan. FIIs are mainly buying into new shares.

Over October and November so far, FIIs have invested a net of US$ 1.9 billion in Indian equities. For the year to date, they are buyers to the tune of US$ 7.4 billion.

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While flows to Asia ex-Japan country funds were mixed in the week to 1 November, commitments to both Korea and India Equity Funds hit a 13-week high even as China Equity Funds recorded their second straight week of outflows in excess of US$600 million, the reports noted.

Also, dedicated Brazil, Russia, India and China (BRIC) equity funds posted consecutive weekly inflows for the first time since early April as well.

Notably, a surging primary market has attracted a lot of foreign investor interest. Further, Indian companies raised a total of Rs 1.39 trillion from the primary market in 2017, exceeding the previous high of Rs 1.04 trillion in 2010.

FIIs, who were net sellers in the secondary market to the tune of US$3.43 billion from the start of the year up to 31 October, have simultaneously pumped in US$9.41 billion in the primary market alone, their highest in the last seven years. In November, they have invested US$1.5 billion in the secondary market.

Meanwhile, FY17 saw the highest inflows of foreign Direct Investments (FDI) in India at US $60 billion in the past four years. It will be crucial for the country going forward to maintain this momentum of inflows to help drive the economic development of the Indian economy.

Rising Foreign Direct Investments Augurs Well for India

While valuation has reached dizzy heights, earnings are yet to catch up. Fund managers believe there are some underlying risks that the Indian market is not factoring in like sluggish earnings growth. PE multiple expansion rather than earnings growth explains nearly all of the performance this year for India.

So, should you stay away from the market? Or swim with the tide?

Here's an excerpt of what Rahul Shah, Co-head of Research, wrote in one of the edition of The 5Minute WrapUp:

  • "Indian retail investors should not blindly follow FPIs in and out of stocks. It is far better to take advantage of the volatility caused by their selling to enter good quality stocks for the long-term."

Moving on to the news from pharma sector. As per an article in Livemint, two domestic drug makers are under the scanner of the pharmaceutical regulator for allegedly launching a combination drug to treat hypertension without mandatory prior approval.

The Central Drug Standards Control Organization (CDSCO) initiated an inquiry against Cadila Healthcare's subsidiary Zydus Cadila and Intas Pharmaceuticals after receiving a complaint from another drug company conducting clinic trials for the launch of the same project.

One shall note that, a drug maker needs approval from the Drug Controller General of India (DCGI) before launching any product. The drug has so far been approved for launch only in the US and Canada.

According to the clinical trials guidelines of the CDSCO, if the product is approved elsewhere and not in India, phase III clinical trials and bio-equivalence studies are required to establish its safety and efficacy on the Indian population.

The complainant-Hyderabad-based Hetero Drugs Ltd-had in December 2015 applied for manufacturing and marketing approval. The drug advisory committee recommended that the company conduct bio-equivalence and clinical trials in July 2017.

When the trials were still on, it was found that the combination drug is already available in the market.

Cadila Healthcare share price opened down by 1.2%.


Mahindra Logistics' Market Debut; GST Council Meet Outcome; Key Q2 Earnings & Top Cues in Action Today
Pre-Open

On Thursday, Indian share markets ended flat as oil prices fell overnight after they hit a more than two-year high earlier in the week. At the closing bell, the BSE Sensex closed higher by 32 points and the NSE Nifty finished up by 6 points. The S&P BSE Mid Cap finished up by 1% while S&P BSE Small Cap finished up by 0.8%.

Asian Paints, Bharti Airtel, ICICI Bank and Tata Steel were top gainers on Thursday with gains to the tune of 2.1%, 1.8%, 1.7% and 1.6%, respectively. Meanwhile, shares of ITC, Coal India, Lupin and ONGC fell 2.1%, 1.6%, 1.3% and 1%, respectively.

Top Cues in Action Today

Tata Motors share price will be in focus today after it reported a robust three-fold growth in profit for July-September quarter, driven by better-than-expected JLR's operational performance. Profit during the quarter increased to Rs 25 billion, from Rs 8.5 billion in same quarter last fiscal.

SBI share price is set to hog limelight today on the reports that the bank will open more branches in Nepal and consider options to re-enter Vietnam under a three-year goal to grow its international operations to as much as 15% of total business.

SAIL share price will be in focus after the government asked state-owned SAIL and ArcelorMittal to expedite setting up of their proposed joint venture for a Rs 50-billion auto-grade steel plant.

Titan Company has received an approval for investment of US $0.5 million in KaHa, a company registered in Singapore. The board of directors at its meeting held on 7 November 2017 has approved for the same.

JSW Steel reported crude steel production of 1.3 million tonnes (LT) in October 2017, a growth of 1% over the corresponding month in 2016.

Hindustan Petroleum Corporation (HPCL) reported over 2-fold jump in its net profit at Rs 17.5 billion for the quarter ended 30 September 2017 as compared to Rs 7 billion for the same quarter in the previous year.

Coffee Day Enterprises, the owner of Cafe Coffee Day retail chain, reported a healthy 267% growth year-on-year in profit at Rs 598 million for July-September quarter, driven by one-time gain of Rs 532 million.

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GST Council Meeting

The 23rd meeting of the goods and services tax (GST) council will be held in Guwahati. Finance ministers of 24 states have confirmed their participation.

Tax rates on 100 items are likely to be cut from 28%, with the GST council set to approve sweeping changes including simpler procedures and a single return filing form for small firms.

In today's meeting, the GST Council will also discuss the inclusion of real estate in the new indirect tax regime. It would also discuss ways of reducing the compliance burden on taxpayers.

Notably, the GST Council in the last three or four meetings has reduced rates on over 100 items, bringing them down either from 28% to 18% or from 18% to 12%.

Notably, a wider tax base will also allow the government to lower its tax rates in future.

After studying these and other finer aspects of GST, our colleague Vivek Kaul, has penned his views on what could go right and wrong. Get a balanced perspective on the entire GST saga from Vivek. The report is titled The Good, the Sad and the Terrible (GST). Claim your own copy of his special report now.

Earnings Today

Those scheduled to announce their second-quarter results include Alkem Laboratories, Allahabad bank, Ashoka Buildcon, Balaji telefilms, Bank of India, Bank of Maharashtra, BPCL, Bosch, Dena Bank & DLF, GE Shipping, MRF and M&M among others.

Global Stock Market Drivers

Asian stocks closed mixed on Thursday after Japanese stocks erased all the gains they made during morning trade. Investors in the region also digested the release of Chinese inflation data and kept an eye on President Donald Trump's stop in Beijing.

European stocks struggled for traction after a volatile session in Asian markets. The dollar was steady and Treasury yields declined as President Donald Trump challenged China over what he called unfair trade practices.

Meanwhile, Brexit talks resume Thursday in Brussels with no indication that a breakthrough is in reach.

Oil Prices Stabilize

Oil prices steadied just below two-year highs on Thursday, supported by supply cuts by OPEC and other major exporters including Russia.

Reportedly, a rally that has pushed up Brent by more than 40% since July may have run its course due to increases in US supplies and some indicators of a demand slowdown.

To keep a tab on the movements in crude oil 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.

IPO Buzz

HDFC Standard Life's initial public offering on Thursday, the last day of its issue, was oversubscribed 2.46 times. The portion meant for qualified institutional buyers (QIBs) was oversubscribed 9.4 times, non-institutional investors 0.9 times and retail investors 0.7%.

The company had, on Monday, raised Rs 23.2 billion from anchor investors.

With the stock markets buzzing, insurance companies are also making a beeline to capitalise on the IPO frenzy. After ICICI Prudential got listed last year, a number of both life and non-life insurance companies have lined up their IPOs this year.

But insurance protection in India remains grossly inadequate. This explains the huge protection gap of US$ 8.5 trillion for the country as of 2014. As per a Swiss Re report, India's protection gap stood at a staggering 92% and was the highest among all countries in the Asia Pacific.

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.

To know more about the company, you can access our IPO note on the same in our IPO section.

Meanwhile, Mahindra Logistics, the 3rd party logistics (3PL) solutions provider, will list its equity shares on exchanges today. The issue price is fixed at Rs 429 per share.

The initial public offering was oversubscribed over 7.9 times during 31 October-2 November 2017.