Sensex Ends 106 Points Lower; Consumer Durable and FMCG Stocks Witness Selling
Closing

Share markets in India continued to trade in the red during closing hours and ended their trading session marginally lower. Sectoral indices ended on a mixed note with stocks in the consumer durable sector and FMCG sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 106 points (down 0.3%) and the NSE Nifty closed down by 14 points (down 0.1%). The BSE Mid Cap index ended the day down 0.1%, while the BSE Small Cap index ended the day up 0.1%.

The rupee was trading at 70.66 against the US$.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was up by 0.29% and the Shanghai Composite was up by 0.4%. The Nikkei 225 was down 2.4%.

In the news from the macroeconomic space, global rating agency Moody's Investors Services projected India's real GDP to grow 7.2% in the year ending March 2019 and 7.4% in the following year. As per the agency, the growth will be driven by investment growth and strong consumption.

It said that asset quality will be stable (but weak) as cleanup of legacy problem loans nears completion and corporate health improves. Banks have recognised the bulk of legacy problem loans and will start making recoveries from large resolved nonperforming loans.

It further added that banks' second quarter performance showed that fresh bad loan and will start making recoveries from large resolved nonperforming loans.

The rating firm, however, predicted improvement in banks' profitability but high credit costs would keep it muted. It said funding and liquidity profiles of public sector banks will remain resilient, notwithstanding their solvency challenges.

From the pharma space, Sun Pharma share price was in focus today as the company eased concerns and saying it will work towards re-establishing credibility and corporate governance which could include the review of some past decisions.

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

This include decisions such as a US$ 250 million loan to employees and others and a possible buyout of a domestic company classified as a related party.

Note that the company's stock price plunged around 10% yesterday, hitting a six-month low after various allegations of mis governance and insider trading.

Last Tuesday, a note by Macquarie, an Australian brokerage firm went viral which raised concerns among the investing community.

The note raised questions about inadequate disclosures regarding the role of promoter Dilip Shanghvi's brother-in-law Sudhir Valia, Sun Pharma's past links with banned traders Ketan Parekh and Dharmesh Doshi, related party transactions involving promoter Shanghvi and guarantees given to real estate firm Suraksha Realty.

The note also questioned the selection of little-known London-based firm Jermyn Capital to manage the drug major's $275 million foreign convertible bond issue in 2004-07.

The markets regulator reportedly is planning to reopen the investigation into the insider trading case against the company and its promoters which was settled through consent mechanism.

Responding to the above news, Sun pharma denied all the allegations and said the information which was already available in the public domain had been portrayed in a way to indicate that something inappropriate had been done by the company.

To know more about the company, You can read Sun pharma Q2FY19 result analysis and Sun pharma fact sheet on our website.

In the news from the banking space, Yes Bank share price continued its rally and witnessed buying interest today.

Gains were mostly seen on the back of news of TS Vijayan's inclusion to the bank's board of directors. The development has turned up well for the lender which was hit by a series of resignations.

The stock of the company plunged to its lowest levels in over two years last week after credit rating agencies ICRA and CARE ratings downgraded the bank's debt instruments.

ICRA downgraded domestic long-term ratings of the bank's senior debt instruments to 'ICRA AA' from 'ICRA AA+' and its subordinate debt instruments to 'ICRA AA-' from 'ICRA AA'.

Meanwhile, CARE Ratings cut domestic ratings of Yes Bank's senior debt instruments to 'CARE AA+' from 'CARE AAA' and subordinate debt instruments to 'CARE AA' from 'CARE AA+'.

Earlier last week, Moody's also downgraded the bank's foreign currency issuer rating and changed the outlook on the bank to 'negative' from 'stable'.

To know more about the company, you can access to Yes bank Q2FY19 result analysis and Yes bank Stock Analysis on our website.

Speaking of corporate banks, Sarvajeet offers an interesting observation on a corporate bank stock.

Here's what he wrote in one of the recent editions of The 5 Minute WrapUp...

    Corporate banks have underperformed retail-focused banks in the last five years. The chart below shows the annualised returns of the last five years.

    Corporate Banks Underperforming Retail-focused Banks

    Retail-focused banks such as HDFC Bank and Kotak Mahindra bank performed significantly better compared to corporate banks. One of the important reasons for this outperformance is stable asset quality. They could maintain gross NPAs below 1% in the previous five years.

    Whereas corporate focused banks such as ICICI BankAxis Bank, and SBI are facing serious asset quality issues. Not to mention, some of these banks had management issues as well. No wonder these banks not only underperformed retail-focused banks, but also the BSE Bank index as well.

    But as I mentioned earlier, the worst is behind them.

    We recommended a corporate bank in Smart Money Secrets.

    Its aggressive clean-up of its corporate loan book, hiring the right people at the top, adoption of digital technology, and using algorithms in its core operations, bodes well for the bank and its stock. Smart Money Subscribers can access the report here.

If you do not have access to Smart Money Secrets, you can sign up here...


Sensex Trades Marginally Lower; HDFC & Bharti Airtel Top Losers
12:30 pm

Share markets in India are presently trading marginally lower. Sectoral indices are trading mixed with stocks in the IT sector and oil & gas sector witnessing maximum buying interest while realty stocks and metal stocks are witnessing selling pressure.

The BSE Sensex is trading down by 142 points (down 0.4%), while the NSE Nifty is trading down by 23 points (down 0.2%). The BSE Mid Cap index is trading on a flat note and the BSE Small Cap index is trading up by 0.3%.

The rupee recovered from the day's low point and is presently trading at 70.35 against the US$.

The rupee had posted its biggest single-day loss in three months on Monday by falling 88 paise. Rupee fell against the US$ after appreciating for three successive sessions as global crude oil prices stabilized ahead of the important OPEC meeting scheduled later this week.

Traders will closely watch the outcome of the RBI and OPEC meet policy. Reportedly, the Reserve Bank of India (RBI) is likely to keep interest rate unchanged.

Despite its recent weakness, the rupee is sharply higher from its October lows of 74.48 a dollar, helped by a moderation in oil prices. On Friday, the rupee had closed at a four-month high of 69.58 against the US dollar.

Also, speaking of rupee, note that the Indian rupee is the worst performer in Asia in 2018.

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How 3 Simple Steps Can Tell You Which Stocks Look Marked to Boom

Most investors aren't aware of this.

But 3 simple steps can give you a list of potential multi-bagger stocks to buy.

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  1. Log on to a website I'll just tell you about…
  2. Type in the name of the stock you want information on.
  3. Download a copy of this little-known legal document that reveals Top Stocks which are Marked to Boom.
This document is only released four times a year…and the last one came out in June.

Click here to get all the answers.
------------------------------

Here's what we wrote about rupee and its repercussions in one of the edition of The 5 Minute WrapUp...

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

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

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

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

HUL share price and GSK Consumer share price are in focus today as Hindustan Unilever Ltd (HUL) is set to merge with GSK Consumer for a transaction valued at Rs 317 billion in India's largest deal in consumer goods space.

The Indian unit of Unilever Plc will merge with GSK consumer healthcare with itself in an all stock deal that will give the country's largest pure-play consumer goods company access to Horlicks, Boost and Maltova malted drinks brands as well as distribution rights for a five-year period over over-the-counter and oral care brands such as Sensodyne, Eno and Crocin.

Moving on to the news from the automobiles space, Tata Motors share price is witnessing buying interest today as the company's wholly owned subsidiary - Jaguar Land Rover (JLR) has launched a special edition of its Jaguar XJ model for Rs 11.1 million in India to celebrate 50 years of the company's flagship luxury saloon. The special edition, XJ50 will be available in long wheelbase with 3 litre diesel engine option.

Last week, JLR reduced the workforce at the plant in Solihull, Central England. The company also reported that the external environment remains challenging and decisive actions are taken to achieve the necessary operational efficiencies to safeguard long term success.

In other news, Jaguar Land Rover (JLR) has also won the backing of the UK government's 25-million Pounds grant intended to accelerate the development of innovative low-carbon vehicle technologies.

The funding will be provided through the UK's Advanced Propulsion Centre (APC) enabling JLR and others to drive the development of low-carbon propulsion technologies and their supply chains.

Tata Motors share price is presently trading up by 0.7%

To know more about the company, you can access to Tata Motors Q2FY19 result analysis and Tata Motors stock analysis on our website.

Speaking of blue-chip automobile stocks, 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.

Bluechip Auto Are Stocks Way Off Their Valuation Peaks

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.

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.

Tanushree Banerjee, Co-head of Research at Equitymaster believes, this could be the opportunity long term investors were waiting for.


Indian Indices Open Marginally Lower; Realty and Telecom Stocks Witness Selling
09:30 am

Asian shares are trading on a mixed note today. The Nikkei 225 is down 1.2% while the Hang Seng is down 0.2%. The Shanghai Composite is trading up by 0.04%.

Back home, India share markets opened the day marginally lower. The BSE Sensex is trading down by 146 points (down 0.4%) while the NSE Nifty is trading down by 35 points (down 0.3%). The BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index has opened the day up by 0.2%.

Sectoral indices have opened the day on a mixed note with realty stocks and telecom stocks witnessing maximum selling pressure.

The rupee is trading at 70.51 to the US dollar.

From the banking space, Yes Bank share price is in focus today as the bank appointed TS Vijayan, a former chairman of Insurance Regulatory & Development Authority to its board of directors after a series of resignations.

As per a statement by the bank, the financial services veteran who also served Life Insurance Corporation of India would be an independent director.

In the news from commodity markets, crude oil is witnessing buying interest today. Crude oil prices extended the gains seen yesterday and rose today amid expected supply cuts by the OPEC.

Gains are also seen on the back of a mandated reduction in Canadian output.

As per the news, the Organization of the Petroleum Exporting Countries (OPEC) plus Russia and other allies are meeting on 6th and 7th December. Producers are discussing a supply curb of 1 million to 1.4 million barrels per day (bpd) and possibly more.

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How 3 Simple Steps Can Tell You Which Stocks Look Marked to Boom

Most investors aren't aware of this.

But 3 simple steps can give you a list of potential multi-bagger stocks to buy.

It's easy.
  1. Log on to a website I'll just tell you about…
  2. Type in the name of the stock you want information on.
  3. Download a copy of this little-known legal document that reveals Top Stocks which are Marked to Boom.
This document is only released four times a year…and the last one came out in June.

Click here to get all the answers.
------------------------------

The OPEC meeting in Vienna will follow a gathering by the Group of 20 (G20) nations in Argentina, at which oil policy is expected to be discussed. The meet will also potentially lay the groundwork for an OPEC deal.

Note that OPEC's de-facto leader Saudi Arabia wants the cartel and its allies to cut output by about 1.4 million barrels per day (bpd), around 1.5% of global supply.

However, while OPEC is considering withholding supply, US crude oil production reached another record high last week at 11.7 million barrels per day (bpd), according to U.S. Energy Information Administration (EIA). So, this, on the other hand, is helping cap the sharp rise in crude oil prices.

Speaking of crude oil, India's crude oil production was lower by 4.2% in September 2018 as compared to last year.

India's Increasing Crude Oil Demand Supply Gap

The worrying factor is this was the lowest production this year.

Here's what Tanushree Banerjee wrote about it in one of the editions of The 5 Minute WrapUp...

  • Comparing domestic production with the crude oil processed by refineries gives an idea of the demand supply gap. Low domestic production as compared to the demand for crude oil places a huge burden on India's import bill.

    Rising crude oil prices could have severe implications. Rising inflation. Rising interest rates. Pressure on the government to cut excise duty, thereby impacting its revenues.

    We have seen some of this play out. With elections around the corner, expect a lot of subsidies on fuel prices. This is bound to worsen India's fiscal deficit further.

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

From the pharma space, Sun Pharmaceuticals share price is in focus today as the company yesterday said that it will work towards re-establishing credibility and corporate governance which could include the review of some past decisions.

This include decisions such as a US$ 250 million loan to employees and others and a possible buyout of a domestic company classified as a related party.

Note that the company's stock price plunged around 10% yesterday, hitting a six-month low after various allegations of mis governance and insider trading.

Last Tuesday, a note by Macquarie, an Australian brokerage firm went viral which raised concerns among the investing community.

The note raised questions about inadequate disclosures regarding the role of promoter Dilip Shanghvi's brother-in-law Sudhir Valia, Sun Pharma's past links with banned traders Ketan Parekh and Dharmesh Doshi, related party transactions involving promoter Shanghvi and guarantees given to real estate firm Suraksha Realty.

The note also questioned the selection of little-known London-based firm Jermyn Capital to manage the drug major's $275 million foreign convertible bond issue in 2004-07.

The markets regulator reportedly is planning to reopen the investigation into the insider trading case against the company and its promoters which was settled through consent mechanism.

Responding to the above news, Sun pharma denied all the allegations and said the information which was already available in the public domain had been portrayed in a way to indicate that something inappropriate had been done by the company.

To know more about the company, You can read Sun pharma Q2FY19 result analysis and Sun pharma fact sheet on our website.

Speaking of pharma sector, note that the BSE Healthcare Index has been on a roller coaster ride in the past few years. The period from 2012 to 2015 saw the index go up more than three times.

And since then it has been a painful ride downwards.

As we wrote in one of our editions of The 5 Minute WrapUp...

  • Pre-2015, pharma companies enjoyed a fairytale ride in the US market. Low labor costs, good chemistry skills, along with efficiency, ensured Indian companies could copy innovator drugs to make generic drugs at a fast pace.

    The generic business had lucrative margins for all major pharma players. But the party did not last long. In the quest to supply drugs quickly, they compromised on quality at their manufacturing facilities.

    No wonder, the US regulatory authority (USFDA) took strict action. Sun Pharma received a warning letter for its Halol manufacturing facility in 2015. It was like a bolt out of the blue. Since then, the downward spiral began and has continued till date.

We believe that 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 as well as in the overall industry.


Sensex Ends Day Flat, Global Markets Cautious, and Top Stocks in Action
Pre-Open

On Monday, share markets in India opened on a positive note and ended the day in red after a volatile day of trading.

The BSE Sensex closed higher by 47 points to end the day at 36,241. While the broader NSE Nifty ended the up by 7 points to end at 10,884.

Among BSE sectoral indices, pharma stocks fell the most by 1.2%, followed by auto stocks at 0.2%. Sun Pharma and M&M were among the top losers.

Top Stocks in Action Today

HUL, GSK Pharma share prices are likely to be in focus as Hindustan Unilever Ltd (HUL) is set to merge with GSK Consumer for a transaction valued at Rs 317 billion in India's largest deal in consumer goods space.

Crude oil prices jumped as top exporter Saudi Arabia announced a supply cut in December and other producers also considered supply reductions in 2019.

Sun Pharma share price is among the stocks to watch today as the stock hit a six-month low after various allegations of misgovernance and insider trading.

--- Advertisement ---
How 3 Simple Steps Can Tell You Which Stocks Look Marked to Boom

Most investors aren't aware of this.

But 3 simple steps can give you a list of potential multi-bagger stocks to buy.

It's easy.
  1. Log on to a website I'll just tell you about…
  2. Type in the name of the stock you want information on.
  3. Download a copy of this little-known legal document that reveals Top Stocks which are Marked to Boom.
This document is only released four times a year…and the last one came out in June.

Click here to get all the answers.
------------------------------

Oil Prices in Focus

Crude oil was witnessing buying interest recently. Crude oil prices rose by around 4% in early trades yesterday after the United States and China agreed a truce in their trade conflict.

Gains were also seen ahead of a meeting by producer club OPEC this week that is expected to result in a supply cut.

As per the news, the Organization of the Petroleum Exporting Countries (OPEC) plus Russia and other allies are meeting on 6th and 7th December. Producers are discussing a supply curb of 1 million to 1.4 million barrels per day (bpd) and possibly more.

The OPEC meeting in Vienna will follow a gathering by the Group of 20 (G20) nations in Argentina, at which oil policy is expected to be discussed. The meet will also potentially lay the groundwork for an OPEC deal.

Note that OPEC's de-facto leader Saudi Arabia wants the cartel and its allies to cut output by about 1.4 million barrels per day (bpd), around 1.5% of global supply.

However, while OPEC is considering withholding supply, US crude oil production reached another record high last week at 11.7 million barrels per day (bpd), according to U.S. Energy Information Administration (EIA). So, this, on the other hand, is helping cap the sharp rise in crude oil prices.

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

Also, note that India's crude oil production was lower by 4.2% in September 2018 as compared to last year.

The worrying factor is this was the lowest production this year

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?

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.