Sensex Ends 150 Points Higher; Banking Stocks Witness Buying
Closing

Indian share markets continued their momentum and ended the day on a positive note. Gains were largely seen in the banking sector, consumer durables sector and realty sector.

At the closing bell, the BSE Sensex stood higher by 150 points (up 0.4%) and the NSE Nifty closed higher by 54 points (up 0.5%). The BSE Mid Cap index closed higher by 0.8%, while the BSE Small Cap index ended the day up by 0.7%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 1.3% and the Nikkei was trading up by 0.9%. The Shanghai Composite stood higher by 1.2%.

European markets were also trading on a flattish note. The FTSE 100 was up by 0.03%. The DAX was up by 0.02% while the CAC 40 was up by 0.01%.

The rupee was trading at 71.59 to the US$ at the time of writing.

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Bandhan Bank share price witnessed buying interest today after the Reserve Bank of India allowed the bank to open as many as 40 new branches, the first time since it put a restriction on the bank's branch opening spree three months back.

In September, the Reserve Bank of India had barred Bandhan Bank from opening new branches without its approval and had ordered it to freeze the MD's salary over its failure to meet shareholding rules.

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

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

In other news, the Indian share market regulator allowed decided to allow mutual funds to create segregated portfolios with respect to debt and money market instruments in case of credit events while ensuring fair treatment to all unit holders.

This creation of segregated portfolios is to separate distressed, illiquid and hard-to-value assets from other more liquid assets in a portfolio.

It prevents the distressed assets from damaging the returns generated from more liquid and better-performing assets.

The market regulator in a statement said that with a segregated portfolio, investors who may take the hit when the credit event happens shall get the upside of future recovery.

These measures, along with a raft of other steps, were announced after the board meeting on Wednesday.

The board also took note of the proposal to review the valuation norms applicable to mutual fund schemes investing in debt and money market instruments.

In the news from the banking space, Yes Bank share price was in focus today. The lender today said it is on track to name new Managing Director and Chief Executive Officer within the deadline given by the Reserve Bank of India (RBI).

The bank said its nomination and remuneration Committee (N&RC) and Board of Directors have finalised the recommendation for non-executive part-time chairman position and shall be promptly seeking requisite approvals from the RBI.

It further added that the 'Search & Selection Committee' (SSE) has discussed and deliberated on the final shortlisted external and internal candidates presented by Korn Ferry post their comprehensive interviews and assessment.

The final recommendation will be submitted to the RBI by the board of directors post their next meeting scheduled on January 9, 2019.

The development comes as the lender was hit by a series of resignations lately.

The stock of the bank plunged to its lowest levels in over two years earlier this month 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 Higher; IndusInd Bank & Tata Motors Top Gainers
12:30 pm

Share markets in India are presently trading on a positive note. All sectoral indices are trading in green with stocks in the realty sector and auto sector witnessing maximum buying interest.

The BSE Sensex is trading up by 172 points (up 0.5%), while the NSE Nifty is trading up by 56 points (up 0.5%). The BSE Mid Cap index is trading up by 1.1% and the BSE Small Cap index is trading up by 0.9%.

The rupee is trading at Rs 71.51 against the US$.

In the news from the banking space, Bandhan bank is witnessing buying interest today. Shares of the bank climbed around 7% in early trade after the Reserve Bank of India (RBI) allowed the bank to open as many as 40 new branches, the first time since it put a restriction on the bank's branch opening spree three months back.

In September, the Reserve Bank of India had barred Bandhan Bank from opening new branches without its approval and had ordered it to freeze the MD's salary over its failure to meet shareholding rules.

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

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

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

At the time of writing, Bandhan Bank share price was trading up by 6.5%.

Moving on to the news from the pharma space, Sun pharma is witnessing selling pressure today as the markets regulator said that it is examining the whistleblower complaint against Dilip Shanghvi-led Sun Pharmaceutical Industries.

A whistleblower had last month approached markets regulator with a document alleging various irregularities by the company, its promoter Shanghvi and others.

The whistleblower made allegations in a 150-page letter sent to the markets regulator, which had earlier banned Doshi and Parekh following the 2001 scam.

According to the news in a leading financial daily, the irregularities involved two or three major rounds of foreign currency convertible bonds (FCCBs) issues by Sun Pharma during 2002-2007, which was managed by Jermyn Capital LLC.

Sun Pharma share price is trading down by 1.4%.

You can read Sun pharma Q2FY19 result analysis and Sun pharma fact sheet on our website.

In another news, Strides Pharma Science is also in focus today as the company's wholly owned subsidiary, Strides Pharma Global Pte., Singapore has received approval from the United States Food & Drug Administration (USFDA) for Lidocaine Ointment USP 5%.

Lidocaine Ointment contains a local anesthetic agent which is administered topically to numb and relieve pain from minor burns, skin abrasions, and other painful conditions affecting mucous membranes. Lidocaine Ointment is also used to numb the skin before certain medical procedures.

According to IQVIA MAT data, the US market for Lidocaine Ointment USP 5% is approximately US$50 million. The product will be marketed by Strides Pharma Inc. in the US Market and will be launched immediately.

To know more about the company, you can read Strides Pharma Q2FY19 result analysis and Strides Pharma annual report 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 can be seen from the chart below:

The Roller Coaster Ride of the BSE Healthcare Index

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 Opens Strong; PSU & Realty Stocks Lead
09:30 am

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1% while the Hang Seng is up 1.3%. The Shanghai Composite is also trading up by 1.3%. US stocks closed up on Wednesday afternoon, though well below their session highs as investors pulled back in the last few minutes of trading despite optimism about US-China trade relations and some reassuring signs in British politics.

Back home, India share markets opened strong today. The BSE Sensex is trading up by 248 points while the NSE Nifty is trading up by 65 points. The BSE Mid Cap index opened the day up by 1% while BSE Small Cap index opened up by 0.9%.

All sectoral indices have opened the day on a positive note with PSU stocks and realty stocks witnessing maximum buying interest.

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The rupee is currently trading at Rs 71.62 against the US$.

Speaking of benchmark indices, if we check how the BSE-Sensex performed compared to BSE-Midcap and BSE Smallcap during downturns.

We get this result.

The starting point of this exercise was the economic downturn of 2008.

During this time, the BSE-Sensex was down 38% compared to -54% and -59% of BSE-Mid and BSE-Small index respectively.

Similarly, during the period of 'policy paralysis' of 2011-12, the large-cap index outperformed both the indices.

FY16 was an exception where the large-cap index underperformed.

Nevertheless, during the current calendar year, the BSE-Sensex outperformed by a wide margin and is currently giving a positive return of 6% compared to -17% and -27% of BSE-Mid and BSE-Small indices respectively.

Clearly, in the face of such volatility, you need a balance of growth and safety. Safe stocks will offer you that safety.

To get started, I recommend Tanushree's special report - 7 Stocks To Profit From This Market Crash.

If you are a StockSelect subscriber, you can read the report here.

If you want to access to this special report, all you need to do is sign up here.

In the news from the economy. As per the latest data released by the Central Statistics Office (CSO), two key indicators of macro economy, industrial production and retail price inflation improved their performance in October and November, respectively.

Industrial activity grew at an 11-month high of 8.1% in October, while the retail inflation rate fell to a 17-month low of 2.33% in November.

With inflation consistently undershooting the Monetary Policy Committee's target, it increases the likelihood of a change in policy stance from calibrated tightening to neutral, which could serve as a precursor to a rate cut.

Reserve Bank of India Governor Shaktikanta Das will chair the next monetary policy committee meeting in February.

The index of industrial production rose from 4.5% in September, with the major sectors registering strong growth. Manufacturing grew 7.9% in October, from 4.6% in September. Electricity generation and mining output increased by 10.8% and 7% respectively. Capital goods grew by 16.8%.

Further, the consumer price index (CPI) fell from 3.38% in October, on the back of falling food prices, correction in retail fuel prices and the waning impact of the Housing Rent Allowance revision.

The consumer food price index contracted by 2.61% in November, with major segments such as vegetables, pulses and sugar contracting.

It must be noted that, the Reserve Bank of India's (RBI) monetary policy statement is one of the most tracked events in the financial world. With both core and retail inflation easing to new lows, a rate cut in key interest rates is widely expected.

Rate cut or not, we at Equitymaster, do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies.

The ValuePro  team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles.

Moving on to the news from pharma sector. Lupin share price is in focus today after the company said a court in Europe has upheld a decision to impose a fine of 40 million euros (over Rs 3.3 billion) on the company by European Commission (EC).

It involves a litigation over blood pressure lowering drug Perindopril.

The company said the General Court of the European Union has delivered its judgment concerning Lupin's and other companies appeal against the EC 2014 decision in the Perindopril litigation.

Note that, the company added that it will study the court's judgment and evaluate further course of action.

In 2014, Lupin and Unichem Laboratories are among six global drug makers on which the European regulator had imposed a collective fine of 427.7 million euros for striking deals to prevent entry of cheaper version of blood pressure drug Perindopril in the EU.

To know more about the company, you can access to Lupin's Q2FY19 result analysis and Lupin's 2017-18 Annual Report Analysis on our website.

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


Indian Indices End on a Strong Note, US-China Trade Talks, and Top Cues in Focus Today
Pre-Open

Indian share markets continued their momentum throughout the day and ended the day on a strong note. Gains were largely seen in the realty sector, telecom sector and auto sector.

At the closing bell yesterday, the BSE Sensex stood higher by 629 points (up 1.8%) and the NSE Nifty closed higher by 188 points (up 1.8%). Both, the BSE Mid Cap index and the BSE Small Cap index, ended the day up by 2.5%.

Top Stocks in Focus Today

From the pharma space, Unichem Lab share price will be in focus today as the company yesterday reported that it has received a tentative nod from the US health regulator for generic Tadalafil tablets used for treatment of erectile dysfunction.

Aurobindo Pharma will also be in focus today as the company's wholly owned subsidiary - Helix Healthcare B.V, Netherlands, has entered into an agreement with Shandong Luoxin Pharmaceutical Group, China (Luoxin) to establish a joint venture (JV) company in China with manufacturing facilities to manufacture nebuliser inhaler and other products for China, US and EU markets.

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The Secrets Behind Our Most Successful Recommendations…Revealed (Claim Within 48 Hours)

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Not only does it contain the lessons we've learnt in over 20 years of successful stock picking…

It also reveals the secret strategies behind some of our most successful recommendations!

And it's one of the most popular books we've ever published.

And we'd like to send you a copy…

Just confirm your address and other details, and we'll have this book delivered right to your doorstep (anywhere in India).

You don't have to pay us anything for the book – just cover postage and handling.

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To know more about the company, you can access Aurobindo pharma Q2FY19 result analysis and Aurobindo pharma Annual report on our website.

Cadila Healthcare share price will also be focus today as its subsidiary has received approval from the US health regulator to market Ranitidine injection. It is used to treat stomach and duodenal (intestinal) ulcers.

To know more about the company, you can access to Cadila Healthcare's latest result analysis and Cadila Healthcare's stock analysis on our website.

Market participants will also be tracking shares of banking and nonbanking financial companies (NBFCs). Shares of companies and lenders from this space witnessed a sharp rally yesterday on expectations that the new Reserve Bank of India (RBI) governor would announce steps to ease liquidity.

Note that the shares of several lenders have been battered in the recent past amid worries that shrinking liquidity will hurt their earnings.

Shaktikanta Das Appointed the New RBI Governor

In the news from the macroeconomic space, Shaktikanta Das was named as the new governor of the RBI.

Reportedly, former economic affairs secretary Shaktikanta Das had been instrumental in establishing the monetary policy committee (MPC) and the switchover to an inflation targeting regime, among other things. Now that he's moving to the regulatory side, Das may even have to resist some of the ideas he supported when in government.

Das was named the 25th governor of the Reserve Bank of India to succeed Urjit Patel. As we all know, Urjit Patel quit abruptly on Monday amid a bitter dispute over the regulator's autonomy.

The above development came on the back of Reserve Bank of India (RBI) governor Urjit Patel's resignation on Monday.

Patel, whose three-year term was to end in September 2019, is the first governor since 1990 to step down before his term ended.

Patel cited personal reasons for his resignation, but as per the reports, there were undercurrent since the government cited hereto never-used-before provisions of the law to bring him to negotiating table on issues it felt were of national interest.

Owing to the above developments, public sector lenders rallied the most on expectations that Das could support public lenders in recapitalization process. The BSE PSU index closed 1.1% higher on Tuesday. Punjab National Bank shares closed 5.7% higher. Shares of State Bank of India, Bank of Baroda and Axis Bank have all gained in the range of 2-4% each. The BSE PSU index closed 1.1% higher on Tuesday. Punjab National Bank shares closed 5.7% higher. Shares of State Bank of India, Bank of Baroda and Axis Bank have all gained in the range of 2-4% each.

From the International Financial Markets...

In the news from international financial markets, as per a leading financial daily, top officials from the US and China have begun talks to sort out their trade differences.

In particular, they've begun to identify steps that address the concerns of US President Donald Trump on intellectual property and reduce the balance of trade.

As per the news, Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer held a tele-conference with Chinese Vice Premier Liu He Monday night. Tuesday morning, Trump, without referring to the tele-conference, reported that great progress was being made.

The above news led to optimism in global financial as well as domestic stock markets.

In an interview with Reuters, US President Donald Trump also said talks were taking place with Beijing by phone and he would not raise tariffs on Chinese imports until he was sure about a deal.

Of Assembly Elections and More...

The Congress was able to make significant gain in this round of assembly elections. This came it won in three states - Chhattisgarh, Rajasthan, and Madhya Pradesh. It, however, lost to the Mizo National Front (MNF) in Mizoram.

Speaking of elections, are we heading for a volatile election year?

If history is anything to go by, it's time to fasten the seat belt.

Every year before the Indian General Election, the stock market has bordered on the extreme. Two of these elections have also coincided with one of the biggest stock market corrections in recent history.

Why this volatility though? Why should elections matter to the stock markets?

Investors, both domestic and foreign, expect stability at the central government level. A stable government will be in a position to implement a clear roadmap for the future.

On the other hand, a divided mandate could mean policy paralysis and roadblocks. Markets speculate on these factors.

Also, certain sops are announced before the elections to appease the masses. That too has an indirect effect on listed companies.

Should investors be mindful of these factors? Does this one-year volatility even matter for long-term investors?

As per Research Analyst, Girish Shetty, it ideally shouldn't but the year can certainly throw up a lot of opportunities if there is an irrational reaction to high-quality safe stocks.

With the state and general elections ahead, market participants expect the stock markets to remain volatile. In our latest episode of Indian Stock Market Podcast, Rahul Shah talks about his mantra to ride out the volatility in times like these. Listen in... visit SoundCloud, iTunes or Stitcher.