Rising Inflation and Onion Effect: Your Inside Scoop on the Markets
Podcast

Stock markets remained rangebound this week too. Macroeconomic news globally and domestically remained the focus of the week.

However, the markets turned green by the end of the week owing to global cues.

Economic concerns continued to affect the market sentiments. India's retail inflation rate in November rose and India's industrial output contracted.

November, but the culprit was food inflation, onions in particular.

So, what lies ahead of the Indian economy?

Tune in to know more...

Now you can also listen to our podcasts on Spotify. Here's the link: Indian Stock Market WrapUp


Sensex Ends 428 Points Higher; Metal and IT Stocks Witness Buying
Closing

Indian share markets witnessed positive trading activity throughout the day and ended on a strong note.

Gains were largely seen in the metal sector, IT sector and automobile sector.

At the closing bell, the BSE Sensex stood higher by 428 points (up 1.1%) and the NSE Nifty closed higher by 115 points (up 1%).

The BSE Mid Cap index ended the day up by 0.9%, while the BSE Small Cap index ended up by 0.8%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 2.6% and the Nikkei was up 2.5%. The Shanghai Composite stood higher by 1.8%.

The rupee was trading at 70.77 to the US$ at the time of writing.

Speaking of the Indian stock markets, how expensive is the Sensex? What has the trend been in recent years?

It would be interesting to see how the valuation of the index has moved over the last five years.

The chart below maps the price to earnings ratio of the Sensex from October 2014 to now.

How Pricey Is the Sensex Now?

Here's what Ankit Shah wrote about this in one of the editions of The 5 Minute WrapUp...

  • It is worth noting that the Sensex has gained 44% over the last five years, compounding at an annual rate of 7.6% (excluding dividends).

    Not quite impressive.

    During the same period, the Sensex price to earnings ratio has mostly been in a rising trend, except some intermittent declines.

    Between October 2014 and now, the gain in the Sensex price to earnings ratio is 42%. That means that the gains in the index have mostly come from expansion in the valuation multiple, and just meagerly from increases in earnings.
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So, before taking the current market bullishness for granted, do weigh in the fact that the Sensex is quite expensively priced.

Meanwhile, smallcap analyst Richa Agarwal talks about the ongoing economic slowdown, an upcoming rebound in the small cap space, and her number 1 stock pick for 2020 in the video below.

Tune in to find out more...

In news from the aviation sector, domestic air passenger traffic for November grew at the fastest pace in 2019. Indian airlines carried 12.95 million people in November, up 11.2% year-on-year.

According to the data from the Directorate General of Civil Aviation (DGCA), this was the fastest growth recorded since December 2018.

Domestic passenger traffic growth in November was led by SpiceJet, which carried 2 million passengers in the month, a jump of 43% year-on-year, while India's largest airline IndiGo carried 6 million passengers, up 21%.

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GoAir's passenger traffic increased 39.5% to 1.4 million, while that of Air India increased by 10% to 1.5 million.

SpiceJet's passenger load factor rose 3%, while Vistara, Air Asia and Air India recorded higher passenger load factors at 84%, 87% and 83%, respectively.

Passenger load factor of the six major carriers stood between 83% and 92.8% in November as against 76-90% in October.

Air passenger volumes increased as the combined capacity of airlines rebounded recently following the closure of Jet Airways in April.

Reports state that growth is seen due to low airfares. Lower airfares have been due to the seat capacity additions as well as stable oil prices.

The weakness in airfares reflects slowdown in the economy, similar to what has been seen in various other sectors.

How this trend pans out in the coming months remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Moving on to news from the IT sector, US-based Schall Law Firm has said it will file a class action lawsuit against Infosys to recover losses suffered by investors in the wake of allegations of "unethical practices" at the Indian IT major.

The firm asked investors who had purchased the company's securities between July 7, 2018 and October 20, 2019, inclusive (class period), to contact the firm before December 23, 2019.

Replying on the above matter, Infosys in a regulatory filing today said that "the company is aware of several media stories referencing an additional securities class action lawsuit against Infosys. The company is not aware of any additional complaints, other than the initial complaint, which was disclosed on 24 October 2019."

Earlier in October, an anonymous employees' group from the company had accused the management, mainly chief executive officer Salil Parekh and chief financial officer Nilanjan Roy of alleged unethical accounting practices to shore up revenue and profit, and lapses in corporate governance.

In response to the allegations, chairman Nandan Nilekani had said the company will take necessary steps if investigation into whistleblower complaints substantiates claims of corporate mis governance.

How the above developments pan out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

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


Sensex Jumps 350 Points; Tata Motors and Vedanta Top Gainers
12:30 pm

Share markets in India are presently trading on a strong note. Benchmark indices opened higher today tracking global markets on renewed optimism about a US-China trade deal.

Barring telecom stocks and healthcare stocks, all sectoral indices are trading in green with stocks in the metal sector and banking sector witnessing most of the buying interest.

The BSE Sensex is trading up by 331 points while the NSE Nifty is trading up by 84 points. The BSE Mid Cap index and the BSE Small Cap index are trading up by 0.6%.

The rupee is trading at 70.71 against the US$.

Speaking of Indian stock markets, Vijay Bhambwani states why he is positive about the markets and the Indian economy for the next 11 months.

As per Vijay, the US election season is set to have a big impact on India. In the video below, he covers what to expect over the next 11 months. Tune in to find out more...

In news from the metal sector, metal stocks are witnessing buying interest today after US President Donald Trump approved trade deal with China to halt December 15 tariffs.

President Donald Trump signed off on a phase-one trade deal with China, averting the December 15 introduction of a new wave of US tariffs on about US$ 160 billion of consumer goods from the Asian nation.

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Shares of Vedanta, Tata Steel and Hindustan Copper surged over 4%, while SAIL, Jindal Steel and NALCO gained in the range of 2-3%.

Steel companies have witnessed contraction in margins, dragged down by lackluster demand and lower global commodity prices.

Margins of Tata Steel, JSW Steel, Jindal Steel & Power Ltd (JSPL) and SAIL contracted by Rs 1,200-2,400 per tonne in Q2FY20.

Any progress in the US-China trade deal would come in as a huge relief for metal stocks which have been under pressure ever since the global trade war between the two countries began.

How this development pans out and what effect it has on metal stocks remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Moving on to news from the automobile sector, Tata Motors share price is witnessing buying interest today.

The company said that it has launched the new generation range of Prima and Ultra trucks in Kuwait, specially designed to meet the changing customer needs.

The launch of the new products come in line with the successful delivery for orders from waste management and cleaning companies operating for the Kuwait Municipality.

Tata Motors bagged the contracts that includes the use of its new generation Prima and Ultra trucks for municipality cleaning projects for the next 5 years.

In other news, India's largest carmaker Maruti Suzuki has raised its vehicle production target for this fiscal.

The Suzuki Motor Corp. unit increased the target for the year ending 31 March by 6%, or 60,000 units, to 1.65 million vehicles.

Reportedly, the target has been increased because of expectations of stronger demand in the fiscal fourth quarter with the rollout of more cars compliant with Bharat Stage- VI (BS-VI) emission norms, cheaper financing options and brisk demand for its new products, XL6 and S-Presso.

Currently, of the 15 models of Maruti Suzuki, eight are compliant with BS-VI emission norms.

Note that Maruti increased its production in November by 4.3%, after having reduced output for nine straight months due to lower demand.

The automaker had cut its production by 20.7% in October to 1.19,337 units. Similarly, in September it had reduced its production by 17.5% to 1,32,199 units.

Automobile sales in the domestic market have been on a decline since the September 2018 due to an overall slowdown in consumption and liquidity crisis at financial institutions after the collapse of Infrastructure Leasing and Financial Services.

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Speaking of the auto sector, note that India's automobile industry is bracing itself for a unique challenge in the first quarter of 2020 when the transition of BS-IV to BS-VI emission norms has to be made at the stroke of midnight on 31 March 2020.

No BS-IV vehicle could be sold from 1 April 2020, which means automakers would have to reduce their inventory on BS-IV models to zero by then.

The exercise is likely to see companies show extra caution in dispatching cars to dealers in the next few months, which may cause a continuation of the decline in wholesale numbers.

However, despite the slowdown in the auto sector, the sales volume of electric vehicles (EVs) are growing at a robust pace.

Sale of Electric Vehicles in India Projected to Go Up 10x in the Next Two Decades

Electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

The recently announced government incentives will give a further boost to EV sales.

The coming one year will be a real test for India's auto companies.

It will also tell us if this slowdown is temporary or if there has been a structural change in the sector.

In our view, companies in the sector adapting their business models to the rapidly changing environment will survive and thrive.

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


Sensex Opens Firm; Metal Stocks Rally
09:30 am

Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 1.2% while the Hang Seng is up 2.1%. The Nikkei 225 is trading up by 2.4%. Wall Street's main indices hit record highs on Thursday following news that the United States had reached a "deal in principle" with China to resolve a trade war that has rattled markets for nearly two years.

Back home, India share markets opened higher. The BSE Sensex is trading up by 229 points while the NSE Nifty is trading up by 62 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.5% and 0.4% respectively.

Barring telecom stocks and healthcare stocks, all sectoral indices have opened the day in green with metal and automobiles stocks witnessing buying interest.

The rupee is currently trading at 70.59 against the US$.

Speaking of the Indian share markets, the past few months have seen stock markets trading on a volatile note. While the Sensex has been rising, the rest of the market has seen most stocks falling. And even the Sensex's rise has been topsy-turvy.

But isn't that how markets have always behaved?

If you look at the stock market returns over the years, you will see that the markets have never moved in a linear fashion.

What do I mean by that?

It has never been a one-way street - only up or down.

Stock markets have always moved in cycles.

The Time to Buy Stocks is Now

The Time to Buy Stocks is Now

Here's what Radhika Pandit wrote about this in one of the editions of The 5 Minute WrapUp...

  • If you would have bought stocks when either the Sensex or the Smallcap index was in a downturn, you would have made big returns once the cycle turned and the bulls took over.

    Sarvajeet and I believe we are seeing a similar situation currently.

    The economic slowdown does not herald the end of the world or for that matter the end of India. It's a phase and like all phases - This too shall pass.
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So, the real question is - Are you taking advantage of these market movements to buy quality stocks?

Our smallcap stocks analyst Richa Agarwal talks about the ongoing economic slowdown, an upcoming rebound in the small cap space, and her number 1 stock pick for 2020 in the video below.

Tune in to find out more...

Moving on to the news from the economy. Rising food prices pushed the retail inflation in November to over three-year high of 5.54%, while the industrial sector output shrank for third month in a row by 3.8% in October, indicating deepening slowdown in the economy.

The retail inflation in November breached the Reserve Bank's medium-term target of 4%, justifying the central bank's decision to keep the benchmark interest rate unchanged in its monetary policy earlier this month.

According to the data released by the National Statistical Office (NSO), costlier vegetables, pulses and protein rich items pushed the consumer price index (CPI) based retail inflation to a 40-month high in November.

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The previous high was in July 2016, when retail inflation was at 6.1%. The print stood at 4.6% in October and 2.3% in November 2018.

Inflation in vegetables shot up to 36% in November, as against 26.1% in October.

Prices of pulses and related products jumped 13.9% during the month. In the fuel and light category, prices dropped 1.9%.

On the other hand, the falling output of manufacturing, mining and electricity sectors pulled down the Index of Industrial Production (IIP) in October, as per the official data.

Notably, the Indian economy grew at the slowest pace in over six year at 4.5% during the second quarter of the current fiscal. The GDP growth remained at 5% in the first quarter ended June.

Volatile markets and some recent economic numbers have confused investors.

In this video, Tanushree Banerjee decodes a few economic myths and reveals three big trends of Rebirth of India.

Tune in...

Moving on to the news from the engineering sector. As per an article in a leading financial daily, Larsen & Toubro has bagged an order in the range of Rs 10 billion - Rs 25 billion from Rail Vikas Nigam.

The order entails construction of Rishikesh, Karanprayag Tunnel 2 package works comprising tunnels, bridges and formation works in the state of Uttarakhand.

L&T's heavy civil infrastructure division will execute this order.

The company stated that, this is a fast track project to be completed within stringent timelines.

Notably, diversification continues to help L&T negotiate and get better terms and margins for projects. Apparently, this is because it is less desperate to win orders as compared to a company which are present in only a couple of sectors.

Its reputation, extensive technical prowess, and large skilled workforce have enabled L&T to command a certain premium from customers and vendors alike.

Whether, further addition to these new projects provides a cushion to its profitability will be an interesting thing to watch out for going forward.

To know more about the company, you can access to L&T's Q2FY20 result analysis and L&T's 2018-19 Annual Report Analysis on our website.

L&T share price opened up by 0.6%.

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


Global Stock Market Updates, IPO Buzz, and Top Cues in Focus Today
Pre-Open

On Thursday, Indian share markets traded on a positive note throughout the day and ended higher.

The BSE Sensex closed higher by 169 points to end the day at 40,582. Tata Motors and Yes Bank were among the top gainers.

While the broader NSE Nifty ended up by 62 points to end at 11,972.

Among BSE sectoral indices, metal stocks gained the most, followed by auto stocks and banking stocks.

Top Stocks in Action Today

Larsen & Toubro (L&T) share price will be in focus today as its's construction arm - L&T Construction's Heavy Civil Infrastructure business has secured a prestigious order from Rail Vikas Nigam (RVNL) for the construction of tunnels, bridges and formation works in the state of Uttarakhand.

Maruti Suzuki share price will also be in focus today as the company has partnered with Federal Bank to provide dealer finance and customized auto retail financing solutions to customers.

Market participants will also track Kotak Mahindra Bank share price.

InstantPay, one of India's largest inclusive and neo banking platform, has entered into a strategic partnership with Kotak Mahindra Bank's subsidiary - Kotak Mahindra Life Insurance Company to reach out to the billion uninsured and under banked population of India, including the urban migrant.

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From the IPO Space...

EaseMyTrip is planning a Rs 7 billion maiden public share sale that will make it the first online travel agency to be listed in the Indian stock market.

Reports state that the company aims to file the draft red herring prospectus, with the capital markets regulator shortly.

Currently, two Indian online travel companies - MakeMyTrip and Yatra are listed on New York's Nasdaq. A media report recently cited a senior executive at Cleartrip as saying it will look at an IPO in 2-3 years.

In other news, after witnessing a massive subscription of more than 165 times last week in its Rs 7.5 billion IPO, shares of Ujjivan Small Finance Bank listed yesterday on the exchanges with 57% gains.

Earlier this month, USFB raised Rs 2.5 billion in a pre-IPO round.

The bank's parent microfinance lender Ujjivan Financial Services went public in 2016 after receiving an in-principle license from the Reserve Bank of India (RBI) to start a small finance bank.

The stock of Ujjivan Small Finance Bank closed 49.5% higher yesterday.

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Fed Leaves Rates on Hold

The US central bank decided to keep rates unchanged and added that more rate changes were unlikely in 2020.

After cutting rates three times earlier this year, the US Fed left its benchmark rate at the target range of between 1.5% and 1.75%.

The Fed in a policy statement said that "the committee judges the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the symmetric 2% objective."

The policymakers added that they would continue monitoring global developments in deciding whether interest rates need to change.

Chairman Jerome Powell told reporters that the committee might consider widening reserves management-related treasuries purchases to include short-term coupon-bearing securities, if necessary, to ease liquidity strains in money markets.

Oil Gains amid OPEC Deficit Forecast

In news from the commodity space, oil prices rose on Thursday, recouping some of the losses from the previous session that followed a surprise increase in US crude inventories.

Crude stockpiles last week rose unexpectedly, gaining more than 800,000 barrels, compared with a Reuters poll that forecast a 2.8-million-barrel decline.

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday said it now expected a small deficit in the oil market in the next year, suggesting the market is tighter than previously thought - even before the latest pact with other producers to curb supply takes effect.

However, the International Energy Agency (IEA) said that global oil inventories could rise sharply despite an agreement by OPEC and its allies to deepen output cuts.

It stated that inventories will also rise despite the lower expected production by the US and other non-OPEC countries.

It stated that despite the additional curbs and a reduction in our forecast of 2020 non-OPEC supply growth to 2.1 million barrels per day (bpd), global oil inventories could build by 700,000 bpd in Q1 2020.

How the above developments pan out and what effect it has on crude oil markets remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Speaking of crude oil, the Organization of Petroleum Exporting Countries (OPEC) and Russia last week agreed to cuts in oil production.

In the video below, Vijay Bhambwani shares interesting insights into this space. He talks about what to expect going forward.

Tune in to find out more...

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