Sensex Finishes on a Firm Note; Pharma Stocks Rise
Closing

After trading on a flat note in the noon session, Indian share markets witnessed buying momentum in the afternoon session ahead of exit polls after the second phase of Gujarat elections today.

At the closing bell, the BSE Sensex closed higher by 194 points and the NSE Nifty finished higher by 59 points. The S&P BSE Mid Cap finished up by 0.1% while S&P BSE Small Cap finished down by 0.3%. Gains were largely seen in energy sector, bank sector and FMCG sector.

Asian stock markets finished lower today with shares in China leading the region. The Shanghai Composite is down 0.32% while Japan's Nikkei 225 is off 0.28% and Hong Kong's Hang Seng is lower by 0.19%. European markets are lower today with shares in Germany off the most. The DAX is down 0.27% while France's CAC 40 is off 0.23% and London's FTSE 100 is lower by 0.17%.

Rupee was trading at Rs 64.27 against the US$ in the afternoon session. Oil prices were trading at US$ 56.59 at the time of writing.

As per an article in The Economic Times, Torrent Pharmaceuticals Limited announced that it has completed acquisition of branded business of Unichem Laboratories Limited for India and Nepal, including its Sikkim manufacturing facility, on a going concern basis by way of slump sale.

This transaction was in pursuance of the definitive binding agreement entered into between Torrent and Unichem on November 3, 2017.

Torrent pharma share price finished down by 0.7% while Unichem Laboratories share price finished up by 0.7%.

Lupin share price finished up by 1% on the BSE. The company received final approval for its Tydemy (Drospirenone, Ethinyl Estradiol, and Levomefolate Calcium Tablets, 3 mg/0.03 mg/0.451 mg and Levomefolate Calcium Tablets, 0.451 mg) from the United States Food and Drug Administration (USFDA) to market a generic version of Safyral Tablets of Bayer HealthCare Pharmaceuticals Inc.

In another development, Cadila Healthcare's wholly owned subsidiary Zydus Pharmaceuticals (USA) Inc. has received the final approval from the United States Food & Drug Administration (USFDA) to market Pramipexole Dihydrochloride Extended-Release Tablets. The drug is indicated to treat signs and symptoms of Parkinson's disease (PD).

The group also received the final approval from the USFDA to market Nitrofurantoin Capsules USP (macrocrystals), which is indicated to treat acute uncomplicated urinary tract infections. Both the drugs will be manufactured at the group's formulations manufacturing facility at Moraiya, Ahmedabad.

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The group now has more than 175 approvals and has so far filed over 300 ANDAs since the commencement of the filing process in FY 2003-04.

Cadila Healthcare share price finished the day up by 0.3%.

In news from the economy, following the trend of Consumer Price Index (CPI), India's annual rate of inflation based on wholesale prices too rose in the month of November, due to increasing prices of food and fuel products.

The index rose for the second consecutive month, after easing in the month of September to 2.60%. According to the data released by the Ministry of Commerce & Industry, the wholesale price inflation (WPI) surged to 3.93% in November 2017 from 3.59% in October 2017 and 1.82% during the corresponding month of the previous year.

Build up inflation rate in the financial year so far was 2.74% compared to a build-up rate of 3.90% in the corresponding period of the previous year.

In another development, the Reserve Bank of India's (RBI) latest data has showed that India's current account deficit (CAD) doubled to 1.2% of gross domestic product (GDP) or US$7.2 billion in July-September, from 0.6% of GDP or US$3.4 billion reported in the same period a year ago.

The RBI further in its release said that the widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit brought about by a larger increase in merchandise imports relative to exports. India's trade deficit increased to US$74.8 billion in H1 of 2017-18 from US$49.4 billion in H1 of 2016-17.

In news from banking sector, Corporation bank share price fell 1.5% after it was reported in the Economic Times that The Reserve Bank of India has imposed certain restrictions on Corporation Bank to carry out banking activities as its share of bad loans rose sharply.

The government-owned bank said the RBI has triggered prompt corrective action (PCA) against it in view of high non-performing loans and requirement to raise capital. This makes Corporation Bank the eighth lender to face restrictions in a span of 10 months.

Once PCA is triggered, the bank faces restrictions on expenses such as on opening branches, recruiting staff and giving increment to employees. It can disburse loans only to those companies whose borrowing is above investment grades.

Meanwhile, credit-deposit ratio, a.k.a. CD Ratio has been steadily increasing over the past one year. This ratio shows how much a bank lends out of the deposits it has mobilized. This ratio was below 70% in November 2016, when demonetization resulted in a flood of deposits while lending slowed down.

CD Ratio and Bank Credit Growth Rising Upwards

Deposit growth and bank credit growth impacts the CD ratio. Bank credit growth rate is continuously improving and achieved 9.6% growth in November 2017. Although the base effect may have played a part in making, the current growth numbers look better. Nevertheless, the rise in bank credit growth will be positive for India's banking sector facing lower loan demand and severe capital constraints.

Over the past five years, private capex was stalled because of high leverage and weak capacity utilization levels. However, the above chart shows early signs of revival of capex cycle.

Moving on to news from automobile sector. Mahindra & Mahindra (M&M) share price finished on an encouraging note (up 1.4%) after it was reported that the company's wholly owned subsidiary - Mahindra Overseas Investment Company (Mauritius) (MOICML) has executed a sale of 64,50,000 shares representing 5% of the share capital of CIE Automotive S.A.

CIE Automotive S.A. is incorporated in Spain and quoted on the Madrid and Bilbao Stock Exchanges at an average gross price of Euro 23.50 per share, aggregating euro 151.58 million. The sale has been executed on the stock exchange.

Following the sale, MOICML's shareholding in CIE Automotive S.A. would come down to 7.435% of its share capital. This transaction will facilitate diversification of Investor base of CIE Automotive S.A. MOCIML would utilize the sale proceeds, inter alia, for part re-payment of its debt and/or for declaration of Dividend or for any other purpose, as may be decided by the Board of MOICML.

And here's a note from Profit Hunter:

The Nifty 50 Index is up nearly 60 points but TCS is down 3% - the top loser in the index.

Last time we reviewed the stock it had broken out of the falling trendline (red line). But it was trading very close to its life high which usually acts as a good resistance point. As a result, the stock fell nearly 9% from that point to touch a low of 2,531.

Today, it plunged 3% with strong volumes. But overall, the stock is trading in an uptrend. It did not make a lower low since November 2016 indicating strength in the price action.

So will the stock continue to move lower given the recent fall or this is only a temporary setback in the larger uptrend?

TCS Fell 3% for the Day
TCS Fell 3% for the Day 

Sensex Continues Downtrend; Capital Goods Stocks Witness Selling
01:30 pm

Stock markets in India are presently trading marginally lower. Sectoral indices are trading on a negative note with stocks in the power sector and capital goods sector witnessing maximum selling pressure.

The BSE Sensex is trading down 74 points (down 0.2%) and the NSE Nifty is trading down 26 points (down 0.3%). The BSE Mid Cap index is trading down by 0.4%, while the BSE Small Cap index is trading down by 0.9%. The rupee is trading at 64.28 to the US dollar.

In the news from macroeconomic front, market participants are tracking the second phase of polls for Gujarat elections today.

The first phase of the Gujarat Assembly Elections 2017 took place on Saturday, 9 Dec 2017. 89 of the total 182 constituencies in Gujarat went to polls in the first phase of this high-decibel, high-stakes state election. As per news reports, the voter turnout was around 68%.

The final outcome of the elections will be declared on 18th December.

The outcome is decidedly important for the Indian stock markets. As Ankit writes in one his editions of Equitymaster Insider..."stock market valuations in India seem to reflect what I call the 'Modi market premium'". You can read his entire note on this topic here (subscription required).

Let's wait and watch how the result of this elections turn out. We'll keep a close watch on the developments in this space and keep you updated.

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In other news, as per an article in the Economic Times, the Supreme Court yesterday permitted the Centre to modify the notification banning use of pet coke and furnace oil in Uttar Pradesh, Rajasthan and Haryana for industries like cement, lime stone and thermal power plants.

The apex court also directed the Ministry of Environment and Forest (MoEF) to come out with regulations for the sale of pet coke and fix emission standards for thermal power plants.

Petcoke is a dirtier alternative to coal which had temporarily been banned as pollution levels shot up in Delhi last month.

India is the world's biggest consumer of petroleum coke, better known as petcoke, a dark solid carbon material that emits 11% more greenhouse gas than coal.

The above development will come as a welcome breather for cement companies.

Speaking of cement companies, UltraTech Cement is setting up a 3.5-million-tonne greenfield cement plant at Pali in Rajasthan for Rs 18.5 billion.

This is the second greenfield project by the cement maker this year as it looks to capitalize on the government's focus on infrastructure and affordable housing.

Further, this plant is being set up in one of the fastest growing markets in the country and the highest cement consuming State in the North Zone. It will cater to the markets in Western Rajasthan where UltraTech does not have a significant presence.

With this expansion UltraTech will have a foot print across the country with 50 plant locations, along with 103 ready-mix concrete plants.

Earlier, the company had announced the setting up of a 3.5-million-tonne integrated cement plant at Dhar, Madhya Pradesh at a total cost of around Rs 26 billion.

Meanwhile, the Board of the company also approved a proposal for an increase in the investment limits by Registered Foreign Portfolio Investors (RFPIs) including Foreign Institutional Investors (FIIs).

The approval would result in raising the limit from the existing 30% of the paid-up equity share capital up to 40% of the paid-up equity share capital of the Cement major.

Note that cement companies in India are presently trading at expensive valuations. If one were to go by the numbers as reported by Business Standard, the valuations of the Indian cement companies are obscenely expensive.

Globally, cement makers are valued at 26x their latest annual earnings and 1.6x times their latest book value. The corresponding ratio for Chinese players is 23x and 0.95x respectively. On the other hand, Indian cement makers are valued at 48 times their net profit in the last financial year.

Also, the consolidation in the sector has weakened the balance sheet of top cement companies in India. The net debt-to-equity ratio of the 26 companies rated by Crisil is likely to increase to 2.9 times in 2018 as compared to 1.5 in 2017. Further, debt funded 78% of the acquisition cost in FY17. This is evident in the chart below:

Cement Companies Increasing Leverage


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

After opening the day on a flat note, share markets in India witnessed volatile trades and are presently trading marginally lower. Sectoral indices are trading on a negative note with stocks in the power sector and consumer durables sector witnessing maximum selling pressure.

The BSE Sensex is trading down 132 points (down 0.3%) and the NSE Nifty is trading down by 33 points (down 0.3%). The BSE Mid Cap index is trading down by 0.5%, while the BSE Small Cap index is trading down by 0.7%. The rupee is trading at 64.25 to the US$.

In the news from global financial markets, the US Federal Reserve raised its interest rates by 25 basis points in its policy meet yesterday. This marks as the third rate hike by the Fed this year.

As per the news, the US Fed took the decision to raised interest rates on expectations that the job market will remain robust. According to the quarterly economic projections, Fed officials expected the unemployment rate will maintain at 4.1% by the end of 2017 and will further drop to 3.9% in 2018.

The Fed also raised forecast for economic outlook and noted that there are hopes that the US economy will grow 2.5% both in 2017 and 2018. This was higher than its forecasts in September which projected a 2.4% growth for 2017 and 2.1% increase for 2018.

Regarding the Fed's balance sheet, the central bank confirmed that it would step up the monthly pace of shrinking its balance sheet, as scheduled, to US$ 20 billion.

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Note that the Fed plans to start normalizing its US$4.5 trillion balance sheet. The central bank is said to trim its holdings of US Treasury bonds and mortgage-backed securities.

Normalising the balance sheet could impact emerging markets.

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

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

Regarding upcoming rate hikes, the Fed currently predicts three more hikes in 2018. How this pans out and what impact it will have on the global financial markets remains to be seen. We'll keep you updated on the developments in this space.

In the news from commodities market, crude oil is witnessing buying interest today.

Most of the gains are seen as industry data yesterday showed a larger-than-expected drawdown in US crude stockpiles. Gains were also seen after the shutdown of the Forties North Sea pipeline hit supply levels from a market that was already tightening due to OPEC-led production cuts.

Owing to the above developments, brent crude oil, the international benchmark for oil prices, jumped above US$ 65 per barrel for the first time since 2015.

Note that crude oil prices have been witnessing a rising trend this year, as can be seen from the chart below:

Crude Oil Hits 28-Month High

However, rising crude oil prices do not bode well for the Indian economy. This we say is because India is hugely dependent on petroleum imports. In fact, the share of petroleum imports for India has only increased over the years.

India is the world's third-largest oil consumer. And energy consumption in India is set to grow as our economy remains one of the few 'bright spots' in a slowing, aging world economy. And India could face a potent risk with a rise in crude oil prices.

The only way out for India is to reduce its dependence on oil imports and achieve fuel-sufficiency.

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.


Sensex Opens Flat; Realty & Consumer Durables Stocks Gain
09:30 am

Asian indices are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.14% while the Hang Seng is down 0.07%. The Shanghai Composite is trading down by 0.2%. Overnight, the US markets closed mixed.

Back home, India share markets have opened the day marginally higher. The BSE Sensex is trading higher by 33 points while the NSE Nifty is trading higher by 9 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.4% & 0.3% respectively.

Barring FMCG stocks and bank stocks, all sectoral indices have opened the day in green with realty stocks and consumer durables stocks witnessing buying interest. The rupee is trading at 64.45 to the US$.

As per the data published by the Reserve Bank of India (RBI), India's July-September current account deficit more than doubled from a year earlier after imports accelerated while crude prices surged.

The July-September current account deficit (CAD) widened to 1.2% of gross domestic product, or US$7.2 billion. That was wider than the 0.6% or US$3.4 billion in the same period a year ago.

Meanwhile, the trade deficit widened to US$32.8 billion in the previous quarter from US$25.6 billion a year ago.

Reportedly, the widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit brought about by a larger increase in merchandise imports relative to exports.

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Going ahead the current account deficit is expected to widen and end the fiscal year ending in March at 1.7-2.0% of GDP, as oil and other global commodity prices continue to gain, while exports remain stable.

Despite a wider current account deficit, India's balance of payments posted a surplus of US$9.5 billion in July-September compared with US$8.5 billion a year ago, helped by a stronger capital account.

The capital account surplus, which includes foreign direct investment and portfolio inflows, was at US$6.9 billion in the September quarter compared with US$4.3 billion a year ago.

Moving on to the news from the automobile sector. As per an article in a leading financial daily, Maruti Suzuki India (MSI) plans to increase prices across its models by up to 2% from January in order to partially offset rise in input costs.

The company currently sells a range of models, from hatchback Alto 800 with price starting at Rs 0.2 million to crossover S-Cross priced at Rs 1.1 million (all prices ex- showroom Delhi).

Reportedly, the company is revising prices as there has been a gradual increase in commodity prices over the past few months.

According to the company, the raised cost of equipments, parts, fuel, transportation and processing are the major reasons that compelled the company to decide in favour of the price hike.

It is pertinent to mention here that the company utilizes 95% manufacturing parts through its ancillaries while only 5% are imported components.

The quantum of price increase will vary based on the different models and fuel specifications.

Earlier, Tata Motors had said that it will increase the prices of its entire passenger vehicle range by up to Rs 25,000, starting from January to offset the impact of rising input costs.

Another automobile manufacturer Ford India said that it will increase the prices of all its vehicles by up to 4% from 1 January 2018.

Speaking of automobile industry in India, S&P BSE Auto index is the best performing sectoral index since the global financial crisis. Auto index has surged by a mammoth 823% since November 2008. This is way ahead as compared to the benchmark index returns of 230% during the same period.

Within the auto index, Tata Motor's stock has appreciated the most since November 2008. The stock has posted a gain of 1180% since November 2008. Other stocks too such as Maruti Suzuki, Bajaj Auto, Mahindra and Mahindra have gained more than 1000% since then.

BSE Auto Index Witnessed the Highest Gains Since Financial Crisis

The main reason leading to this surge is the booming consumption story. Driving aspirations of the rising middle class have pushed up car sales in the world's second most populous country. Further, benign interest rates and lower oil prices too have supported this consumption boom.

Having said that, valuation too plays a big part in the trajectory of the stock prices and currently the valuations of the auto majors appears to be a bit stretched. Past performance is no validity of the stocks performing well going ahead and hence investors should pay utmost heed to the valuation before investing in the auto majors.

Maruti Suzuki share price opened the day down by 0.1%.


Of Gujarat Elections, Rising Crude Oil Prices, and Top Cues in Focus Today
Pre-Open

Indian share markets witnessed selling pressure in yesterday's trading session and finished lower at closing prices.

At the closing bell yesterday, the BSE Sensex closed lower by 175 points and the NSE Nifty finished lower by 47 points. The S&P BSE Mid Cap finished down by 0.9% while S&P BSE Small Cap finished down by 0.8%. Losses were largely seen in realty sector, metal sector and capital goods sector.

Top Stocks in Focus Today

Banking stocks be in focus today banks are set to refer about 23 of the 28 stressed accounts identified by the Reserve Bank of India (RBI) to the National Company Law Tribunal (NCLT). Note that bankers are looking to speed up the resolution of 28 accounts including Videocon Industries, Jaiprakash Associates as the RBI's deadline ends.

Asian Paints share price will be in focus today. The stock of the company witnessed buying interest yesterday after it was reported that the company has acquired 100% stake in Reno Chemicals Pharmaceuticals and Cosmetics (Reno), having its Registered Office at Santacruz East, Near Asian Paints, Mumbai. As per the news, the company has acquired 4,950 equity shares of the face value of Rs 100 for an amount of Rs 1.5 billion.

From the automobile sector, market participants will be tracking Ashok Leyland share price today. The company yesterday reported it is planning to invest Rs 4 billion over the next two years in developing new products, including left-hand-driving trucks. The company is working on left-hand-driving commercial vehicles to tap the potential export markets in Gulf countries and Africa.

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Gujarat Election 2017: Second Phase of Polls Start Today

Market participants will be closely tracking the second phase of polls for Gujarat elections which is set to kick off today.

The first phase of the Gujarat Assembly Elections 2017 took place on Saturday, 9 Dec 2017. 89 of the total 182 constituencies in Gujarat went to polls in the first phase of this high-decibel, high-stakes state election. As per news reports, the voter turnout was around 68%.

The final outcome of the elections will be declared on 18th December.

The outcome is decidedly important for the Indian stock markets. As Ankit writes in one his editions of Equitymaster Insider..."stock market valuations in India seem to reflect what I call the 'Modi market premium'". You can read his entire note on this topic here (subscription required).

Let's wait and watch how the result of this elections turn out. We'll keep a close watch on the developments in this space and keep you updated.

Fed's Decision on Interest Rate

Apart from the above, stock market participants will also take cues from the US Federal Reserve policy meeting.

The Fed, in its last meeting, had kept the benchmark interest rate unchanged.

US Federal Reserve rate hikes generally have a negative impact on emerging economies. But India is currently seen as better equipped than other emerging markets to ride the impact of higher US interest rates. That's largely because of its stronger economic growth and impressive foreign exchange reserves.

How the stock markets react to the development remain to be seen. We'll keep you updated on all the happenings from this space.

Crude Oil Continues Uptrend

In the news from commodities market, crude oil is witnessing buying interest this week.

Oil prices rose yesterday as industry data showed a larger-than-expected drawdown in US crude stockpiles.

Gains were also seen after the shutdown of the Forties North Sea pipeline hit supply levels from a market that was already tightening due to OPEC-led production cuts.

Owing to the above developments, brent crude oil, the international benchmark for oil prices, jumped above US$ 65 per barrel for the first time since 2015.

Rising crude oil prices do not bode well for the Indian economy. This we say is because India is hugely dependent on petroleum imports. In fact, the share of petroleum imports for India has only increased over the years.

India is the world's third-largest oil consumer. And energy consumption in India is set to grow as our economy remains one of the few 'bright spots' in a slowing, aging world economy. And India could face a potent risk with a rise in crude oil prices.

The only way out for India is to reduce its dependence on oil imports and achieve fuel-sufficiency.

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.