What's Your Investing Resolution for 2019?
Podcast

The year 2019 is starting with a highly pessimistic backdrop that spans asset classes and geographies.

As curtains close on the year 2018, and year 2019 makes it way, we take a look at the key events that drove the markets this week.

Stock markets around the world staged a post-Christmas rally. Shares on Wall Street soared sharply after their worst ever performance on Christmas Eve.

Despite the historical rise on Wednesday, the fundamental concerns of investors about the global economy and trade had not disappeared.

Back home, the Goods and Services Tax (GST) Council slashed rates on 23 items. Meanwhile, the fiscal deficit of India stood at Rs 7.2 trillion by the end of November 2018.

We also talk about the key stocks that were in the news this week.

As the year 2018 draws to a close, we talk about the investment strategy be for 2019 and Richa Agarwal's 4 small cap stocks that we need to watch out for.

Tune in...


Sensex Ends 269 Points Higher; Consumer Durables & Healthcare Stocks Witness Buying
Closing

Indian share markets traded on a positive note throughout the day and ended on a strong note. Gains were seen in the consumer durables sector, healthcare sector and finance sector, while telecom stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 269 points (up 0.8%) and the NSE Nifty closed higher by 80 points (up 0.7%). The BSE Mid Cap index and the BSE Small Cap index ended the day up by 0.9%.

The rupee was trading at 70.00 against the US$.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was up by 0.1% and the Shanghai Composite was up by 0.4%. The Nikkei 225 was down 0.3%.

In the news from global financial markets, Japan's Nikkei fell today as energy-related shares sunk, leading the index to its first annual loss in seven years.

Energy-related shares weighed on the broader market after oil prices fell steeply overnight on worries about oversupply and an increasingly muddled outlook for global growth.

Earlier this month, Nikkei witnessed selling pressure and hit 9-month low on the back of a sell-off seen in US stock markets as the US Federal Reserve made a dovish stance in its monetary policy.

As expected, the US Federal Reserve raised interest rates. It, however, forecasted fewer rate hikes next year.

It further signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

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The central bank said the US economy has been growing at a strong rate and the job market has continued to improve.

The rate hike, the fourth of 2018, lifted the target range for the Fed's benchmark overnight lending rate by a quarter of a percentage point to a range of 2.25% to 2.50%.

The decision to raise borrowing costs again is likely to anger US President Donald Trump, who has repeatedly attacked the central bank's tightening this year as damaging to the economy.

The Fed has been raising rates to reduce the boost that monetary policy gives to the economy, which is growing faster than what central bank policymakers view as a sustainable rate.

The Fed also made a widely expected technical adjustment, raising the rate it pays on banks' excess reserves by just 20 basis points to give it better control over the policy rate and keep it within the targeted range.

In the news from the automobiles sector, Maruti Suzuki share price was in focus today. Reportedly, the auto company is planning to shut its diesel engine assembly plant in Gurgaon.

As per an article in The Economic Times, the Suzuki Motor Corp. unit might either convert the diesel engine line in its Gurgaon plant to produce petrol engines or to add an assembly line for petrol engines at it plans in Manesar.

The company currently assembles a 1.3-litre diesel engine sourced from Fiat in Gurgaon. The Gurgaon plant also makes an 800cc diesel engine, which has been developed in-house and is currently offered on Maruti's Super Carry light truck.

The diesel assembly line in Gurgaon has a capacity of approximately 170,000 engines per annum. Maruti plans to replace the 1.3 litre engines with 1.5 litre engine.

To know more about the company, you can read Maruti Suzuki Q2FY19 Result Analysis and Maruti Suzuki Annual Report on our website.

Speaking of automobiles sector, India's auto sales slowed down in last two months due to weak consumer sentiment because of high interest rate, a spike in fuel price and insurance cost and liquidity crunch.

During H1 of FY18, the sector grew 11% in which CV & tractor segment expanding 34% and 13% while PVs grew by only 7%. On the other hand, higher rural participation has led the 2-wheeler & 3-wheeler segments to grew 36% and 10%.

Also, 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.

Moving on to the news from the banking sector, shares of public sector undertaking (PSU) banks were witnessing buying interest today, trading higher for the third straight day on reports that the central government would release Rs 286.15 billion before the end of this month towards a fresh tranche of funds to recapitalize state-run banks.

Canara bank, Vijaya bank, PNB, and Syndicate bank were up in the range of 2% to 4%.

Earlier this year, the government pumped in Rs 113.4 billion into five PSBs, including PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank to improve their financial health.

However, using recapitalization bonds can only act as a short-term measure to the crisis afflicting Indian public-sector banks today. Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Our big picture editor, Vivek Kaul, talks about moral hazard risk arising out of recapitalization. He writes:

  • "If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly."

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


Sensex Trades 300 Points Higher; Sun Pharma & Yes Bank 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 consumer durable sector, banking sector and finance sector witnessing maximum buying interest.

The BSE Sensex is trading up by 316 points (up 0.9%), while the NSE Nifty is trading up by 95 points (up 0.9%). The BSE Mid Cap index and the BSE Small Cap index are trading up by 0.8%.

The rupee is trading at 70.02 against the US$.

The rupee rose by 35 paise to 70.00 against the US$ in early trade aided by foreign fund inflows amid a weak dollar globally and sharp fall in crude oil prices.

The US dollar fell against major global currencies as investors turned their focus to safe-haven currencies amid renewed worries over US-China trade tensions and global economic growth.

In the last few sessions, the rupee has been strengthening against the US$. Last week, dollar came under pressure after the Federal Reserve in its policy statement mentioned that rate hike in the coming year could be restricted to two compared to earlier estimates of three rate hikes next year.

In the news from the commodity space, after falling in the previous session, oil prices jumped as much as 3% but growth in US crude stockpiles and ongoing concerns about the global economy kept markets under pressure.

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On Thursday, crude oil declined by 4.24% to US$ 52.16 per barrel after reports of an increase in US inventories. Oil prices fell to their lowest in more than a year on Thursday, a day after their biggest one-day rally in two years, pulled down by worries about the global economy and a supply glut.

Reportedly, US crude inventories rose by 6.9 million barrels to 448.2 million barrels on increased refinery output.

The United States has emerged as the world's biggest crude producer, pumping 11.6 million barrels per day (bpd), more than both Saudi Arabia and Russia.

On Thursday, Russian Energy Minister Alexander Novak said that rising protectionism and the unpredictability of the US administration had greatly contributed to global oil price volatility over the past two years. Novak also said Russia would cut its crude output by between 3 and 5 million tonnes in the first half of 2019 as part of a deal between producers

Earlier this month, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, agreed to curb output by 1.2 million bpd starting in January in a bid to clear a supply overhang and prop up prices.

Oil prices have been pulled down sharply since October by signs of an economic slowdown. Meanwhile the two world's biggest economies, the United States and China, are locked in a trade war which is threatening to slow global growth and battering investor sentiment.

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.

Moving on to the news from the IPO space, Antony Waste Handling Cell has filed draft papers with the markets regulator to float an initial share-sale.

The initial public offering (IPO) comprises fresh issue of equity shares aggregating up to Rs 435 million and an offer-for-sale of up to 94,42,164 stocks by the existing shareholders, according to the draft papers.

Proceeds of the issue will be utilized towards reduction of the aggregate outstanding borrowings of the company on a consolidated basis, and for general corporate purposes.

Speaking of IPO's, according to an article in The Economic Times, Indian stock exchanges ranked second globally in terms of IPOs, raising US$ 5.52 billion from 161 offerings till November this year. The US ranked first, raising US$ 60 billion from 261 IPOs.

Here's an excerpt from the article:

  • According to the report, the drop in IPOs could be attributed to reasons such as significant corrections in the stock markets in mid-cap and small-cap stocks.

    Further, the amount of volatility has increased due to uncertainties around global growth compounded by the ongoing US-China trade wars.

    In addition, there are a number of macroeconomic factors which are contributing uncertainties such as liquidity crises among non-bank lenders in India triggered by defaults done by a leading infrastructure finance company IL&FS and currency volatility (depreciation of the rupee), the report added.

With so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

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


Sensex Opens Strong; Consumer Durables & Capital Goods' Stocks Lead
09:30 am

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.5% while the Hang Seng is up 0.1%. The Shanghai Composite is trading up by 0.3%. Meanwhile, US stocks roared back to end in positive territory on Thursday following steep losses for much of the session, as equities rebounded for a second day.

Back home, India share markets opened on a strong note. The BSE Sensex is trading up by 257 points while the NSE Nifty is trading up by 67 points. Both, the BSE Mid Cap index opened up by 0.4% while BSE Small Cap index opened up by 0.5%.

All sectoral indices have opened the day in green with consumer durables stocks and capital goods stocks witnessing maximum buying interest.

The rupee is currently trading at Rs 70.11 against the US$.

In the news from the economy. In the latest development, the fiscal deficit of India stood at Rs 7.2 trillion (US$101.9 billion) by the end of November 2018.

India's financials seem to be steeping deeper in trouble as the fiscal deficit went on to race past the designated target despite government assurances.

Now, this amounts to 114.8% of the budgeted target for the current fiscal year. The fiscal deficit for the corresponding period last financial year stood at 112%. Government had already breached the fiscal deficit target of 3.3% of the GDP back in October.

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Net tax receipts in the first eight months of the fiscal year that ends in March 2019 were Rs 7.3 trillion.

Further, revenue receipts ended at Rs 8.7 trillion by end of November this year. This is a touch ahead of half of the Budget Estimates for this financial year.

Revenue expenditure climbed to Rs 14.2 trillion or over two-thirds of the Budget Estimates. During the April-November period, the loans disbursed crossed Rs 144 billion, which is 66.2% of budgetary estimates.

Significant rise was recorded in subsidies given for petroleum products and urea, with each reaching 93% and 74% respectively of their Budget Estimates. The same for the corresponding period last fiscal was at 86% and 64% respectively.

The overall expenses on major subsidies came up to Rs 2.2 trillion by April-November period, which is 83% of the budgetary estimates.

The government is widely expected to miss its fiscal deficit target in the current fiscal year or announce spending cuts in the last quarter.

Note that, it has already cut its fiscal deficit target to 3.3% of the GDP from 3.5% last year.

Steady Decline in Fiscal Deficit Over the Years

In the past, the government has relied on reducing expenditure to keep the fiscal deficit in check.

This year, the government is banking on earning much more than it has in the past. It expects a major portion of the revenue to be collected through GST tax collections. Also, the recent rise in crude oil prices has cast a doubt over how much the government will be to curb its spending.

The dual pressure of increasing expenditure and lower inflows makes this FY19 deficit target an uphill challenge.

Moving on to the news from engineering sector. As per an article in a leading financial daily, Larsen & Toubro (L&T)'s construction arm has won orders worth Rs 23.6 billion in the domestic market.

L&T's water and effluent treatment and transportation infrastructure business has secured order worth Rs 12.8 billion from Andhra Pradesh Capital Region Development Authority (APCRDA).

The order is for activities including investigation, design and construction of roads, bridges, storm water drains, culverts, water supply systems, sewerage systems for the villages of Kurugalla, Nidamarru in Zone 12A area at Amravati Capital City, Andhra Pradesh.

The company said its water and effluent treatment business has also secured orders worth Rs 10.8 billion from the Madhya Pradesh Jal Nigam Maryadit (MPJNM).

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 Q2FY19 result analysis and L&T's 2017-18 Annual Report Analysis on our website.

L&T share price opened the day up by 1%.

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


Global Stock Market Drivers; Falling Oil Prices; HUL, L&T Among Top Stocks in Action Today
Pre-Open

On Thursday, the Indian share markets extended gains for a second straight session, tracking positive trends in Asian stocks following a rally in US stocks.

At the closing bell, the BSE Sensex ended at 35,807, up 157 points, while the Nifty50 index settled at 10,780, up 50 points.

IT stocks such as Infosys, TCS and Tech Mahindra led gains on the Sensex and the Nifty 50. However, a drop in shares of bank and financial services companies limited gains. Reliance and ONGC gained, while oil marketing companies HPCL, BPCL and Indian Oil declined following an 8% surge in oil prices in the previous session.

The Indian rupee traded marginally lower against the US dollar.

Top Stocks in Focus

Suven Life Sciences share price will be in focus today as the company received a product patent from each Brazil and Eurasia corresponding to new chemical entities for the treatment of disorders associated with Neurodegenerative diseases.

Hindustan Unilever said it is considering "legal options" after GST anti-profiteering authority found it guilty of not passing on rate cut benefits to consumers. The stock will be watched out for today.

Sun Pharma said its arm DUSA Pharmaceuticals has received relief from a US court in a patent infringement case.

Meanwhile, Dr Reddy's Laboratories launched Sevelamer Carbonate for oral suspension, in 0.8 g and 2.4 g packets, a therapeutic equivalent generic version of Renvela (sevelamer carbonate).

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It's outrageous that we're giving 1-year FREE access to our proven and extremely popular small cap service.

But it would only make a difference to you if you take advantage of this outrageous offer before it ends soon.

In fact, hundreds of other readers like yourself have already done that. And we may NEVER make an offer like this again. So don't let this opportunity go.

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

L&T share price will hog limelight today as the construction arm of the comapny has won orders worth Rs 23.6 billion on Thursday.

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

By the way, you can read our recently released Q2FY19 result analysis of the following companies: Asian Paints, TVS Motors, Wipro, Ambuja Cement, HDFC Bank, Infosys and more.

Global Stock Market Drivers

On Thursday, the biggest rally in American equities since 2009 flowed powerfully through to Japanese stocks. But had little momentum thereafter, with mixed trading in US futures and European and Asian stocks.

The dollar gave up some of Wednesday's advance.

Here are some events coming up:

  • US new-home sales are due today.
  • Weekly data on active US oil rigs will be released today.
  • Brazil's new president is sworn in on Tuesday.

Oil Prices Fall

Oil prices fell on Thursday after soaring at least 7.9% in the previous session. The fall came on the back of worries over a glut in crude supply and concerns over a faltering global economy pressured prices even as a stock market surge offered support.

Brent crude oil futures were down by 0.3%, at US$54.31 per barrel. They rose 7.9% to US$54.47 a barrel the day before.

US West Texas Intermediate (WTI) crude futures fell 0.4% to US$46.05 per barrel. They jumped 8.7% to US$46.22 per barrel in the previous session.

Both crude benchmarks are down at least 37% from highs touched in October.

From the IPO Space...

On Wednesday, Anand Rathi Wealth Services decided to withdraw its proposed IPO and made an application for the same through the BRLMs. It had filed draft papers with the market regulator towards the end of September.

Pessimism gripped the IPO mart since September in the wake of a selloff in the secondary market.

While the last mainboard IPO of Dinesh Engineers (September 28-October 3) had to be withdrawn amid poor investor response, others such as Aavas Financiers, and Garden Reach Shipbuilders just about managed to sail through.

However, the year ahead looks promising, with some Rs 600 billion worth of issues lined up with markets regulator's clearance.

As per the reports, Renew Power, Lodha Developers, Rail Vikas Nigam, PNB Metlife India Insurance, Flemingo Travel Retail, Ask Investment Managers, Chalet Hotels, GR Infraprojects, Atria Convergence, Bharat Hotels, Muthoot Microfin and Nazara Technologies are some of the companies that are waiting with approvals to hit the markets.

With so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.