Todays Market from Equitymaster The happenings in the stock markets, including a pre-open and closing commentary. Todays Market from Equitymaster Sensex Finishes Flat; Dr Reddy's & HDFC Gained the Most
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The Indian share markets finished the day on a flat note with a negative bias. Metal and consumer durables stocks were under pressure, while realty and IT stocks led the pack of gainers. At the closing bell, the BSE Sensex closed lower by 53 points, whereas the NSE Nifty finished lower by 6 points. The S&P BSE Midcap finished the day up by 0.3% and the S&P BSE Small Cap finished up by 0.1%.

Asian markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.3% and the Shanghai Composite rose 0.21%. The Nikkei 225 lost 0.3%. European markets are trading higher today with shares in London leading the region. The FTSE 100 is up 0.1%, while Germany's DAX is up 0.07% and France's CAC 40 is up 0.02%.

The rupee was trading at Rs 66.89 against the US$ in the afternoon session. Oil prices were trading at US$ 50.81 at the time of writing.

As per an article in The Economic Times, HCL Technologies (HCL) has entered into an agreement to acquire Butler America Aerospace, LLC. Butler Aerospace is a provider of engineering, design services and aftermarket engineering services to US Aerospace and Defense customers.

The consideration for the proposed transaction is US$85 million to be paid in cash. The proposed acquisition will exclude the staffing business of Butler America Inc. The acquisition, subject to regulatory approvals in the US, is expected to be completed by 31 December 2016. The acquisition will likely bolster HCL's capabilities in this space and access to clients with large R&D spends.

The news comes amid a major rejig within HCL. The company announced that its Chief Executive Officer, Anant Gupta, has resigned. The current Chief Operating Officer, C Vijayakumar would take over the post.

Meanwhile, HCL today reported a 16.7% increase in net profit at Rs 20.1 billion for the quarter ended September 2016. On a sequential basis, the company's net profit was lower by 1.6% from Rs 20.4 billion in June 2016 quarter, while revenues grew 1.6% from Rs 113.3 billion.

Reacting to the better-than-expected quarterly performance, HCL's share price rallied as much as 4% on the BSE during the day.

Moving on to the news from stocks in power sector. As per an article in a leading financial daily, NTPC will set up solar projects aggregating 50 MW with battery storage system at different locations in Port Blair in Andaman & Nicobar (A&N).

In this regard, a memorandum of understanding (MoU) between NTPC, the Andaman & Nicobar administration and the Ministry of New and Renewable Energy was signed.

Reportedly, the power generated from these solar plants will contribute to higher renewable energy deployment (Subscription Required) and greening of A&N islands.

Notably, NTPC group's total installed capacity stands at 47,228 MW. It includes 800 MW of hydro and 360 MW of solar generation capacity. Moreover, its 1,700 MW renewable energy projects of the company are under execution. The company is quickly moving towards its goal of realizing a solar portfolio of 10 GW out of the 100 GW target of the government by 2022.

Rahul Shah, Co-head of Research, pointed out that a few of the solar projects are already running into financial troubles. Can we rule out a similar fate for the other solar projects? Click here to read more.

Shares of NTPC finished the day up by 0.5%.

This article (Sensex Finishes Flat; Dr Reddy's & HDFC Gained the Most) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 21 Oct 2016 10:30:00 GMT
Sensex Down 110 Points; Metal Stocks Trade in the Red
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The Indian share market continued to languish in the negative territory in the post-noon trading session due to weak Asian cues. Sectoral Indices are trading on a mixed note with stocks from realty & IT sector leading the gains. While metal sector & consumer durables stocks are trading in the red.

The BSE Sensex is trading lower by 117 points (down 0.4%) while the NSE Nifty is trading lower by 28 points (down 0.3%). The BSE Mid Cap index is trading flat while BSE Small Cap index is trading up by 0.2%. Gold prices, per 10 grams, are trading at Rs 29,840 levels. Silver price, per kilogram is trading at Rs 41,858 levels. Crude oil is trading at Rs 3,386 per barrel. The rupee is trading at 66.90 to the US$.

As per an article in The Economic Times, Wipro Limited announced that it has signed an agreement to acquire Appirio for a purchase consideration of US$500 million. Appirio helps companies move applications to hosted servers offered by Amazon, Google and

Reportedly, the deal aims to unlock transformational synergies in the applications space and help enterprises create new business models. In an increasingly digital world, as consumer expectations continue to be reshaped by experiences, this acquisition will strengthen the company's portfolio. Also, it will help retain existing clients and ultimately revive growth.

Notably, about half of Wipro's revenue comes from business applications. The rest flows from business process outsourcing and other work. When this deal is done, Wipro's existing salesforce and workday cloud practices will come under the Appirio brand. Wipro's existing Oracle, SAP, and Microsoft service practices will run separately, the reports noted.

Further, the acquisition is subject to customary closing conditions and regulatory approvals and is expected to be closed in the quarter ending December 2016. One must also note that, Wipro has spent US$1.13 billion to buy four companies, including Appirio since April last year. The company acquired Denmark-based Designit for US$95 million, it paid US$78 million to buy Germany's Cellent and a Florida based Healthplan Services for US$460 million.

India is an information technology powerhouse. In an extremely challenging global economy, western corporations are now expecting Indian IT firms to deliver a more compelling value proposition in terms of growth prospects. Going forward, whether the Indian IT firms are up to the task will be the key thing to watch out for.

Wipro's share price was Rs 498.8 at the time of writing, up by 0.7%.

Moving on to news from stocks in auto sector. As per an article in a leading financial daily, Ashok Leyland has bagged order worth US$170 million from the Government of the United Republic of Tanzania.

Reportedly, the order is for the purchase of Ashok Leyland's vehicles, gensets, spares and equipment for development of workshops, training modules and allied equipment to be fitted on ambulances. The order is being financed fully by EXIM Bank of India under National Export Insurance Account (NEIA) Scheme.

The move comes as Ashok Leyland's strategic intent (Subscription Required) to globalize its product portfolio and de-risk itself from supplying only into India. The new order follows the company's recently concluded supply of 773 vehicles to Tanzania under Line of Credit from Government of India. Further, the company is currently executing another order for supply of 777 vehicles to the Ministry of Home Affairs in Tanzania.

Moreover, the company had won a similar order worth US$200 million from West African country Cote D'Ivoire in November last year.

Exports remain a lucrative opportunity for Indian auto manufacturers. But in the past year and in the current fiscal, exports performance has been poor. Despite the challenges, is it still a good idea for companies to venture overseas if demand for their products exist? Click here (Subscription Required) to know more.

Shares of Ashok Leyland were trading up by 1.4% at the time of writing.

This article (Sensex Down 110 Points; Metal Stocks Trade in the Red) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 21 Oct 2016 08:00:00 GMT
Sensex Flat; Cipla Leads the Losers
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After opening the day flat, the Indian share markets registered some further losses and went on to trade marginally lower. Sectoral indices are trading on a mixed note with energy sector stocks and consumer durables sector stocks witnessing maximum selling pressure. Realty stocks are trading in the green.

The BSE Sensex is trading down 144 points (down 0.5%) and the NSE Nifty is trading down 38 points (down 0.4%). The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading up 0.1%. The rupee is trading at 66.88 to the US$.

The European Central Bank (ECB), in its meeting yesterday, kept the policy rates unchanged. The governing council of the central bank also stood pat on interest rates and its asset purchases program. It left the main refinancing rate at zero, the deposit rate at minus 0.4%, and asset purchases at 80 billion euros a month.

ECB President Mario Draghi said the ECB had left door open to more monetary stimulus. He stated that officials would extend the institution's unprecedented stimulus, if needed. However, he refrained from talking about the future of asset purchases by the ECB.

Draghi's comments also mentioned that it was mainly economic events outside the euro zone that would affect the euro area economy. On the inflation front, Draghi said there is a threat of inflation in the coming month which would also mean the euro zone economy improving at a slower rate than expected.

The ECB, in March, announced aggressive moves that lit a fire under European markets. It cut its main interest rate from 0.05% to 0% and its bank deposit rate from minus 0.3% to minus 0.4%. Four long-term loan schemes were also announced, with banks given incentives to boost credit growth with the help of cheaper rates. Borrowing terms under the scheme were as low as minus 0.04%. This meant the ECB would pay banks to take its cash if they could show they were lending it to households and firms. The bank also expanded its quantitative easing program from 60 billion euros to 80 billion euros a month in an effort to boost inflation and revive a stuttering eurozone economy.

Along with the BoJ, many central banks across the world are trying to prod growth with the help of stimulus measures and near-zero or negative interest rates. If you're interested in knowing what's really happening in the world of man and money, you can claim your free copy of Bill Bonner's latest book Hormegeddon (just pay Rs 199 for shipping and handling).

If the above actions of central banks do not come to an end, there is a possibility for another 2008-like crisis in the global economy...and India cannot afford to ignore it. If there's a severe crisis in the West, the consequences will be felt on our shores too.

We believe investors must be prepared to witness increasing volatility in the stock markets. Apart from the developments in the domestic economy, several global factors are likely to influence the course of the stock markets in the coming times.

Our message to investors is to not fear volatility and uncertainty. Instead, use it to your advantage as increased volatility could throw up bargain buying opportunities.

In another news update, the Reserve Bank of India (RBI) has opened the gates for more overseas investment coming to India. This comes as the RBI has initiated a series of steps to liberalize the foreign direct investment rules.

As per a leading financial daily, the RBI has allowed 100% foreign investment through the automatic route to the regulated financial services companies other than banks or insurance companies. Furthermore, the bank has eased external commercial borrowing regulations.

The RBI has also simplified rules for easier entry of venture capital funds to startup ventures. The central bank said that Foreign Venture Capital Investors (FVCIs) can invest in Indian startups without prior permission of the RBI.

This article (Sensex Flat; Cipla Leads the Losers) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 21 Oct 2016 06:00:00 GMT
Indian Share Market Opens Flat
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Major Asian stock markets have opened the day on a negative note with stock market in Singapore and China are trading lower by 0.8% and 0.3% respectively.

Stock markets in Europe ended their previous session on a positive note. While benchmark indices in the US ended their previous session trading lower by 0.2%.

The rupee is currently trading at 66.8 per US$.

Indian stock markets have opened the day on a flattish note. The BSE Sensex is trading marginally higher by 33 points (up 0.1%) and NSE Nifty is trading marginally higher by 10 points (up 0.1%). Both, BSE Mid Cap and BSE Small Cap are trading higher by 0.2% each.

Major sectoral indices have opened the day in green with stocks from oil & gas space are witnessing buying interest.

As per an article in Livemint, Yes Bank reported its results for the quarter ended September 2016. The company's net profits grew by around 30% YoY during the quarter. The profits grew on the back of strong growth in interest as well as non-interest income.

Net Interest Income, considered to be the core income of the bank grew by 30.5% YoY during the quarter. Net Interest Margins too came in at a healthy 3.4% during the September quarter.

Further, advance and deposits too grew at a robust pace. Advances grew by 37.7% during the quarter as compared to a year ago. While, deposits too grew by 28.9% during the quarter.

However, the concern pertaining to its asset quality escalated. The company's gross non-performing asset (GNPAs) has risen by 87% from a year ago period.

While calculated as a percentage to total advances the GNPAs remain below 1. However, it is imperative to note that the ratio has remained at the lower level because of the fact that the company is growing its advances at a robust pace.

Further, while the bad loans have shot up 87% from a year ago, the provisioning has risen by just 56% during the same period. Reportedly, low provisioning could mean that the lender is confident of keeping asset quality ship-shape either through higher recoveries or by keeping the run rate of its loan book growth intact.

Corporate loans formulate a lion's share of the company's loan book. Further, the bank has a high 9% exposure towards the power sector, which is currently in a bad state. Hence, a check on the asset quality will be the key things to watch out for going forward. The share price of Yes Bank is trading higher by 0.6%.

In another news update, research and ratings firms CRISIL in its recently published report stated that the loss of power distribution companies (DISCOMs) will halve to 28 paise per unit in FY 2019 from the prevailing 64 paise per unit.

Losses are nothing but the difference between the average revenue realized and average cost of supply. As per the report, the aggregate losses of the DISCOMS will decline to Rs 200 billion from the prevailing Rs 370 billion.

The Ujwal Discom Assurance Yojana (UDAY) targeted losses to be nil by FY19. However, the DISCOMs are expected to still operate in losses during that period.

We believe that even after implementation of the UDAY scheme, the situation at SEBs will only improve if they take tariff hikes. While some states have taken tariff hikes recently, many states have yet not taken the same on account of political pressures. Increase in tariff hike does not bode down well with the political parties as it takes a toll on their vote bank.

Further, these SEBs had aggregate technical and commercial losses of 24.6% in 2013-14. And this ratio hasn't improved significantly since then. This means that a major portion of the power that is used is not paid for. Unless these issues are addressed, the situation at the SEBs is not going to change drastically even after implementation of UDAY.

This article (Indian Share Market Opens Flat) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 21 Oct 2016 04:00:00 GMT
The Road Ahead for Sensex and the Indian Economy...
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The US presidential election has become a hot topic of late. Mainstream media has gone gaga with the conclusion of the third and last debate between republican president nominees Donald Trump and Hillary Clinton. That said, one particular bit in the debate got the attention of most Indians. It came when Donald Trump cited India's growth rate to compare it with the US economy.

Donald Trump, during the debate said Indian is growing at 8%, while US at 1%. By doing so he cited that America's economy is dying and is lagging behind India and China. His comments revived sentiments that India is one of the top performing economies in the world.

But this is not something new. India was crowned as one of the fastest growing economy in the world early this year. Along with this, Indian stock markets were seen less exposed to the risks of global economic slowdown witnessed during the start of 2016. This also attracted many foreign investors to Indian markets.

So, where does Indian stock markets stand at present as compared to their global peers? We came across an article in the Economic Times that states how Indian markets have fared during the last six months.

As per the article, the Indian market put up the fourth-best performance in the world since March 1, 2016. In doing so, they edged past heavyweights of the developed world such as the US, Japan, and Germany.

Going by the numbers, the Nifty returned 27% since March 1 in dollar terms. This is quite good when compared with Dow's 9.5% return during the corresponding period. Also, the returns by Nifty stand tall when compared with the MSCI World and MSCI Emerging Market indices. As per the article, the MSCI World and MSCI Emerging Market indices have risen 10% and 21%, respectively, in the same period.

The above data has come as a welcome breather for Indian markets. The only question is will the Indian economy and Indian stock markets continue this momentum?

As far as the Indian economy is concerned, there are considerable challenges that lie ahead which the government seriously needs to address. This we say is because the common man in India doesn't seem to be doing much better now than he did a few years ago. One of our editions of The 5 Minute WrapUp confirms this fact while stating the common thread between most of India's economic problems.

For Indian stock markets, our research in March revealed that, in aggregate, the profit margins of Sensex companies were trading at ten-year lows. So, if profit margins were to revert to their long-term averages, the Sensex may hit 40,000 three to four years down the line. To know more on this, you can download our special report, Sensex 40,000: 4 Stocks to Profit from the Coming Stock Market Wave.

This article (The Road Ahead for Sensex and the Indian Economy...) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Fri, 21 Oct 2016 03:00:00 GMT