Todays Market from Equitymaster http://www.equitymaster.com/tm.asp The happenings in the stock markets, including a pre-open and closing commentary. Todays Market from Equitymaster http://www.equitymaster.com/icons/eqtm_small1.gif http://www.equitymaster.com/tm.asp http://blogs.law.harvard.edu/tech/rss Sensex Crosses 31,000 Mark; Metal & Energy Stocks Rally http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Sensex-Crosses-31000-Mark-Metal--Energy-Stocks-Rally
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Indian share markets hit record highs, with ITC share price and Tata Steel share price Ltd leading the gains, as June derivatives series took off on a strong footing on encouraging earnings and sustained foreign capital inflows. Firmness in the rupee against the US$ and fall in global crude oil prices also influenced trading sentiment.

At the closing bell, the BSE Sensex stood higher by 278 points, while the NSE Nifty finished up by 85 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished up by 2.1% and 1.6% respectively. Gains were largely seen in metal stocks, oil & gas stocks and FMCG stocks.

Time to Be Fearful?

The markets are touching new highs. Markets are awash with funds. Experts are justifying high valuations. The reasons are far-fetched - from GST to Make in India to a cashless economy. And retail investors seem to be falling for it.

One must note that currently, in most of the cases, it is liquidity driving the valuations, and not fundamentals. And this is exactly the time when one must allow fear to substitute greed. Also, this is precisely the time when it is most difficult to overpower greed and stay disciplined.

Asian stock markets mostly closed mixed, tracking the overnight plunge in crude oil prices. The Shanghai Composite gained 0.07% and the Hang Seng rose 0.03%. The Nikkei 225 lost 0.64%. European markets are mixed. The FTSE 100 is higher by 0.09%, while the CAC 40 is leading the DAX lower. They are down 0.65% and 0.48% respectively.

The rupee was trading at Rs 64.59 against the US$ in the afternoon session. Oil prices were trading at US$ 49.19 at the time of writing.

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Shares of Aviation stocks were trading higher after international crude oil price fell. Jet Airways India Ltd share price rose 3%, and InterGlobe Aviation Ltd share price finished up 1.6%.

Indian Oil Corp. (IOC) reported a net profit growth of 85% in the fourth quarter of 2016-17, amid intense competition from private players due to the deregulation of fuel pricing. The company's profit came in at Rs 37.21 billion rupees (US$ 576.45 million) in the quarter ended March 31, compared with Rs 20.06 billion a year earlier.

Revenue from operations jumped 24% to Rs 1.22 trillion. The company stated that it saved Rs 10 billion after the government allowed them freedom to formulate their own crude import rules. IOC is now looking to focus on overseas expansion to shore up revenues.

IOC share price finished the day down by 2.8% on the BSE.

Oil marketing companies finished the trading session on a firm note with BPCL share price finished the day up by 3.4% and HPCL share price finished up by 11.4% on the BSE.

In news from economic sector, as per a leading financial daily, the Union Road Transport and Highways Minister Nitin Gadkari will soon be urging Finance Minister Arun Jaitley to bring down Goods and Services Tax (GST) rates on hybrid vehicles and other automobiles that run on alternative fuels.

As per the GST Council's fourteenth meeting hybrid cars, which are considered eco-friendly will attract a 15% cess over and above peak rate of 28%, same as those of large luxury cars and SUVs. Currently, hybrid vehicles attract excise duty of 12.5% with an effective overall tax rate of 30.3%.

The Minister plans to request Arun Jaitley that the tax slabs for vehicles run on ethanol, bio diesel, bio CNG should be reduced. The minister said that the government's policy is to promote electric mobility in the country and GST rate on electric vehicles has been kept at 12%.

Gadkari further said that in order to reduce India's import of crude oil, electric and hybrid vehicles along with alternate fuels like ethanol should be encouraged, and added that India import crude worth Rs 7 lakh crore. Electric, ethanol, bio diesel, bio CNG these are import substitutes and are cost effective, pollution free and indigenous too.

He also said that if such vehicles are encouraged on a large scale, the cost will also come down. Besides, the automobiles sector has also expressed concern on the high rate on hybrids stating it would put a spanner in the wheels of government plans to promote green vehicles.

Moving on to news from telecom sector. As per an article in The Economic Times, Bharti Airtel, Vodafone India and Idea Cellular are likely to launch voice over LTE or VoLTE services by the end of September as part of their efforts to upgrade technology and compete better with the new entrant Reliance Jio Infocomm.

Reportedly, this could enable these incumbent telecom operators to keep their low-end subscribers from switching to Mukesh Ambani-led Jio, which runs an all-VoLTE network and offers voice calls for free.

Meanwhile, Bharti Airtel's Nigeria unit said a partnership with China's ZTE to provide 4G high-speed broadband will see it add subscribers and narrow the gap with market leader MTN in Africa's most populous country.

Airtel was Nigeria's third-largest wireless operator with 34.7-million customers at the end of March 2017. Airtel has invested more than US$ 1.5bn in its Nigerian network in the past five years, seeking to tap rising demand for mobile and data services in a country with 180-million inhabitants.

Bharti Airtel share price finished the day up by 1.1% and Idea Cellular share price finished the day up by 0.3% on the BSE.

Meanwhile, Cipla share price fell 2.5% in today's trade after the company reported consolidated net loss of Rs 61.79 crore for the March quarter. The company had posted a net loss of Rs 928.3 million for the corresponding period of the previous fiscal.

Consolidated total income of the company rose to Rs 36.04 billion for the quarter under consideration as against Rs 33.73 billion for the same period a year ago.

Lupin share price continued to fall and fell 2.3% in today's trade to a two year low after the company yesterday reported over 49% dip in consolidated net profit for the fourth quarter ended March.



This article (Sensex Crosses 31,000 Mark; Metal & Energy Stocks Rally) 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, 26 May 2017 10:30:00 GMT http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Sensex-Crosses-31000-Mark-Metal--Energy-Stocks-Rally
Sensex, Nifty Trading at All Time High; Tata Steel Surges by 5.7% http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Sensex-Nifty-Trading-at-All-Time-High-Tata-Steel-Surges-by-57
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After opening the day on a positive note, the Indian share markets have continued the momentum and are trading at record high levels. Except stocks in the pharma sector all sectoral indices are trading in green, with stocks in the capital goods sector and stocks in the metals sector leading the gains.

The BSE Sensex is trading up by 234 points (up 0.8%) and the NSE Nifty is trading up by 67 points (up 0.7%). Meanwhile, the BSE Mid Cap index is trading up by 1.3%, while the BSE Small Cap index is trading up by 1.4%. The rupee is trading at 64.53 to the US$.

In news from stocks in the pharma sector. Glenmark Pharma share price is in focus today and surged over 3% in intraday trade.

Glenmark Pharma announced that it had received final approval form the US Food and Drug Administration (USFDA) approval for its generic version Olmesartan Medoxomil Tablets, used in treatment of high blood pressure.

The ANDA (Abbreviated New Drug Application) approval granted by the USFDA is for multiple strengths of 5 mg, 20 mg and 40 mg, the company said in a statement.

Glenmark's Olmesartan Medoxomil tablets will be manufactured by the company's facility located in Goa, India. These are a generic equivalent of Benicar Tablets of Daiichi Sankyo, Inc.

Citing IMS Health sales data for the 12-month period ended March 2017, the company said Benicar achieved annual sales of about US$ 950 million.Glenmark's current portfolio consists of 115 products authorised for distribution in the US market and approximately 69 ANDA's pending approval with the USFDA.

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The pharmaceutical major also informed the exchanges that S&P Global Ratings reaffirmed its credit rating as 'BB' as part of their annual review cycle. In addition, they have affirmed 'BB' issue rating on the senior unsecured notes issued last year.

Glenmark Pharma share price had plunged by over 30% this month over tepid results and subdued growth.

The BSE Healthcare Index too, is down by 7% over the last month.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

The sector has faced great volatility over the years.

Volatility in the Pharma Sector

We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

  • Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

In such a volatile environment, how can earn good returns from the stock markets?

We believe a few super investors could provide the clue. These are the guys who've beaten the markets black and blue and have an eye for multi bagger stocks irrespective of the macro environment.

With respect to which super investors to follow, our Research analysts Kunal and Rohan have could be of great help courtesy their project, The Superinvestors of India.

To know more about these superinvestors and their stock picking approach, download a free copy of -The Super Investors Of India.

Moving on to news from stocks from the steel sector. Tata Steel share price hit a 52-week high in today's trade amid merger buzz surrounding the company's European business.

Multiple media reports suggested that the merger of Tata Steel's European business' with German industrial group Thyssenkrupp AG may lead to potential savings anywhere in 400-600 million euros.

Thyssenkrupp and Tata Steel have been in discussions since July about merging their European steel assets to cut costs and reduce overcapacity.

They came close to signing a memorandum of understanding (MoU). However, talks stalled due to Brexit and management reshuffle at Tata, but the talks have since gained momentum, the reports added.

The plan has been further complicated by Tata's pension deficit in Britain. A deal this month to separate Tata's £15 billion ($19.4 billion) UK pension scheme still left many questions unanswered for both the parties.

However, neither Tata Steel nor Thyssenkrupp AG have commented on the reports. This has not stopped the markets from going into a frenzy.



This article (Sensex, Nifty Trading at All Time High; Tata Steel Surges by 5.7%) 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, 26 May 2017 08:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Sensex-Nifty-Trading-at-All-Time-High-Tata-Steel-Surges-by-57
Indian Indices Hit Fresh Record High; Metal Sector Up 3.6% http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Indian-Indices-Hit-Fresh-Record-High-Metal-Sector-Up-36
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Stock markets in India have continued their momentum and are presently trading on a positive note. Sectoral indices are trading on a positive note with stocks in the metal sector and consumer durables sector witnessing maximum buying interest.

The BSE Sensex is trading up 206 points (up 0.7%) and the NSE Nifty is trading up 53 points (up 0.6%). The BSE Mid Cap index is trading up by 1.2%, while the BSE Small Cap index is trading up by 1.3%. The rupee is trading at 64.58 to the US$.

After witnessing a strong rally in yesterday's trade, Indian share markets have continued their momentum today and are presently trading on a positive note.

The rally had led domestic share markets to trade at their lifetime highs.

Most of the recent buying interest in domestic share markets is seen on the back of quarterly result announcements, proposed good rainfall this monsoon season, and positive cues from global financial markets.

However, more than fundamentals, it's liquidity driving the markets and valuations. As we stated in a recent The 5 Minute WrapUp...

  • One must note that currently, in most of the cases, it is liquidity driving the valuations, and not fundamentals. And this is exactly the time when one must allow fear to substitute greed.

    Also, this is precisely the time when it is most difficult to overpower greed and stay disciplined.

Among all this hoopla, we would remind you to focus on the fundamentals and long term moats of companies before deciding to invest in them.

The ongoing rise in Indian share markets also brings us to the question of how can one make money in a rising market, with little support from earning trends?

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We believe a few super investors could provide the clue. These are the guys who've beaten the markets black and blue and have an eye for multi bagger stocks irrespective of the macro environment.

With respect to which super investors to follow, my colleague Kunal and Rohan have could be of great help courtesy their project, The Superinvestors of India.

To know more about these superinvestors and their stock picking approach, download a free copy of - The Super Investors Of India.

In the news from commodities markets, crude oil is witnessing selling pressure today.

Losses for the commodity came after an agreement by the Organisation of Petroleum Exporting Companies (OPEC) to extend existing supply curbs disappointed investors expecting larger cuts.

During their meet in Vienna yesterday, the OPEC and some non-OPEC producers agreed to extend supply cuts of 1.8 million barrels per day until the end of the first quarter of 2018.

While the supply cuts were highly anticipated, oil market investors had expected more longer or deeper cuts to drain the supply glut of oil. This disappointment meant losses for crude oil.

Apart from the above losses, crude oil has been witnessing volatility recently over Donald Trump's proposal to sell half of the country's strategic oil reserves.

Rise and Fall in Crude Oil Prices Over the Fortnight

One shall note that crude oil prices have been remarkably silent over the last two years. Prices have remained within a tight range, rarely dropping below US$40 or rising above US$60. Volatility has crashed. And if you are trading crude oil, it's critical to understand why this has occurred.

One of the issues of Vivek Kaul's Inner Circle (requires subscription) explains what has triggered the above taming in crude oil prices.

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.

In the news from global financial markets, Moody's ratings agency today reported that China's structural reforms will not be enough to arrest its rising debt. It also said that another credit rating downgrade for the country is possible unless it gets its ballooning credit in check.

The above comments come days after Moody's Investors Service downgraded China's sovereign ratings on Wednesday by one notch to A1.

This came as the agency expects the financial strength of the world's second-largest economy to erode in coming years as growth falters and debt continues to rise.

Many economists are of the view that continuing stimulus measures by the central bank are masking the deeper problems of industrial overcapacity and high levels of corporate debt in China.

However, despite the above concerns, one of the issues of Vivek Kaul's Inner Circle (requires subscription) states that there are plenty of legs left for the dragon economy. The issue points out some positive signs emerging in the Chinese economy, without undermining the longer-term risks and challenges.

Regarding stock markets, many participants are worried that China and its slowing economy will bring more concerns for Indian markets. However, a crash can be an ideal time to bet on solid Indian companies that are well-shielded from any adverse developments in China. In our view, these companies can turn into bargain buying opportunities.



This article (Indian Indices Hit Fresh Record High; Metal Sector Up 3.6%) 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, 26 May 2017 06:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Indian-Indices-Hit-Fresh-Record-High-Metal-Sector-Up-36
Sensex Opens Flat; Cipla Plunges on Poor Q4 Results http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Sensex-Opens-Flat-Cipla-Plunges-on-Poor-Q4-Results
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Stock markets in Asia are lower today despite major oil producers agreeing to extend output cut for an additional nine months at an Opec meeting in Vienna. The Shanghai Composite is off 0.03%, while the Hang Seng is down 0.14%. The Nikkei 225 is trading down by 0.26%. US stocks closed in positive territory on Thursday registering 6th straight session of gains with S&P 500 and the Nasdaq Composite notching record close.

Meanwhile, share markets in India have opened the day on a positive note. The BSE Sensex is trading higher by 34 points while the NSE Nifty is trading lower by 11 points. The BSE Mid Cap and BSE Small Cap index both have opened the day up by 0.4%.

Sectoral indices have opened the day on a mixed note with FMCG stocks and consumer durables stocks leading the gains. While, oil & gas stocks and PSU stocks are witnessing selling pressure. The rupee is trading at 64.51 to the US$.

Pharma stocks opened the day on a mixed note with Cipla and Cadila Healthcare leading the losses. As per an article in a leading financial daily, the United States Food and Drug Administration (USFDA) completed an audit of one of Dr. Reddy's Laboratories Ltd.'s formulation Plant (SEZ) Unit II in Srikakulum, Andhra Pradesh with zero observations.

In April, the US drug regulator had inspected Dr. Reddy's active pharmaceutical ingredients (APIs) manufacturing unit at the same SEZ plant in Srikakulam with no observations.

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After the inspection of yet another API facility at Srikakulam in the month of April, the USFDA had issued Form 483 after making two observations.

In another development, Cipla reported a smaller quarterly loss, in the fourth quarter of the financial year 2016-17. The company's net loss in Q4 narrowed to Rs 0.62 billion (US$9.56 million) from a loss of Rs 0.93 billion in the corresponding period of the previous FY.

Consolidated total revenue of the company increased 6.84% to Rs 3605 billion in the quarter under review, as against Rs 33.74 billion in the corresponding quarter.

Further, the quarter includes a one-off non-cash impairment charge of Rs 21.42 billion related to litigation expenses, and the company also took a provision of Rs 0.56 billion related to its unit Cipla Biotech in the quarter.

Cipla paid back the debt of about Rs 10 billion during the fourth quarter and has forecast research and development expenses of 8-9% of sales in the ongoing financial year.

To know more about the company's financial performance, subscribers can access to Cipla's latest result analysis and Cipla stock analysis on our website.

Moving on to the news from the stocks in aluminium sector. As per an article in a leading financial daily, National Aluminium Company Ltd (Nalco) has signed a memorandum of understanding (MoU) with the Union ministry of mines for setting higher targets in production, turnover and capital expenditure for the current financial year.

As per the MoU, the target for revenue from operations has been fixed at Rs 81 billion (net of excise) which is Rs 7 billion more than the previous year.

Further, 100% targets have been set for the production of both bauxite and alumina i.e. 6.825 million tonne and 2.1 million tonne, respectively. Aluminium production target of Nalco is set at 0.44 million tonnes for 2017-18.

Additionally, the company has a Capex target of Rs 11.58 billion against Rs 8.73 billion achieved in 2016-17. The target is at an all-time high for the company and is expected to push the profitability of NALCO despite an increase in expenses on account of enhanced electricity duty, the reports noted.

Speaking of the aluminum industry, aluminium demand in India has been growing at a decent rate. This is on the back of increased usage of aluminium and its alloys in the automobile sector. However, the aluminium industry has been plagued by a massive oversupply that has put pressure on prices.

Aluminium Production in 2016

Reportedly, India's aluminium consumption is rising steadily and is estimated to reach eight million tonnes per annum over the next ten years driven by growth in automobile, electricity, building & construction and packaging sectors. The aluminium that is produced here has to meet the costs and environment challenges.

NALCO share price opened the day up by 1.9%



This article (Sensex Opens Flat; Cipla Plunges on Poor Q4 Results) 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, 26 May 2017 04:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=Sensex-Opens-Flat-Cipla-Plunges-on-Poor-Q4-Results
How will India Create Quality Jobs for its Educated workforce? http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=How-will-India-Create-Quality-Jobs-for-its-Educated-workforce
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Things are not going well for Indian IT sector. The sector is the target of anti-immigration and protectionist rhetoric since Mr Trump took charge of the White House.

When the US H1B visa issue came to the fore earlier this year, IT companies traded on a cautious note.

The Trump government wants more local hiring instead of imported cheap labor from foreign countries. As per Trump, H1B visas should only be granted to the most skilled and highest-paid applicants.

Assuming Trump's words turning into actions, what will be the repercussions of the above developments for the Indian IT sector?

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Many IT companies will think to reduce their exposure to the US and move to other geographies is a given. However, given the large chunk of revenues they derive from the country, it's unlikely that the companies will substantially bring down their focus on the US. Instead companies may look out for other means to reduce costs or protect margins.

One way out can be to adjusting to Trump's demands. For this, the outsourcing companies will be applying for fewer US work visas, and bringing outsourced Indian employees back home.

This trend is already visible. As per an article in the Business Standard, the number of H-1B applications fell 16% this year, the first decline in five years.

A more visible example can be drawn from Infosys Ltd. The company is opening a new development center in Indiana in August where it hopes to create some 2,000 jobs for Americans by 2021.

In fact, to just put things in perspective as per an article in Mint, Job websites Naukri.com reported a 27% jump and Monster.com 60-65% rise in IT job applicants in January-April period, highlighting uncertainty surrounding Indian IT firms.

We believe in the short term the laying off from the IT sector will put further pressure on India's quality job situation.



This article (How will India Create Quality Jobs for its Educated workforce?) 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, 26 May 2017 03:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=5/26/2017&title=How-will-India-Create-Quality-Jobs-for-its-Educated-workforce