Connect with us

Capital Markets

Rupee recovers 38 paise against US dollar in early trade

Published

on

Mumbai  |  The rupee today recovered from its all-time low by rising 38 paise to 69.77 against the US dollar in early trade at the Interbank Foreign Exchange market on fresh selling of the greenback by exporters and banks ahead of US-China trade talks this week.

Besides, the dollar weakened against other currencies overseas as demand for the safe-currency receded on optimism over a reduction in US-China trade tensions, helping the domestic currency rebound, forex dealers said.

A higher opening in the equity market also supported the rupee’s recovery, they said.

The BSE benchmark Sensex rallied by 178.77 points, or 0.47 per cent, to quote at an all-time high of 38,126.65 (intra-day) in early trade today. The broader NSE Nifty too breached the 11,500-mark for the first time.

The Indian currency had collapsed to a historic intra-day trading low of 70.40 before closing at a fresh lifetime low of 70.15 per dollar on Thursday, down by 26 paise or 0.37 per cent.

Forex market was shut on Friday on account of Parsi New Year.

Meanwhile, foreign institutional investors (FIIs) bought stocks worth a net of Rs 147.31 crore, while domestic institutional investors (DIIs) accumulated stocks worth a net of Rs 151.89 crore on Friday.

Capital Markets

Capital Market Beat

Ali Azar

Published

on

Sensex

The four-day working week gone by for the markets has not been a memorable one. The effect of two big events that were to impact the market in a positive way hasn’t gone according to plan. First off, Friday evening’s big announcement from the finance ministry of measures it intends to undertake to bridge the ever-widening current account deficit (CAD). Officials enlisted a five-point plan to encourage the dollar inflow into the country and hoped the market would react in a positive way once it was reassured that the government was working towards serious measures to improve the deteriorating macroeconomic situation. Friday evening’s announcement after market hours cut no ice with market participants on Monday, as markets closed firmly in the red. Monday evening, the nation was hit with a shock announcement as plans for a mega bank merger unfolded before us. The government unveiled plans to merge three state-run banks in an attempt at consolidating the ailing banking sector. Adding to our existing woes, US-based investment bank Goldman Sachs downgraded the Indian equities for the first time since 2014, citing valuation concerns and macro headwinds. With Thursday being a bank holiday for the festival of Muharram, the market took a much-needed breather and hopes were that it could regain some legs and push for greener pastures going forward. Friday was no better as a panic-stricken market ran for cover amidst a sea of red in spite of US stock markets hitting new lifetime highs and Asian and European markets witnessing significant upswings as well. This week the markets nosedived amid a host of domestic as well as global concerns with NSE and BSE falling roughly 370 and 1250 points respectively which translates into a drop of more than 3% each.

If one looks at the big picture, frankly, hope is all we can depend on for the market to take strides in the right direction. The three pillars that drive the direction of the stock market are fundamental factors, technical factors and market sentiment. With fundamental and technical indicators in the doldrums lately due to rising crude oil and fuel prices, depreciating rupee, widening CAD, hardening bond yields, increasing rate of interest, inflation and growth worries, concerns about valuations being too high etc. it comes as no surprise that the market is taking a negative outlook. What is compounding our worries is that market sentiment has also turned negative in the recent past. With trade war concerns not receding and the two biggest economies slugging it out for dominance on the economic front, we look to be in for a turbulent ride ahead.

A list of noteworthy developments in the week gone by are

  • Private sector lender Yes Bank Ltd. received the short end of the stick from the RBI, as the regulator via letter dated 17th Sep 2018 intimated its MD & CEO Rana Kapoor that he would be required to step down from the board by 31st Jan 2019, thereby providing him only a limited extension of three months, instead of the three years sought by the lender. RBI’s reasons for doing so are not in public domain but it is widely believed that the regulator has raised concerns about accounting practices and governance standards at the bank.
  • Books of accounts of troubled airline operator Jet Airways are being inspected by the Income Tax Dept. for alleged falsification of accounts and suspicious transactions. An extensive survey is being carried out by tax sleuths across four premises of the airline operator. In another setback for the airline, 30 passengers on Thursday complained of ear and nosebleed, headaches and uneasiness as pilots on a Mumbai to Jaipur flight forgot to maintain air pressure inside the cabin. Affected flyers are seeking compensation from the airline.
  • Leading stock exchanges NSE and BSE have got approval from market regulator SEBI to launch trading in commodity derivatives segment from October 1st. The exchanges will begin trading in non-agricultural commodities like metals and will conduct a mock trading session on Saturday to familiarize brokers with the trading systems.
  • US stock market indices Dow Jones and S&P 500 scaled an all-time high on Thursday led by blue-chip stocks and ever dependent technology companies. Buoyed on the back of rapidly growing economic output, cut in corporate tax rates leading to sharp increase in profits and lowest unemployment numbers in nearly two decades, the US economy is expected to keep the rally going. All three major indices i.e. Dow Jones, S&P 500 and Nasdaq traded higher by 1%, 0.8% and 1% respectively after Thursday’s close.
  • Friday’s trading session had a wicked surprise in store for non-banking finance companies (NBFC’s) specifically housing finance companies. Shares of DHFL and Indiabulls Housing Finance were the biggest losers with a gash of around 60% and 30% respectively intraday. However, partial recovery was seen after management allayed investor sentiments. The extended bandwagon of NBFC’s such as Edelweiss, Bajaj Finance, M&M Financial, Shriram Transport Finance were all down between 10% – 30% intraday. The ongoing crisis at IL&FS spooked investors and created panic as it was feared that a similar situation could befall all NBFC stocks.
  • Transport infrastructure focused, railways engineering and construction PSU, Indian Railway Construction Company Limited (IRCON) which offered its shares for subscription via IPO this week witnessed a splendid response as the issue was subscribed 9.85 times on the last day of bidding on Wednesday. The New-Delhi headquartered company is the second company after RITES Ltd. in which the ministry of railways sold the stake.

 

 

 

 

 

Continue Reading

Capital Markets

Trillion Dollar Club

Ali Azar

Published

on

In today’s information-driven era, no prizes for guessing which sector is the flavour of investors around the world. Any investors worth their salt would have some, if not a major portion of their portfolio exposed to technology stocks. It is these multi-bagger stocks that have provided secular returns for investors in the past decade or so and are expected to do so in the coming decades. It’s not hard to see why they have outperformed peers on national, as well as international platforms and continue to see elevated levels of activity by a wide range of investors at retail as well as institutional level. Competitive advantage, product innovation, high earnings visibility, increasing potential of usage, lack of sensitivity to rising oil prices and interest rates etc. are only some of the reasons why tech stocks are considered as the cream of the crop.

In line with this theme, we in India woke up yesterday with the news that shares of tech major Amazon had touched the 1 trillion $ mark on Tuesday night’s trade on wall street. Shares rose as much as 1.9% on bourses to briefly touch the milestone figure. Surprisingly, this is not unchartered territory for the US stock market. Tim Cooke led Apple Inc, the crown jewel of the US stock markets, achieved this incredible feat last month when it became the first US Corporation to cross 1 trillion $ in market cap as its stock price surged to 207.39 $ on 2nd August. Apple Inc. was not the first to reach there, back in 2007, PetroChina (China’s biggest oil and gas company) briefly hit the $1-trillion mark on the Shanghai Stock Exchange before global oil prices collapsed and its stock tanked. Since 2011, however, Apple has been the world’s most valuable publicly traded corporation after surpassing oil major Exxon Mobil. Technology stocks, at least in the US, have taken over the mantle as the most valuable listed entities on Wall Street from oil major companies such as Exxon Mobil, Chevron Corporation etc. Proof of this tectonic shift can be seen from the fact that the five most valuable companies in terms of market capitalization in the world are Apple, Amazon, Alphabet (Google), Microsoft and Facebook. These fantastic five US tech majors have been a model for resounding success in the build-up of shareholder value and it will be a surprise if all of them don’t hit the 1 trillion $ mark in the near future.

THE INDIAN SCENARIO

Back home in India as well, we celebrate an achievement of a similar kind, albeit on a different scale. Tata Consultancy Services (TCS), the largest Indian IT service and consultancy multinational, on 4th September crossed the coveted Rs 8 lakh crore mark after the stock ended up nearly 2% on Tuesday’s trade to end at Rs 2,093.20 on the BSE after hitting a lifetime high of Rs 2,100 during the session. TCS, the majority of whose income comes from export-oriented US market, has benefitted from a weakening rupee and a recently announced buyback program. The flagship Tata enterprise wasn’t the first Indian listed entity to cross the monumental 8 lakh crore mark, the Mukesh Ambani led industrial behemoth Reliance Industries Limited (RIL) achieved this feat on August 23rd of last month amidst an incredible bull run seen in the stock over the last two months. Shares of TCS and RIL have gained 55% and 35% respectively, so far in 2018.

While the entire investor community undoubtedly lauds the effort of these two Indian listed companies, let’s step back and put things into perspective from a global standpoint. Rs 8 lakh crore translates into roughly 112.68 billion $ assuming an exchange rate of Rs 71/$. This figure indicates a massive difference in market capitalization between the Indian heavyweights and its American peers, valuing them at nearly nine times that of our frontrunners.

Some reasons for this disparity in value are, US markets are the largest in the world in terms of market cap and hence there is far greater liquidity and penetration thereby acting as a catalyst for much quicker growth. There are also issues regarding the extent to which the sophisticated systems of the stock exchanges (BSE) are utilised in terms of the volume and frequency of transactions and the range of instruments traded. The bigwig tech companies mentioned earlier, in the US, cater to a worldwide audience and are market leaders in their respective fields world over. The commodity segment, derivatives and such other segments are yet to see activities like the equity segment in the Indian market. The reasons that can be attributed to this is the fact that it has been only few years (derivatives started in 2000) that the various segments, apart from equity and debt, have started operating and hence it is reasonably nascent compared to its global counterparts. It would, therefore, not be unjustified to say that the system is still evolving and it would take some time not only to attain efficiency of operation, but also to generate increased interest and awareness. Then only can we expect the operations to match its global counterparts in terms of volumes, frequency and variety of instruments traded. Added to this, extremely robust business models, exponential growth in revenues and profits and high level of technological innovation have kept the Silicon Valley stocks the envy of the entire globe.

Hence, crossing the 8 lakh crore figure is without a doubt a national achievement to be proud of, but in the grand scheme of global competitiveness, Indian entities have a lot of catching up to do. With the growth of the Indian economy being the fastest among all major economies and figures such as 8.2% GDP growth being achieved recently, adding a couple of zeros at the end of the market valuation of our top listed companies does not seem like a far-fetched reality.

Continue Reading

Capital Markets

Capital Market Beat

Ali Azar

Published

on

The stock markets opened on a tepid note this morning at 9.15 am, with Nifty falling by 18 points to 11,658.5 & BSE Sensex index falling by 71 points to open at 38,619.20

This precarious start was well founded with the rupee hitting historic lows, falling 26 paise to hit the 71/$ mark early morning amid a host of macro and global concerns, such as rising interest rates in the US, inflation fears, Sino-US trade war escalation concerns, consistent outflow of foreign funds from domestic equity markets & the ever-present threat of rising crude oil prices. A rise in crude oil price is looming over markets, as disruptions in supply from Iran & Venezuela weigh in.

Early cues for a weak opening could be deciphered from Nifty Futures & SGX Nifty, both of which were pointing to a southward opening. All three major indices in the US ended in the red last night, with the DOW ending 0.53% lower. Early risers in Asia too, were trading lower this morning, with the Japanese Nikkei trading down 0.4% at the start of the day. China’s SSEC index, Hong Kong’s HSI index & South Korea’s KOSPI index were all down today morning.

A surprise spike in the indices was seen roughly half an hour into trade with Nifty reclaiming the 11,700 mark, going all the way up to 11,726 intraday. The 30 share BSE Sensex recovered in excess of 200 points touching 38,833 intraday. Perhaps this spike was seen in anticipation of GDP data to be released later in the day for the April – June quarter, which according to consensus is said to grow by 7.6% However, this up move was quickly sold in to by traders, with the gloomy sentiment returning to the market.

After a fall from the intraday highs, the market remained flattish at lower levels and was range bound. The NSE Nifty index ended with a negligible 0.3% gain at 11,680.50 with the Sensex ending days’ trade with minor losses of 0.12% at 38,645. The Bank Nifty, the index comprised of 12 private & public sector banks, traded lower to end 28,061.75, a loss of 0.15%

Information Technology (IT) & Pharma stocks, being export-oriented sectors tend to do well when the dollar index is strong against the rupee, therefore it was no surprise that IT & Pharma indices were up 1.81% & 2.67% respectively.

Individual stocks that saw cheer today include Mindtree (IT) up 5.92%, Dr. Reddys Labs (Pharma) up 4.70% & PNB Bank which was up 3.64%

Shares that disappointed were market favourites Bajaj Finance & Bajaj Finserv that saw some profit booking, down 2.40% & 2.63% respectively & index heavyweight Reliance Industries was down 2.57%

Few stocks that were in the news today & in the week gone by are

  • ICICI Securities yesterday voted with an overwhelming majority of 95.78% on the reappointment of Chairperson Chanda Kochhar to continue on the board of the broking & investment banking firm in its first AGM since listing in April.
  • Yes Bank clarified that RBI has allowed its MD & CEO, Rana Kapoor to continue until further notice. His term ends on September 1st. Shares of the bank ended 5.04% down amid the uncertainty.
  • JSW Steel Ltd. will replace pharma major Lupin Ltd. in the benchmark NSE Nifty 50 Index. The changes are a part of periodic reconstitution & will be effective from September 28th. JSW Steel has been the best performing steel sector stock worldwide and has risen over 30% so far this year. Shares of Lupin ended higher by 4.23% on the back of dollar strength.
  • Shares of Hindustan Construction Company (HCC) fell by 2.74% today amid concerns of insolvency proceedings initiated against Lavasa Corporation. The luxury township has been referred to NCLT by its operational creditors.
  • Idea Cellular completed its much-anticipated merger with Vodafone India Ltd. creating India’s biggest telecom service provider with over 408 million subscribers. The telecom giant has toppled Bharti Airtel to move into the top position among the nine telco populated sector. Shares of Idea ended down 1% in today’s trade.

 

 

 

Continue Reading

Popular Stories

Copyright © 2018 Theo Connect Pvt. Ltd.