Nifty struggles below 10,000, Sensex under pressure; HDFC extends gains

Goldman bearish on Blue Dart: Goldman Sachs remained bearish on Blue Dart Express and maintained sell rating after weak set of earnings for the quarter ended June 2017. The stock price fell more than 2 percent intraday.

The research house slashed its 12-month target price to Rs 4,160 (from Rs 4,500) after lowering FY17/18/19 EPS estimates by 27/13/6 percent on pricing pressure.

With continued pressure on pricing and the industry adjusting to prepare for GST, it expects near term profitability of the company to remain muted.

Blue Dart reported weak Q1FY18 earnings across parameters. Revenue growth remained subdued at 7 percent YoY (sixth straight quarter of less than 10 percent growth) at Rs 666.6 crore, which partially impacted by lower transportation activity in the June prior to the GST rollout.

A decline in margins resulted in consolidated profit declining by 52 percent YoY to Rs 21.1 crrore in June quarter.

Market Check: Equity benchmarks remained under pressure in morning trade, with the Sensex falling over 100 points following weakness in global peers.

The 30-share BSE Sensex was down 127.08 points at 32,256.22 and the 50-share NSE Nifty fell 30.65 points to 9,989.90.

The broader markets outperformed benchmarks, with the BSE Midcap and Smallcap indices rising 0.35 percent each on positive breadth.

About 1,057 shares advanced against 949 declining shares on the BSE.

HDFC extended gains today, hitting fresh record high of Rs 1,776.20, up 2.4 percent on top of 5.83 percent rally in previous session after strong earnings.

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Top 10 companies with three digit PE gave up to 400% return in last 1 year; do you own them?

Many small and midcap stocks have more than doubled investors’ wealth in the last one year without much improvement in the earnings, which is depicted by low earnings per share and high PE multiple.

Kshitij Anand
Moneycontrol News

The Indian market has produced many multibaggers in the last one year and one such theme which catches attention are stocks which are trading at three-digit PE and low earnings per share (EPS).

Before we go further, let us understand the relation between the PE, EPS and market price. Price earning multiple or earnings multiple is calculated by dividing market price by earnings per share (EPS).

Many small and midcap stocks have more than doubled investors’ wealth in the last one year without much improvement in the earnings, which is depicted by low earnings per share and high PE multiple.

In other words, if earnings fail to catch up in near future then companies with high PE multiple and low earnings per share could come under pressure.

Companies, which are trading with three digit PE multiples include names like Medicamen Biotec which rose 444 percent, followed by Generic Engineer which rallied 271 percent and International Combustion rose 205 percent in the last one year.

High PE may not be the only reason why a stock could witness correction. But, to safeguard from any adverse volatility, investors should first study the reason of high PE and if required try and avoid exposure to small and midcap stocks which have high PE and low EPS.

“Investors should investigate the reason for such high PEs. In most cases, such high PE is caused due to low base effect. For example, due to some reason, the EPS of a sound company drops to Rs 0.1 per share from Rs 10 per share in the previous fiscal,” Sanjeev Zarbade, Vice President, PCG Research at Kotak Securities told Moneycontrol.

“Yet, it does not mean that the value of the company should also decline commensurately. Investors have to look beyond this low EPS and make a judgment regarding the future profitability of the company,” he said.

Zarbade further added that such high PEs may also be due the expectation of a potential turning around in profits. In such cases, investors are forecasting a dramatic jump in future profits and hence such PEs may be justified.

1

It is prudent for investors to understand that taking investment decisions just based one parameter i.e. PE multiple might not be the right strategy.

Investors also take into account the book value, sales, replacement value of assets, brands into consideration. Hence, while on the face of it, a PE valuation of 100x is not sustainable, it is possible that investors are valuing the company on other parameters, suggest experts.

“A higher P/E may indicate that an investor is willing to pay a premium for that particular stock over actual earning based on identified factors prevailing in the market,” Dinesh Rohira, Founder & CEO, 5nance.com told Moneycontrol.

“It can also be interpreted as a speculation which doesn’t support a fundamental buying sentiment but prices moving up based on the speculations and triggered events,” he said.

Stocks with high EPS:

Most of the bluechip names have high EPS and a double digit PE ratio has given good returns in the last one year. A steady rise in EPS is a positive factor for a stock. A company’s PE should be compared with its respective peer group to make out if the stock is overvalued or undervalued.

Companies which have more than doubled investors’ wealth in the last one year with high EPS include names like MRF, Rasoi, Vardhman, Polson, and Borosil Glass. Maruti Suzuki gave over 70 percent return so far in the year currently has an EPS of Rs 248.

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Investors should understand that company’s earnings and growth in earnings are the main drivers of the stock price. However, there are other things which impact the price.

“Other factors which impact the price of the stock include factors like change in product mix, change in margin profile, estimated growth, market positioning in terms of market share, new product launches & its impact on future earnings also have impact on valuations,” Arpit Jain, AVP at Arihant Capital Markets Limited told Moneycontrol.

EPS is also one of the prime parameters to examine a stock valuation. Any investment into stock should be supported by fundamental factors which come after carrying out proper analysis and timely evaluation, suggest experts.

“An ESP less than 1 indicates a poor revenue generation or inefficiency of the business to limit the operating cost which resulted in the outflow,” said Rohira.

“It also indicates an expected capex expenditure through borrowed funds which translate into high-interest outflow or through equity which lowers the earning per share,” he said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decision.

Source: Moneycontrol

Sensex dives 300 pts, Nifty breaks 9850; FMCG index sinks 7%

Buzzing: Shares of Balaji Telefilms gained over 4 percent intraday as investors cheered the likely fundraising activity by the firm.

In a late evening exchange notification, the company informed the exchanges that a meeting of the Board of Directors will be held on July 20, 2017, to consider various fund raising options including raising funds through issue of securities on preferential basis, subject to approval from the shareholders of the Company and other necessary approvals, if any.

The company was in the news recently after one of its top executives exited the firm. It announced the stepping down of its Group CEO Sameer Nair from an executive capacity.

Market Check: Equity benchmarks extended losses in afternoon trade, with the Sensex down 298.79 points at 31,775.99, dragged by ITC (down 12.2 percent) and Reliance Industries (down 2 percent). HDFC Bank also turned lower.

The 50-share NSE Nifty has broken the 9850 level, down 71 points at 9,844.95.

The market breadth was negative as about 1,465 shares declined against 1,039 advancing shares on the BSE.

ITC continued to reel under heavy selling pressure on hike in cess on cigarettes by the government.

Sensex jumps over 250 pts, Nifty above 9700; pharma & IT stocks rally

Europe trade: The markets in Europe opened higher, extending gains seen across the US and Asia.

The pan-European Stoxx 600 was firmly in the black, with all sectors and major bourses trading in positive territory.

Finance ministry sources told CNBC-TV18 that the Department of Economic Affairs has asked the NSE to submit a report on the technical glitch.

SEBI issued notification, saying National Stock Exchange of India, (NSE) stopped trading this morning, reportedly, due to “technical glitch”. SEBI is in touch with NSE and is closely monitoring the situation.

Normal Trade at NSE begins: The 50-share NSE Nifty was up 62.65 points or 0.65 percent at 9,728.45 while the 30-share BSE Sensex rose 266.62 points or 0.85 percent to 31,627.25.

Market Update: Equity benchmarks maintained morning gains, with the Sensex rising 252.92 points or 0.81 percent to 31,613.55.

About 1,479 shares advanced against 885 declining shares on the BSE.

Meanwhile, the pre-opening session at NSE resumed, with the Nifty up 47.50 points or 0.49 percent at 9,713.30.

Sensex falls over 250 points, Nifty down almost 1%; SBI down 4%

State Bank of India (SBI), Axis Bank, Bank of Baroda and BPCL were the top losers on both indices, while Bharti Airtel, Adani Ports, and GAIL gained the most.

Stake sale: Mafatlal Industries shares rallied more than 11 percent intraday on approval from board of directors for stake sale in Navin Fluorine.

“The board of directors, on June 23, approved the sell of 1,18,389 equity shares of Navin Fluorine at appropriate market price at BSE and/or NSE,” the company said in its filing.

At Friday’s closing price, the transaction is valued at more than Rs 35 crore.

Hence, the textile company said trading window for dealing in equity shares will remain closed for all directors and designated employees, with effect from June 24-28.

The deal is related to restructuring of shareholding in Navin and reclassification of that shareholding from promoters to public/non-promoter category.

Heavyweights, banks help Sensex, Nifty stay in positive terrain

Management talks: Opto Circuits told CNBC-TV18 that it is optimistic of prevailing with legal claims in excess of USD 160 million against parties.

Unviable operational segments are being closed, it said, adding the company is taking various strategic alternatives for additional capital & business opportunities.

According to the medical equipment maker, market size of EuroCor is likely to double over next 3-5 years. It expects growth in profit to continue over next few quarters.

Citi on Aurobindo: The research house believes Aurobindo is one of the best placed to ride out a challenging environment for generic companies in the US, courtesy of its relatively low product concentration, clean compliance slate, large and improving pipeline as well as strong execution.

Recent Q4 results, management commentary and approvals such as generic version of Renvela oral suspension further validate this view, it said. Moreover, rising scale and improving profitability in Europe would gradually reduce dependence on the US market and, along with better cashflows, augur well for longer term growth, it added.

Jayant Agro-Organics bonus issue: Jayant Agro-Organics has approved bonus issue in ratio of 1:1 in place of stock split. It has also approved raising upto Rs 250 crore via issue of various securities.

Market Check: Equity benchmarks continued to be in positive terrain in afternoon trade, helped by index heavyweights and banks.

The 30-share BSE Sensex was up 32.52 points at 31,108.25 and the 50-share NSE Nifty rose 14.35 points to 9,592.40.

Outperformance by broader markets also continued on positive breadth. About 1,388 shares advanced against 1,114 declining shares on the BSE.

ITC, Tata Motors, HDFC, Axis Bank, M&M, Reliance Industries and SBI were leading contributors to Sensex’ gains.

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GST to keep July 1 date: 15 stocks to gain from new dynamics

The government on Tuesday put all speculation to rest and clarified that the goods and services tax (GST) will keep its July 1 date for countrywide rollout. Market experts said, when implemented, GST would be dream come true for the stock market.

There are expectations that the immediate benefit of GST would be felt across sectors, but the biggest beneficiaries would be industries where the unorganised sector has a large market share.

“It is important to understand that the main beneficiary will be the India, Indian indices and India’s image. The government and the common man would benefit equally,” said VK Sharma, Head of PCG Research at HDFC Securities.

Stocks have already rallied quite a bit in the runup to GST rollout, lifting BSE Sensex and the Nifty50 to all-time high levels of 31,430 and 9,700 on June 6.

Investors and brokerages are bullish about the long-term positive impact GST is going to have on different businesses.

Sensex, Nifty consolidate with negative bias; Maruti hits record high

Market check: Equity benchmarks continued to consolidate with a negative bias. Asia turned mixed and European stocks are also likely to open mixed as UK general elections’ results indicated possibility of a hung parliament.

The 30-share BSE Sensex was down 59.06 points at 31,154.30 and the 50-share NSE Nifty fell 19.95 points to 9,627.30.

Maruti Suzuki hit a fresh record high intraday, up nearly 2 percent after a media report indicated that the company plans to spend Rs 1,000 crore in land acquisition this year.

Reliance Industries continued to support the market, up nearly 1 percent followed by HDFC Bank. HDFC rebounded after early losses while TCS remained higher.

Infosys continued to be leading contributor to Sensex’ losses, down 2 percent followed by ITC, Adani Ports, L&T, Tata Motors, SBI.

Market Outlook: At a time when the market is witnessing strong moves, with bouts of consolidation, IL&FS sees sideways movements for the near term.

Highlighting that in the current situation, macros are positive and could be better post good monsoon, Vibhav Kapoor of IL&FS told CNBC-TV18 that it was legitimate for the market to assume that these will translate into higher earnings growth.

Having said that he saw strong resistance at 9650-9700 as a strong resistance point for the Nifty. A crossover from this point could take the index to 10000, he said. But, in the near term, there could be a correction, but not a deep one.

Sensex, Nifty rangebound; RBI holds repo rate but cuts SLR by 50 bps

Five members of Monetary Policy Committee were in favour of the monetary policy decision, while Dr Ravindra H Dholakia was not in favour.

The minutes of the MPC’s meeting will be published by June 21, 2017 while the next meeting of the MPC is scheduled on August 1 and 2, 2017.

Stressed assets: Reserve Bank said it would continue to work in partnership with the government to address the stress in banks’ balance sheets.

Better alignment of administered interest rates on small savings with market rates and stepped-up recapitalisation of banks to facilitate adequate flow of credit to productive sectors are important steps to follow through, it added.

Economic growth: With the CSO’s provisional estimates for 2016-17, the projection of real GVA growth for 2017-18 has accordingly been revised 10 bps downwards from the April 2017 projection to 7.3 percent, with risks evenly balanced, RBI said.

Sensex off day’s high, Nifty hovers around 9650 post record highs

Buzzing: GMR Infrastructure shares gained nearly 11 percent intraday after significant reduction in debt and turning profitable in the financial year 2016-17.

Company’s gross debt fell significantly to Rs 19,856 crore in FY17 from Rs 37,480 crore in FY16 and net debt to EBITDA ratio for the year improved to 4.3 from 10.2 in FY16.

“With significant reduction of gross & net debt and the improvement of Debt-to-EBITDA improving more than 100 percent, GMR has substantially brought down its leverage,” the Delhi-based infrastructure conglomerate said in its filing.

Market check: Equity benchmarks were off day’s high in morning trade after hitting record highs in opening.

The 30-share BSE Sensex was up 96.97 points at 31,234.56 and the 50-share NSE Nifty rose 28.15 points to 9,644.25.

The broader markets also came off day’s high, up 0.4 percent on positive breadth. About two shares advanced for every share falling on the BSE.

Bharti Airtel was biggest gainer among Sensex stocks, up 3 percent after the telecom operator received approval from SEBI & stock exchanges for merger with Telenor India. The company filed application with National Company Law Tribunal for nod to scheme of merger.

Tata Motors, HDFC, Adani Ports, ITC and TCS were other top contributors to Sensex’ gains whereas ICICI Bank remained under pressure, down nearly a percent.