Sensex, Nifty may witness slow upmove: Monday Closing Report

Nifty has to maintain itself above 5,670 for the upmove to continue

The market recorded minor gains on the first trading day of the fiscal 2013-14, making it the third positive close in a row. The Nifty has to maintain itself above 5,670 for the upmove to continue. The National Stock Exchange (NSE) reported a volume of 50.47 crore shares and advance-decline ratio of 1152:376.
The market opened on a positive note tracking its Asian peers most of which were in the green in morning trade on firm economic indicators from China and Japan. Indian indicators to be released today were HSBC Factory PMI for March and core infrastructure output for February.
The Nifty opened 14 points higher at 5,697 and the Sensex resumed trade at 18,891, up 55 points over its previous close. Gains in realty and capital goods sectors saw the benchmarks hitting their intraday highs in the first hour. The Nifty rose to 5,721 and the Sensex climbed to 18,959 at their respective highs.
However, profit taking at higher levels soon saw the benchmarks paring their gains. News of a slowdown in manufacturing activity in March 2013 put pressure on the market in mid-morning trade. 
The HSBC India Manufacturing Purchasing Managers’ Index (PMI)—a measure of factory production—stood at 52 in March, down from 54.2 in the previous month. The March expansion, which was at the slowest rate of expansion in 16 months, was on account of power outages hampered production activity and decline in new business orders.
The benchmarks slipped into the negative in noon trade on selling in auto and metal shares. The output of eight core infrastructure industries for February plunging 2.5% also weighed on the market, pushing it to the day’s low. At the lows, the Nifty fell to 5,676 and the Sensex went back to 18,797.
Select buying in the post-noon session helped the indices recover from the lows. The gains kept the indices firm in the positive terrain. The market closed with minor gains as domestic indicators lagged expectations, putting a question on the pace of economic growth.
The Nifty closed 22 points (0.38%) up at 5,704 and the Sensex rose 29 points (0.15%) to 18,865. 
The broader indices outperformed Sensex today. The BSE Mid-cap index surged 1.28% and the BSE Small-cap index jumped 2.30%.
Barring the BSE Metal (down 1.22%), BSE Auto (down 0.75%) and BSE Fast Moving Consumer Goods (down 0.04%). all other sectoral gauges settled higher. The top gainers were BSE Realty (up 5.37%); BSE Capital Goods (up 1.68%); BSE Power (up 1.09%); BSE Healthcare (up 0.97%) and BSE Bankex (up 0.63%).
Fifteen of the 30 stocks on the Sensex closed in the positive. The major gainers were Dr Reddy’s Laboratories (up 3.34%); BHEL (up 2.83%); Larsen & Toubro (up 2.18%); Infosys (up 1.85%) and Cipla (up 1.20%). The chief losers were Sterlite Industries (down 4.37%); Jindal Steel & Power (down 1.51%); Tata Motors (down 1.41%); Coal India (down 1.33%) and Wipro (down 1.22%).
The top two A Group gainers on the BSE were—Core Projects (up 23.91%) and Hindustan Copper (up 14.72%).
The top two A Group losers on the BSE were—Sterlite Ind (down 4.37%) and Motherson Sumi Systems (down 3.99%).
The top two B Group gainers on the BSE were—Vulcan Engineers (up 20%) and Gopala Polyplast (up 20%).
The top two B Group losers on the BSE were—Shimoga Technologies (down 16.67%) and GS Auto International (down 14.25%).
Of the 50 stocks on the Nifty, 28 ended in the green. The key gainers were DLF (up 7.80%); Cairn India (up 5.08%); Reliance Infrastructure (up 4.22%); Dr Reddy’s (up 3.42%) and Jaiprakash Associates (up 3.36%). The major losers were Sesa Goa (down 2.77%); Tata Motors (down 1.69%); JSPL (down 1.60%); TCS (down 1.50%) and Bajaj Auto (down 1.50%).
Markets across Asia closed mostly lower as economic indicators released earlier in the day fell short of expectations. The Bank of Japan’s quarterly Tankan survey came in at -8, up from -12 in the previous quarter. Besides, China’s official manufacturing PMI stood at 50.9 in March, bet fell short of analysts’ expectations.
The Shanghai Composite shed 0.09%; the Jakarta Composite lost 0.07%; the KLSE Composite fell 0.24%; the Nikkei 225 plunged 2.12% and the Straits Times settled 0.02% lower. On the other hand, the Seoul Composite gained 0.12% and the Taiwan Weighted advanced 0.41%. The Hang Seng was closed for trade today.
At the time of writing, US stock futures were marginally in the red. Markets across Europe are closed today for the Easter holiday.
Back home, foreign institutional investors were net buyers of shares totalling Rs573.87 crore on Thursday whereas domestic institutional investors were net sellers of equities amounting to Rs346.12 crore.
Engineering and construction firm KEC International today said it has bagged orders worth Rs914 crore in transmission, power system and cables businesses in domestic and international markets. The RPG Group company has bagged Rs800 crore worth contracts in transmission business, Rs40 crore order in power systems business and Rs74 crore worth contract in cables business, a company statement said. The stock declined 3.22% to close at Rs57.15 on the NSE.
Engineering major Larsen & Toubro today said it has bagged a Rs5,689 crore order from state-owned Rajasthan Rajya Vidyut Utpadan Nigam for setting up a supercritical thermal power project. The order involves design, engineering, manufacture, supply, erection and commissioning of two coal-fired thermal units of 660 MW each with supercritical parameters at Chhabra in Rajasthan. The stock advanced 2.215 to close at Rs1,396.45 on the NSE.
Marking its presence in the renewable energy generation space, state-run NTPC has commissioned 10 MW solar power capacity, while its overall generation portfolio has crossed 41,000 MW.
NTPC, which has ambitious renewable energy plans, has commissioned two solar projects—each having 5 MW capacity—in Maharashtra and Andaman & Nicobar Islands. The stock gained 0.67% to close at Rs142.90 on the NSE.


Emerging markets look attractive based on current dividend yields: WisdomTree Research

Yearly periods ending with a high trailing dividend yield have performed well on an average in the following year. With the trailing 12-month dividend yield as of 31 January 2013 at 2.69%, 44 basis points above the median, emerging market equities look attractively poised


Investing in high dividend yield stocks is a traditional way to make money on the stock market. This valuation metric is widely used by investors. According to a recent research report titled—Why We Are Still Bullish On Emerging Market Equities For 2013—by a US-based fund house WisdomTree Investments, emerging market companies are, by and large, mostly dividend payers. The trailing 12-month dividend yield has been an important valuation indicator for the subsequent performance of the MSCI Emerging Markets Index. The present levels of dividend yield for emerging markets have been associated with a strong positive performance in the past. 

Based on the last 24 full calendar years of data on the MSCI Emerging Markets Index, in the years following a higher trailing 12-month dividend yields (having a yield higher than the median observation of 2.25%), the MSCI Emerging Markets Index generated returns that averaged 33.03%, more than 31 full percentage points above the return following low dividend yield years. The average return for all 24 calendar years was 17.47%.

The research further points out that four of the five best yearly return periods for the MSCI Emerging Markets Index were followed by trailing 12-month dividend yields that ranked among the five highest of all 24 calendar year returns. The dividend yield was the highest for the year-end of 2008 at 4.75%. The year following this delivered the highest 12-month forward return of 79.02%. Is the reverse true as well? Yes. The lowest dividend yield for the index was observed for the year-ending of 1999 and was followed by the second-worst yearly returns of -30.61%.

Doing our own research on the BSE Sensex for the yearly periods from 31 December 1994 to 31 December 2012, the highest 12-month trailing dividend yield was at the end of the year 2002 with a yield of 2.14%. The year following that delivered the second highest return of 72.89%. The lowest dividend yield was on 31 December 2007 at 0.83% and the following 12-month period delivered the lowest return of -52.45%. The average yield has been 1.51% and as on 28 March 2013 the dividend yield was 1.61%. The level of dividend yield though slightly higher, may not be too attractive for investors.

“Emerging market companies are, by and large, mostly dividend payers. Well over 90% of the weight of the MSCI Emerging Markets Index is in firms that have paid a dividend in the preceding 12 months”, mentions the report. Higher trailing 12-month dividend yields indicate that a greater amount of aggregate dividends has been generated over the past 12 months relative to the current share price, while lower trailing 12-month dividend yields indicate the opposite. As per the report, “During periods that ranked as expensive for emerging markets, the average return was just 1.90%. This dramatic difference is a significant signal for the best time to own these equities. This historical analysis is why we would say we are still bullish on emerging market equities for 2013.”

Valuations have been a good guide to the future relative performance of various sectors. The research cites a study by Jonathan Garner and his team at Morgan Stanley, for the period from 31 December 1995 to 31 January 2013, “defensive stocks” within the MSCI Emerging Markets Index universe have tended to trade at a price-to-earnings (P/E) ratio approximately 1.3x that of “cyclical stocks” from the same universe. This is also of little surprise when one realizes another important statistic cited in this Morgan Stanley research: during 2012, defensive stocks outperformed cyclical stocks by 966 basis points.

The WisdomTree research reasons that investors may be willing to pay a higher price to gain exposure to more defensive stocks within this space. From 2011, emerging market defensive stocks have been trading at a more significant premium multiple relative to cyclical stocks. Therefore according to the research defensive stocks are currently “too expensive.” This has happened before, but there has been a tendency for the relationship to go back toward 1.3x. Morgan Stanley shows that when defensive stocks have traded at such expensive multiples compared to cyclical stocks in the past, their forward-looking relative performance has suffered.



siddhant jain

4 years ago

"Doing our own research on the BSE Sensex for the yearly periods from 31 December 1994 to 31 December 2012, the highest 12-month trailing dividend yield was at the end of the year 2002 with a yield of 2.14%"

Can the data used for this research be shared? The average Yearly dividend Yields in Sensex?


4 years ago

Premium content! Excellent article!!

Thank you Mr. Jason Monteiro & Thanks Team Moneylife.

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