Upmove on BSE Sensex, Nifty continues: Friday Closing Report

Higher high on the Nifty and a close above 5,710 may result in the upmove continuing

The market settled higher on buying in blue chips and global support. Yesterday we had mentioned that the downtrend has been arrested for now and a small upmove maybe witnessed if the Nifty closes decisively above 5,685. Today the index opened above this level and moved in a narrow range throughout the trading session. The index hit a six day intraday high (including today) of 5,711. It, however, closed at the same level at which it opened the session today. From here if the index manages to make a higher high and close above 5,710 we may see the upmove continuing. The National Stock Exchange (NSE) saw a volume of 62.44 crore shares and advance decline ratio of 992:706.


The Indian market opened in the green on a good set of quarterly numbers reported by IT major Wipro and positive global cues. The IT major reported a 23.8% jump in consolidated net profit for the September quarter to Rs1,610.6 crore. On the global front, US stocks closed higher overnight on better-than-expected jobs and consumer confidence numbers. In line with the US markets, the Asian pack was in the positive in morning trade.


The Nifty opened 51 points higher at 5,696 and the Sensex surged 130 points to start the day at 18,692. Both the indices hit their intra day low in the morning session itself. The Sensex and the Nifty hit a higher low of 18,688 and 5,683 respectively, the highest since 26 October 2012.  With most of the European indices opening in the positive, the domestic indices hit their respective intra-day high in the second half of trade. The Sensex hit a high of 18,794 while the Nifty hit a high of 5,711.


While the indices started slipping after scaling their highs, they ended in the positive. The Sensex closed at 18,755 (194 points up or 1.04%) and the Nifty closed at 5,698 (53 points up or 0.93%). The percentage gain of 1.04% on the Sensex was the highest since 24 September 2012.


While the Sensex closed over 1% up today, the broader indices though closed in he green, could not match its performance. The BSE Mid-cap index gained 0.36% and the BSE Small-cap index rose 0.33%.


All the sectoral indices ended in the positive. The main gainers were BSE Capital goods (up 1.74%); BSE PSU (up 1.52%); BSE Auto (up 1.49%); BSE Bankex (up 1.30%) and BSE IT (up 1.15%).


Twenty six of the 30 stocks on the Sensex closed in the positive. The chief gainers were GAIL India (up 3.75%); Bajaj Auto (up 2.90%); Larsen & Toubro (up 2.68%); ICICI Bank (up 2.12%) and Hero MotoCorp (up 2.11%). The losers were Bharti Airtel (down 2.12%); Jindal Steel, Hindustan Unilever (down 0.80% each) and Sun Pharma (down 0.46%).


The top two A Group gainers on the BSE were—Union Bank (up 8.14%) and MMTC (up 6.74%).

The top two A Group losers on the BSE were—Marico (down 4.47%) and Indiabulls Financial Services (down 3.01%).


The top two B Group gainers on the BSE were—Birla Ericsson (up 20%) and Kwality Dairy (up 20%).

The top two B Group losers on the BSE were—Hazoor Multi Projects (down 11.95%) and Zylog Systems (down 9.99%).


Out of the 50 stocks listed on the Nifty, 42 stocks settled in the positive. The key gainers were GAIL (up 4.20%); Bajaj Auto (up 2.76%); L&T (up 2.49%); ICICI Bank (up 2.36%) and Lupin (up 2.29%). Among the losers were Bharti Airtel (down 2.19%); Jindal Steel (down 1.12%); Hindustan Unilever (down 0.65%); BPCL (down 0.50%) and Jaiprakash Associates (down 0.45%).


One of the developments which happened today was that the government said it would soon come out with a 10-year action plan to strengthen the power generation sector. The ministry of heavy industries and public enterprises is finalising the “Road Map for Power generation, transmission and distribution 2022”. The action plan is expected to be finalised next month after taking views from all the parties concerned, ministries and departments.


Except for KLSE Composite and NZSE 50 all the Asian indices ended in the green. The major gainer was Hang Seng index which rose 1.33% while the major loser was KLSE Composite which fell 1.17%


At the time of writing, the European indices were trading in the red, and the US stock futures were mixed with a negative bias.


Realty firm DLF today said it has received Rs 2,727 crore in full from Lodha Developers against the sale of 17-acre land in Mumbai and will utilise almost entire proceeds to cut whopping debt of over Rs 22,000 crore. In August, DLF had announced sale of this land parcel, which it had purchased in 2005 for Rs 703 crore. DLF had got Rs 500 crore as advance and Lodha paid the balance Rs 2,227 crore yesterday to complete the acquisition. The stock gained 0.29% to settle at Rs204.95 on the NSE.


Aban Offshore has received an approval for raising of long term funds through issue of equity related securities to Qualified Institutional Buyers under the QIP route, subject to approval of members. The board at its meeting held on 1 November 2012 has approved for the same. The stock declined 0.96% to close at Rs439.70 on the NSE.



SL Narula

4 years ago

A conclusion on the future of the market in near terms given at the end will be very useful for the investor.

Indian banks are on course for 14% loan growth in FY13F

A sector-wise analysis of credit growth in Indian banks projects 14% loan growth in FY13F for aggregate non-food credit growth, according to Nomura Equity Research

Indian banks are looking at strong growth in lending rates for FY13F assuming all the major sectors add loans similar to the quantum seen in 2HFY12. Nomura Equity Research believes that aggregate non-food credit growth of 14% is possible as is industrial lending growth rate at 14%. The growth in lending for the agri sector would be 18%, that for SME would be 7.6% and retail loan growth may be around 14%.


The brokerage has used the monthly frequency loan data released by the RBI (Reserve Bank of India) for the month ended September 2012. Now that there is detailed loan data for the first half of FY13, Nomura has analysed the potential scenarios for FY13F loan growth and the implied growth rates for the various subsectors:

  • As of September 2012, aggregate non-food credit growth was 15.9% y-o-y (year-on-year) with primary contributions from industry (15.6% y-o-y), agri (21.3% y-o-y) and retail (15.6% y-o-y). Aggregate non-food credit growth was 15.9% y-o-y in August 2012.
  • For the first half of FY13, aggregate non-food credit growth was 2.6% over the base of March 2012 with contributions coming from retail at 4% and industry at 2.3%. Agri loans were flat at 0.7%n while SME loans declined 2%. Ex-infra industry growth was 1.1% during 1HFY13.
  • Assuming all these major sectors add loans similar to the quantum seen in 2HFY12, then Nomura believes that it is looking at the following potential growth rates for FY13F: aggregate non-food credit growth of 14%; industry growth rate of 14%; agri growth of 18%; SME growth of 7.6%; and retail loan growth of 14%.
  • If the above-mentioned growth rates are to be achieved for FY13F, then Nomura believes the implied annualized growth rates are as follows: aggregate non-food credit, 24%; agri loans, 37%; industry, 24%; retail, 20%; and SME loans, 19%.
  • For reference, the annualized growth rates in 2HFY12 were as follows: aggregate non-food credit growth, 28%; agri, 45%; industry, 28%; retail, 23%; and SME loans, 21%.
  • Within the industry, the various sub-sectors which we believe are likely to see a surge in 2HFY13F are, based on the 2HFY12 trend: infrastructure, metals, mining, food processing, engineering, cement & construction and chemicals. All of these sectors grew at an annualized rate of over 20% in 2HFY12.
  • LDR and deposit trends. As of 5 October 2012, LDR for the banking sector was 75%, easing from the high of 77% as of April 2012. As of 5 October 2012, deposit growth was 14% y-y compared with credit growth of 15.9% y-y.



Dividend trends and forecasting helps to select good companies

Forecasting dividend may not be an easy task but it makes sense to analyse the key trends in dividend to have an idea about how good the company will deliver in terms of rewarding investors in the form of dividend

Investment in stocks is driven by two types of returns: 1) Capital appreciation; and 2) dividend given by the companies from time to time. For passive investors, dividend acts as a key factor for investments in the stock as this category of investor expects to make money from regular and frequent dividend paid by the company. While the significance of dividend in investments cannot be overlooked, stock market analysts predict only stock prices using fundamental and technical analysis. There are very few cases of dividends being predicted in India. In western countries there are models of dividend forecasting which are used for the purpose of predicting dividends of the companies. Markit uses the dividend forecasting model and some other institutions predict dividend on the basis of options pricing model. 
Dividend forecasting is significant because if an investor wants to invest in stocks for long-term or short-term, factoring expected dividend payment in the investment decision is critical. While the significance of dividend is established beyond doubt, the question that needs an answer is—is it possible to forecast the dividend of the company? While the right to declare dividend remains with the company, looking at certain aspects of the company’s performance, dividend amount can be atleast estimated. The critical data to consider is the fundamental analysis, historical performance of the company and peer group comparison. The most important thing to remember is that dividend forecasting will work potentially only in cases where company has an established track record and has been constituent in its approach. Also extra-ordinary dividends need to be ignored for the purpose of this analysis. Considering these assumptions, let us look at some aspects of dividend forecasting:
Understanding dividend policy of companies: As a part of corporate governance practice, various companies announce their dividend policy. CRISIL, one such company has the following policy towards dividend. “It believes in maintaining a fair balance between cash retention and dividend distribution. Cash retention is required to finance acquisitions and future growth, and also as a means to meet any unforeseen contingency.
CRISIL has also been conscious of the need to maintain stability in its dividend payout over the years. From 2008, CRISIL has commenced the practice of paying dividend on a quarterly basis.”
This shows that from a company like CRISIL an investor can expect dividend payment every quarter which is significantly different from what other companies follow. Another company—Infosys—follows a totally different approach compared to CRISIL. As per dividend policy of Infosys, “Currently, Infosys pays dividends to its shareholders. The current dividend policy is to distribute not more than 30% of the PAT (unconsolidated Indian GAAP) as dividend. The board of directors reviews the dividend policy periodically and on 15 April 2008 decided to hike the dividend policy to up to 30% of post tax profits from 20% of post tax profits earlier”.  Infosys’ dividend policy shows that an investor has to think differently when it comes to investing in Infosys shares.
Many companies do not have dividend policy in place which shows that ad-hocism to be in place as far as dividend declaration by the company is concerned.
The relationship between Dividend Per Share (DPS) and earnings of companies: What is the relationship between earnings of a company and its dividend payment. A company like ONGC probably can answer this question. The data for last ten years in case of ONGC reveals a lot about the company’s approach towards dividend:
The dividend payout ratio of ONGC shows that company has been very consistent in dividend payment. The average dividend payout ratio of ONGC during last nine financial years (2002-03 to 2010-11) has been 41.77% with a standard deviation of just 1.77%, showing a very high adherence to the mean value. Dividend payout ratio shows that part of earnings which the company shares with its shareholders.  Can it be safely concluded that dividend payout ratio of the company will be in range of 40%-44% in the years to come which will be derived from its earnings?

While ONGC’s dividend payment behavior may be rubbished as an exception followed by a government company, we can look at some other company which is more independent in decision making. An Ideal example of this kind of company which has been consistently performing is HDFC Bank. The company has been a continuously performing bank and has shown that the company also cares for investors by regularly paying them decent dividend. The details of dividend paid by HDFC Bank are as follows:
Dividend paid by HDFC Bank has been growing and that company officially acknowledges that it has been maintaining dividend payout ratio of 20%-25% (Refer:  So to expect a dividend in the range of 20%-25% won’t be unfair in the case of a company like HDFC Bank.
Dividend and Economic Growth: In a falling growth scenario, it makes sense to acquire shares of companies which have consistently paid dividend. With the growth slowdown and limited opportunity to invest, companies prefer to disburse higher dividend as investment opportunities are limited for a company. 
Forecasting dividend may not be an easy task but it makes sense to analyse the key trends in dividend to have an idea about how good the company will deliver in terms of rewarding investors in the form of dividend. Study of fundamental and policies of the company can go a long way in giving an insight into dividend to be declared by the company. The second approach could be to look at the complex mathematical models which an ordinary may find it difficult to fathom. 
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)



Nem Chandra Singhal

4 years ago

Good piece of information.
Nem Chandra Singhal

Vikas Gupta

4 years ago

Dear Vivek Ji,
Can you please give me list of 10 stocks which has the highest Dividend Yield as per their Current Share Price?

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