Uptrend on Sensex, Nifty not broken: Thursday Closing Report

Support for the Nifty lies at 5,415, which if broken, may slow down the upmove

The volatile market pared all its gains but ended in the green following a report that the Inter-Ministerial Group recommended de-allocation of four mines to private companies and encashing of bank guarantees of three companies for non-development of the mines allotted to them in the stipulated time-frame. The Nifty’s intraday low of 5,422 was the highest since 14 March 2012. With a major portion of the session in the positive, the index ended with a marginal gain. The uptrend is still continuing, however, the support lies at 5,415, which if broken may slow down the upmove. The National Stock Exchange (NSE) saw a volume of 54.59 crore shares and an advance decline ratio of 587:849.


The market opened with flat tracking similar sentiments in the global markets ahead of an announcement from the US Federal Reserve on fresh stimulus to boost growth in the world’s largest economy. US benchmarks closed with meagre gains overnight while its peers in Asia were marginally higher in morning trade today.


The Nifty opened at 5,435, up four points from its previous close, and the Sensex gained 24 points at the opening bell to start off at 18,024. However, cautiousness soon saw the indices dip into the negative.


Buying in select sectors enabled the indices emerge into the green at around 10.00am. The gains pushed the market to its intraday high in mid-morning trade. At this point the Nifty rose to 5,447 and the Sensex scaled 18,063.


The volatile market pared its gains and was range-bound near the previous closing levels as investors waited for cues from the US. The sluggish benchmarks fell to their intraday lows in post-noon trade wherein the Nifty dipped to 5,422 and the Sensex went back to 17,976.


Reports of the Inter-Ministerial Group, looking into the coal block allocation issue, recommending de-allocation of four coal blocks allotted to private companies and encashing of bank guarantees of three companies capped the gains in late trade.


The development resulted in the market closing flat with a positive bias. The Nifty added four points to settle at 5,435 and the Sensex finished the session at 18,021, up 21 points over its previous close.


The broader indices settled lower, as the BSE Mid-cap index fell 0.18% and the BSE Small-cap index declined 0.25%.


The top sectoral gainers were BSE Fast Moving Consumer Goods (up 0.58%); BSE PSU (up 0.55%); BSE Oil & Gas (up 0.44%); BSE Capita Goods (up 0.43%) and BSE IT (up 0.42%). The key losers were BSE Healthcare (down 1.15%); BSE Realty (down 0.53%); BSE Auto (down 0.37%); BSE Metal (down 0.21%) and BSE Power (down 0.13%).


Nineteen of the 30 stocks on the Sensex closed higher. The top performers were Hero MotoCorp (up 1.87%); BHEL (up 1.57%); Hindustan Unilever (up 1.18%); ONGC (up 1.16%) and Bajaj Auto (up 1.15%). The major losers on the index were Bharti Airtel (down 2.8%); Cipla (down 2.44%); Tata Motors (down 1.41%); Jindal Steel (down 1.27%) and Mahindra & Mahindra (down 0.95%).


The top two A Group gainers on the BSE were—United Breweries (up 12.07%) and Muthoot Finance (up 7.83%).

The top two A Group losers on the BSE were—Bharat Forge (down 4.25%) and Lupin (down 3.19%).


The top two B Group gainers on the BSE were—Nikki Global Finance (up 19.99%) and Modi Rubber (up 19.96%).

The top two B Group losers on the BSE were—GKB Ophthalmics (down 13.86%) Kamanwala Housing Construction (down 12.19%).


Out of the 50 stocks listed on the Nifty, 21 stocks settled in the positive. The top gainers were BPCL (up 2%); Hero MotoCorp (up 1.95%); BHEL (up 1.49%); Bajaj Auto (up 1.13%) and HUL (up 1.11%). The key losers on the benchmark were Bharti Airtel (down 3.03%); Cipla (down 2.74%); Ranbaxy Laboratories (down 1.87%); Siemens (down 1.86%) and Tata Motors (down 1.77%).


Markets in Asia settled mostly higher as investors were optimistic about a positive announcement from the US Fed on fresh measures to boost growth. However, Chinese stocks closed lower on concerns about loans going sour as the government directed banks to support lending to infrastructure projects.


The KLSE Composite surged 0.91%; the Nikkei 225 advanced 0.39%; the Straits Times added 0.02%; the Seoul Composite rose 0.03% and the Taiwan Weighted was up 0.11%. On the other hand, the Shanghai Composite dropped 0.76%; the Hang Seng declined 0.14% and the Jakarta Composite fell 0.08%.


At the time of writing, the CAC 40 of France was trailing by 0.69%; the DAX of Germany was down 0.30% while UK’s FTSE 100 was up 0.05%. At the same time US stock futures were in the negative.


Back home, foreign institutional investors were net buyers of stocks totalling Rs451.19 crore on Thursday whereas domestic institutional investors were net sellers of shares amounting to Rs55.77 crore.


Healthcare service provider Apollo Hospitals today announced its foray into the African market and said it has plans to set up 30 tele-medicine units in that country. As part of this initiative, Apollo Hospitals has inked a MoU with Africa-based AfroIndia Medical Services, Apollo said in a statement. The stock jumped 4.09% to settle at Rs684 on the NSE.


Pharma major Glenmark Pharmaceuticals today said it has entered the phase II clinical trials for its new drug molecule aimed at treating ulcerative colitis. The company's subsidiary Glenmark Pharmaceuticals SA will conduct trials at multiple clinical sites in North America and Europe to investigate the efficacy and safety of the new molecule GBR 500, Glenmark said in a statement. The stock closed at Rs432 on the NSE, down 0.05%.


Is Religare Finvest’s NCD worth investing in?

Rising bad loans and negative cash flows of the past three years do not inspire confidence


Religare Finvest, a subsidiary of Religare Enterprises with its focus on SME financing and retail capital market financing, is looking at raising a corpus of Rs500 crore through an issue of non-convertible debentures. The NCD issue offers debentures of five types, termed as series I to series V and the tenure and coupon rate vary across categories in the following sequence:


Is it worth investing in this issue? The issue enjoys a rating of AA- from CARE and ICRA, similar to what the NCD issue of India Infoline holds, with an interest rate of 12.75%. Higher interest rate is attractive but remember higher the interest rate, the higher is the risk. 


The NCD of India Infoline was of a subordinate nature, which means in case the company gets liquidated the principal debtor will be serviced before the investors investing in this NCD issue. The Religare Finvest NCD, however, is in the form of secured debt with ‘first floating pari passu charge’, which means that the debt is fully secured and is not subordinate to other debt providers. In case of liquidation of the company and your debt is secured against immovable property of the company, if any. 
The real risk is the business environment of the company. The company is focussed on financing SMEs for mortgage loans, commercial loans and working capital loans. This possibly includes funding promoters. The profits rely completely on the net interest margins and the interest income earned, which will be directly hit by interest rate volatility in the markets.
Also, the business requires substantial amounts of capital at all times for lending aggressively, and any disruption of sources of funding will have an adverse effect on liquidity which could hit the bottomline. 
If customer default rises, it has to be provided for and that will take toll on profits and tie-up capital. A quick glance at the financials of the company reveal that gross NPAs (non-performing assets) have massively risen from Rs86.21 million on 31 March 2011 to Rs1,067 million on 31 March 2012 and the Net NPAs have increased from Rs17.71 million on March 31 2011, to Rs645.60 million on March 31 2012, which paints a gloomy picture.
The capital adequacy ratio of 19.65% is very near to what the minimum stipulated amount of 15% by the RBI. In case aggressive lending does not continue, the company might have to raise additional capital, a step that could weaken the company’s financial ratios. 
The current asset liability mismatch is another worrisome factor. The loan portfolio of the company is skewed towards providing loans of big ticket size to few borrowers, and thus the risk of default by one increases the risk financial underperformance of the company. As on 31 March 2012, the principal amount outstanding to top 20 borrowers on an unconsolidated basis aggregated Rs26.63 billion while total loan assets amounted to Rs125.74 billion, or about 20%. Any deterioration in the asset quality of any of these exposures will affect income from operations and thereby profitability. Bear in mind the fact that the operating cash-flows have been continuously negative for the past three years.
The financials of the company are not strong enough to sustain huge amounts of debt for a long term. The issue has come up in a marginally falling interest rate situation, when the profitability of all lending companies is expected to take a hit. Considering all these factors it is best to avoid this issue. 




4 years ago

Why to put the amount in million and billions - why not in lakhs and crores?

It is confusing to read in crores in some places and millions & billions in another places.

Is it a ploy to downplay the NPAs by putting it in Millions, instead of Crores?

Piyush I Shah

4 years ago

Why analysis on Religare NCD only & why Not on all ongoing/upcoming NCD in current month. Even though according to your analysis & rating given to each current issues by rating agencies, it may not be worth of Investor's grade but an unbised report of all would have helped common man people, 'Aam Aadmi' to decide/select/choose from Bad, Ugly, Poor, or Worthless..!!??

mani thyagarajan

4 years ago

why did u wait till the INDIA INFOLINE NCD got closed for subscription and then published it on 13th sep 12? So U r also doing a disservice to the public




In Reply to mani thyagarajan 4 years ago

13th Sep 12 article was on Religare NCD and not India Infoline NCD. Religare NCD opens today (14th Sep). India Infoline NCD article was well in time.

R Balakrishnan

In Reply to mani thyagarajan 4 years ago

If you are a regular reader, you would have got to read it on 4th of september, well before the issue closed.

Higher IPO graded companies enjoy better valuation: CRISIL

Higher IPO graded companies will most likely command higher multiples in the longer run as fundamentals will overrule the quintessential emotions of greed and fear, says a study conducted by the ratings agency

A study by ratings agency CRISIL pointed out that companies with higher initial public offering (IPO) grade command superior valuation driven by stronger fundamentals that may overrule quintessential emotions of greed and fear.
“For the period under review, these companies also weathered the business cycles like global financial turmoil in 2008-2009, followed by a slowdown during 2011-2012, better on the back of robust business fundamentals, superior management strength and good governance practices,” CRISIL said in a release.
CRISIL Research’s analysis concludes that IPO grades assigned to companies and the P/B multiples at which they trade have a strong correlation. The analysis highlights the premium assigned to companies with strong business fundamentals, superior management strength and governance practices (key factors that determine a company’s IPO grade), it said.
According to the study, companies with an IPO grade of 5/5 (indicating strong fundamentals relative to other listed securities in India) enjoyed a median P/B (price to latest book value of the company) of 3.79x vis-à-vis 0.33x and 0.45x for companies with IPO grades of 1/5 and 2/5, respectively. Companies with IPO grades of 4/5 and 3/5 had P/B multiples of 1.49x and 1.00x, respectively. 
Similarly, companies with an IPO grade of 5/5 enjoyed a median P/E (price to 12-month trailing earnings per share) multiple of 15.7x vis-a-vis 8.3x for companies with an IPO grade of 2/5. Companies with IPO grades of 3/5 and 4/5 traded at median P/E multiples of 9.0x and 10.6x, respectively. However, the median P/E multiple of 12.7x for companies with IPO grade 1 was an exception as many companies reported extremely low earnings per share (EPS) thereby resulting in high P/E ratio (low EPS = high implied multiples), the ratings agency said.
CRISIL Research analysed the performance of these graded companies over a five-year period between May 2007 and June 2012 on the basis of valuation multiples like P/B and P/E.  
CRISIL said its analysis confirms that there is a strong correlation between the IPO grades and the valuation multiples commanded by them. Higher IPO graded companies will most likely command higher multiples in the longer run as fundamentals will overrule the quintessential emotions of greed and fear, it added.




Piyush I Shah

4 years ago

Can one know How Reliance Power got 5/5 grade for its IPO & how it IPO price was justified & there are still more such incidence & cases. Can any one explain!?



In Reply to Piyush I Shah 4 years ago

Ask SEBI chairman and the Finance Minister.

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