Finance Companies: Buying Opportunity in Panic Selling?
Hit by soaring interest rates and crude oil prices, coupled with a large selling by foreign investors, in just about a couple of months, the stocks of banking and financial services companies have crashed by 20%-50%, even as the Nifty fell by about 13% from its all-time high of 11,682 in August 2018, whereas Nifty Financial Services Index (FSI) fell from 11,845 on 29th August to 10,029 on...
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Global Selloff Hits India as GDP, Cos negotiate rough outlook
When the US sneezes the world catches a cold. This was amply demonstrated on Thursday as US stocks plunged overnight, sending other markets, including others across Asia reeling. 
 
Dow Jones and Nasdaq fell 3.3% and 4% respectively. Indices in Asia too plunged, with Japan’s Topix falling as much as 3.5%, Hong Kong’s Heng Seng 3.9%, Korea’s Kospi 3.5%, Shanghai 4.4% and Australia 2.5%. 
 
Sensex fell as much as 1,037 points, to the lowest level in six months, pared losses to trade about 2.5% lower than its previous closing. All but one of the 30 Sensex stocks fell. Expectation of subdued earnings growth in the quarter ended 30th September is adding to the nervousness as is outflow of funds by foreign investors and liquid funds managed by mutual funds. TCS, the biggest by market capitalisation, will report earnings later today.
 
The International Monetary Fund (IMG) lowered India’s GDP growth outlook to 7.3% from 7.4%. Rising global crude oil prices is expected to push up critical fuel costs and inflation, causing spending cuts by consumers and rising input costs for companies. While the RBI held its repo rate earlier this month, bankers expect it to make up later with rate increase. 
 
Christine Lagarde, managing director, IMF said at the Fund’s annual meeting at Bali today that the outlook for global economy had deteriorated to “drizzling, though not yet a downpour” from “clouds hovering” six months ago and “sun shining, fix the roof” about a year back. 
 
Rising rates and trade war with China is causing concerns US companies may get hurt, affecting growth. Comment by President Donald Trump complaining that the US Federal Reserve was raising rates too fast, added to the nervousness, triggering a selloff. 
 
“I think the Fed has gone crazy,” US media cited Trump as saying. Trump’s frustration stems from rising cost of funds just when the world’s largest economy is picking up with low unemployment rate. 
 
Adding to it is the concern that US-China trade war could hurt earnings of US manufacturing and technology companies. A tit-for-tat increase in tariff between the world’s two biggest economies could increase the cost for consumers and also push up inflation and interest costs. 
 
Impact of the trade war and increase in tariffs comes as the US Federal Reserve increased its key rates four times in 2018 and forecast it will raise rates another three times in 2019. Yield on the benchmark 10-year U.S treasury traded at 3.15%. The 10-year treasury rose to a high of 3.27% earlier this month, climbing about 100 basis points over the past 52 months. 
 
China’s $13.5 trillion economy and a population of 1.4 trillion makes it one of the world’s leading consumer and producer of commodities, and manufactured products. Likewise the $21 trillion US economy is globally the most dominant. A trade and tariff war between the two giants could impact earnings of companies across the globe. 
 
Rising US yields has also prompted foreign portfolio investors (FPI) to pull out their investments from emerging markets including India. FPIs have pulled out Rs80,227 crore from India since 1 January 2018, according to data compiled by NSDL. FPIs invested a net Rs2,00,048 crore in 2017, and pulled out a modest Rs23,079 crore in 2016. 
 
Calling it a tough month for equities, Adrian Mowat, chief emerging market equities strategist at JP Morgan told a local TV channel that stocks in emerging markets are not offering much value. 
 
Yet, Ajay Srivastava, managing director of Dimensions Consulting said in a televised interview that while it was not a bull market by any measure, still investors should avoid selling.
 
Impending national elections, accelerating inflation, likely increase in interest rates and widening of current account deficit and fiscal deficit could spoil India’s growth. 
 
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COMMENTS

Anand Vaidya

6 days ago

Quote: "China’s $13.5 trillion economy and a population of 1.4 trillion makes it"

Hmmm. China has 1.4 TRILLION population? I thought China has 1.4 Billion only...

Nifty, Sensex May Head Higher – Wednesday closing report

We had mentioned in Tuesday’s closing report that Nifty, Sensex were deeply oversold. The major indices of the Indian stock markets rallied on Wednesday and closed with gains over Tuesday’s close. On the NSE, there were 1,470 advances, 298 declines and 291 unchanged. The major trends of the indices in the course of Wednesday’s trading are given in the table below:

 

 
The S&P BSE Sensex vaulted over 400 points, while the NSE's Nifty surged 135 points after last week's hammering. The gains were led by banking, auto and finance stocks. 
 
Maruti Suzuki flagged-off proto-type Electric Vehicles (EVs) for field testing. According to the company, the EVs have been developed by Suzuki Motor Corporation, Japan and built at Maruti Suzuki's Gurugram facility. "This extensive real-life usage of the vehicles in multiple terrains and climatic conditions will help the company get valuable insights that will help in validation and successful launch of Electric Vehicle technology in India," the company said in a statement. "Testing of these vehicles will also help Maruti Suzuki to gather critical inputs based on customer perspectives and will help to create a reliable and suitable Electric Vehicle to delight Indian customers." Maruti Suzuki India shares closed at Rs6,997.00, up 4.44% on the NSE.
 
Honda Cars India (HCIL) launched the fifth generation of sports utility vehicle -- CR-V -- with a diesel engine option. According to HCIL, the petrol variant is priced at Rs28.15 lakh, while the diesel-powered version's cost ranges between Rs30.65 lakh and Rs32.75 lakh. "We strongly believe that the new CR-V has the potential to be a game changer in Premium SUV segment and we foresee a shift in consumer preference towards more luxurious and comfortable SUVs," Gaku Nakanishi, President and CEO, Honda Cars was quoted as saying in a statement. Honda had introduced the CR-V brand in India in 2003. Honda Siel Power Products, a related Honda company, had its share price close at Rs1,139.50, up 7.73% on BSE.
 
The State Bank of India (SBI)'s decision to buy Rs45,000 crore worth asset portfolios from non-banking financial companies (NBFC) will provide them the much-needed liquidity, a top Finance Ministry official said. "SBI stepped up substantially a facility for purchasing portfolio of assets from NBFCs to provide liquidity to NBFCs. SBI would buy such portfolios up to a total amount of Rs45,000 crore. This measure should alleviate liquidity concerns to a great extent," Economic Affairs Secretary Subhash Chandra Garg tweeted. The country's largest lender, which had initially planned for a growth of Rs15,000 crore through portfolio purchase during the current year, on Tuesday announced that it may buy additional portfolio in the range of Rs20,000 crore to Rs30,000 crore. India's NBFC sector has been hit by trust deficit after the Infrastructure Leasing and Financial Services (IL&FS) Ltd, a major infrastructure financing and construction firm, defaulted on its debt obligations leading to constrained liquidity for non-bank lenders. The bank's decision to expand its loan portfolio comes a day after housing finance regulator National Housing Bank (NHB) raised its refinance limit to Rs30,000 crore from Rs24,000 crore to make more funds available to housing finance companies. State Bank of India shares closed at Rs278.10, up 5.88% on the BSE.
 
The state-run Steel Authority of India (SAIL) said the fire at its Bhilai plant, which killed nine workers, has been brought under control. According to the company, the incident occurred at 10.30 a.m when a fire erupted from a gas pipeline of "Coke Oven Battery Complex No. 11". "In an unfortunate incident at around 10.30 a.m today (Tuesday) in SAIL Bhilai Steel Plant, there was a fire in gas pipeline of Coke Oven Battery Complex No. 11 during a scheduled maintenance job. Some persons working at the site sustained burn injuries," the company said in a statement. "Injured persons were immediately rushed to the BSP Hospital for medical care and aid. Meanwhile, the fire has been controlled. So far, nine persons have lost their lives and 14 are undergoing medical treatment. All resources have been mobilised to provide adequate care to the injured." The Bhilai plant, located 30 km west of the state capital Raipur in Durg district, is India's sole producer and supplier of rails for the Indian Railways. Steel Authority of India shares closed at Rs66.85, up 5.36% on the BSE.
 
Dr Reddy’s Laboratories has launched Colesevelam HCI Tablets, USP, a generic version of WELCHOL Tablets of Daiichi Sankyo, in the US market approved by the US Food and Drug Administration. Colesevelam HCl Tablets is available in 625 mg with 180 count bottle size. Dr Reddy’s Laboratories shares closed at Rs2,484.25, up 1.54% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 
 

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