The Mysteries of Stock Valuation – I

In a couple of my previous columns, I shared some thoughts on analysing companies and businesses. However, one big gap that was left was valuation. There are so many different opinions on the valuation of any stock that these, probably, outnumber the number of listed companies! Everyone has his or her pet theories. What is a right price to buy? What is the right price to sell? What is the...

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Nifty, Sensex May Rally a Bit if Today’s Low Holds – Wednesday closing report
We had mentioned in Tuesday’s closing report that Nifty, Sensex continued to be under pressure. The major indices of the Indian stock markets rallied on Wednesday and closed with gains over Tuesday’s close. On the NSE, there were 688 advances, 1,048 declines and 330 unchanged. The trends of the major indices in the course of Wednesday’s trading are given in the table below:
 
 
A recovery in the rupee value along with value buying buoyed the key Indian equity indices on Wednesday. The key equity indices -- S&P BSE Sensex and NSE Nifty50 -- which had a gap-up opening, traded in a flat-to-negative range, as investors were cautious over the upcoming macro-economic inflationary data point.
 
However, the key indices reversed the bearish trend after the mid-afternoon session as buying was witnessed in FMCG (fast moving consumer goods), metal and capital goods counters. In the past two trade sessions the Sensex had shed nearly 1,000 points and gave investors an opportunity to pick up stocks on an attractive valuation. On the currency front, the Indian rupee registered a recovery at 72.11 at 4.00 p.m. after it touched a new low of 72.91 earlier in the day. At the provisional closing time, the wider Nifty50 on the National Stock Exchange stood at 11,369.90 points, higher by 82.40 points or 0.73% from the previous close of 11,287.50 points.
 
An agreement was signed between the Uttar Pradesh government and private air carrier Spice Jet on Wednesday to fly on five new routes in the state, an official said. The new routes on which flights will begin after clearances from the Union Civil Aviation Ministry and the UP government are Varanasi-Kolkata, Varanasi-Bengaluru, Kanpur-Mumbai, Kanpur-Bengaluru and Gorakhpur-Bengaluru. SpiceJet shares closed at Rs79.60, up 0.32% on the BSE.
 
Reliance Capital Ltd, a part of the Reliance group, said it closed the first quarter with a net profit of Rs272 crore on a total income of Rs4,641 crore. In a statement issued here, Reliance Capital said on a consolidated basis its total income for the quarter ended June 30, 2018 stood at Rs4,641 crore up from Rs4,444 crore logged in the corresponding period of the previous year. The company has posted a net profit of Rs272 crore as against a loss of Rs378 crore in the corresponding period of the previous year. As on June 30, 2018, the company had a net debt equity ratio of 5.18. According to the statement, the total assets of the company stood at Rs87,041 crore, an increase of 7%. The consolidated results have been prepared in line with Ind AS. Insurance companies are not covered under Ind AS. Accordingly, the standalone results of Reliance General Insurance and Reliance Nippon Life Insurance have been disclosed on the basis of Insurance Regulatory and Development Authority of India (IRDAI) reporting. Reliance Capital shares closed at Rs414.20, down 5.81% on the NSE.
 
Budget passenger carrier IndiGo said that it has proactively grounded an Airbus A320neo aircraft for a routine engine replacement. "Post normal completion of a flight, an IndiGo aircraft was proactively grounded for a routine engine replacement yesterday (September 10, 2018)," the airline said in a statement. "There was no impact on our flight operations." In July, the budget passenger carrier had grounded a few of its A320neo aircraft due to want of spare engines from Pratt and Whitney. IndiGo, that time said the release of additional spare engines was initiated by PW and all aircraft are expected to be back in service in the second half of August. InterGlobe Aviation shares closed at Rs882.50, down 1.10% on the NSE.
 
Dr Reddy's launched Neostigmine Methylsulfate Injection, USP, a generic version of Bloxiverz Injection approved by the US FDA (Food and Drug Administration), in the US market. Approx. annual US sales for Bloxiverz brand and generic: US$ 111 million (ending July 2018). Dr Reddy’s Laboratories shares closed at Rs2,535.00, up 0.42% on the NSE.
 
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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Is KSE Undervalued After the Recent Decline?

With a market-capitalisation of about Rs820 crore, Kerala Solvent Extractions Ltd (KSE) is the largest manufacturer of compound cattle-feed in the private sector in India. The stock has had a great run from January 2017 till end-May 2018, when it went up by six times. But from June 1st after it had reached an all-time high of over Rs3700, the stock started falling. Due to the recent floods...

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