Sensex Opens Firm; Infosys Gains on Strong Q3 Result

Mon, 13 Jan 09:30 am

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Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.1% while the Hang Seng is up 0.8%. The Nikkei 225 is trading up by 0.5%. US stocks fell on Friday from record-high levels as investors took profit and data showed slower-than-expected December US jobs growth, but the major indices posted gains for the week.

Back home, India share markets opened on a firm note. The BSE Sensex is trading up by 249 points while the NSE Nifty is trading up by 73 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.4% and 0.3% respectively.

All sectoral indices have opened the day on a positive note with IT stocks and realty stocks witnessing maximum buying interest.

The rupee is currently trading at 70.95 against the US$.

Infosys share price opened the day up by 2.8% after the company reported that its third quarter net profit rose 23.5% year-on-year to Rs 44.6 billion. Its revenue went up by 7.9% at Rs 230.9 billion. Infosys also revised upwards FY20 revenue outlook to 10-10.5% in constant currency. On a QoQ basis, Infosys's profit grew by of 10.9%.

In the news from the financial markets, adopting a cautious approach amid the US-Iran tensions, foreign portfolio investors (FPI) have pulled out a net sum of Rs 24.2 billion from the Indian capital markets in January so far.

As per latest depositories data, FPIs invested a net amount of Rs 7.8 billion in equities and pulled out Rs 31.9 billion from the debt segment between January 1-10.

This translates into a cumulative net outflow of Rs 24.2 billion.

Speaking of Indian share markets, Indian indices have witnessed a starkly polarised situation since 2018, after the uninterrupted bull rally of 2017 entered a period of correction.

While the Sensex recovered from the correction and went on to hitting new life-time highs, the broader markets - predominantly the small and midcap stocks -haven't recovered much.

Ankit Shah, the editor of daily premium newsletter Equitymaster Insider (requires subscription), has been talking about this trend since a long time. But now, he has even more elaborate data to show you how deep this trend has been.

He pulled out data on 1,638 companies listed on the NSE.

And he shares his observations in a recent edition of The 5 Minute WrapUp...

• Between 29 December 2017 and 30 December 2019, just 246 companies have witnessed gains. Together, these 246 companies added Rs 29.8 trillion worth of market capitalisation.
  
  In other words, 1,392 companies are below the levels they traded at the end of December 2017. Together, these 1,392 companies lost Rs 28.6 trillion worth of market capitalisation.
  
  So, you see the money has literally shifted from one place to another.

Even among the 246 companies that witnessed gains, the major chunk was captured by just a small list of companies.

This can be seen from the chart below...

A Very Small Group of Stocks Captured All the Gains

As you can see, the top 5 companies captured 41% of all the gains in market capitalisation over the last two years. In fact, the top 30 stocks captured more than 80% of the gains.

In short, money has been rushing to safety, into large, liquid, bluechips stocks.

This brings the question: Where can you look for such bluechip stocks?

You can consider the bluechip recommendations made by our Safe Stocks guru, Tanushree Banerjee. She has picked her top 7 stocks for 2020.

Also, as the divergence between the Sensex and Small cap index widens, Richa Agarwal answers why small cap rebound is just around the corner and why this could be the right opportunity to buy quality small cap stocks.

Tune in to find out more...

Moving on to the news from the economy. Having contracted for three months in a row, the Index of Industrial Production (IIP) recorded a growth of 1.8% in November mainly on account of improvement in the manufacturing sector.

The IIP growth in November 2018 was 0.2%. According to the National Statistical Office (NSO) data, the growth in the manufacturing sector was 2.7% as against a contraction of 0.7% in the same month last year. Electricity generation turned negative -5% as against a growth of 5.1% in November 2018.

Mining sector output decelerated to 1.7% from 2.7% in the year ago month. The IIP growth during April-November period of the current fiscal came in at 0.6%, down from 5% in the same period of 2018-19.

The data for the November month further revealed that production of capital goods, a barometer of investment, contracted by 8.6%. This compares with a contraction of 4.1% in November 2018.

Also, there was a contraction of 3.5% in the infrastructure and construction goods segment.

While consumer durable output was in the negative territory, the consumer non-durable segment or FMCG goods recorded a small growth of 2% (against contraction of 0.3% in November 2018).

As per the NSO data, 13 out of the 23 industry groups in the manufacturing sector showed positive growth during November 2019 as compared to the corresponding month of the previous year.

The industry group 'manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials' has shown the highest positive growth of 23.2% followed by 12.9% in manufacture of basic metals.

On the other hand, the industry group 'other manufacturing' has shown the highest negative growth of -13.5% followed by -12.6 in manufacture of motor vehicles, trailers and semi-trailers'.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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