Sensex Slip on Profit Booking, Metal Index Down 1.8%

Wed, 8 Mar 11:30 am

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After opening the trading day on a cautious note, Indian markets witness selling momentum in morning trade amid weak global markets. Losses are largely seen in oil & gas stocks and metal stocks.

The BSE Sensex is trading lower by 140 points and the NSE Nifty is trading lower by 42 points. The BSE Mid Cap index is trading down by 0.5% while the BSE Small Cap index is trading lower by 0.8%. The rupee is trading at 66.63 to the US$.

Retail companies trading higher ahead of the Rs 18.7 billion initial public offering (IPO) of Avenue Supermarts Ltd, parent of D-Mart. Avenue Supermarts Limited (ASL) is an emerging national supermarket chain with a focus on value-retailing.

It is one of the most profitable Food and Groceries retailer in India. The company opened its first store (D'Mart) in Mumbai in 2002. As on December 31, 2016, the store count has increased to 117 with a retail business area of 3.57 million sq. ft.

We, at Equitymaster, have always recommended IPOs cautiously. Here's Rahul Shah, co-head of research at Equitymaster, explaining our rationale behind the approach:

• 'We know what a dirty game the IPO business is. We've seen it over and over again: It's a game where the odds are stacked against investors. So for us, the equation is simple. We'd rather face criticism in the short run than see our subscribers lose money over the longer term. We weren't afraid to do this during the hot IPO days of 2007, and we're not afraid to do it today.'

The Bottomline: You need to evaluate each IPO on its merits by considering its fundamentals, and most importantly, the valuations. And this is particularly important when the hype surrounding IPOs is at its peak.

And if you wish to run IPOs through a handy checklist, you can download our Handbook of IPOs to pick only the right ones for you.

Moving on to news from IT stocks. According to an article in The Business Standard, as companies redeploy employees on various new technology works, campus hiring is expected to drop. Infosys said it hired 5,500 people in the first nine months of this financial year, as against 17,500 people in the year-ago period. It is expected to reduce campus hiring this year.

Information technology (IT) companies are gearing up to reskill their personnel, to help them stay relevant with automation. Software service providers are seeing a shift in demand from infrastructure development and legacy services to Artificial Intelligence (AI), big data analytics, machine learning and cloud-based delivery models.

Unemployment to rise going ahead

Wipro has also enhanced its digital technology workforce through acquisitions like Designit and Appirio. Infosys has created a Design Thinking platform to both reskill people and drive innovation.

Meanwhile, as noise around repeal and replacement of Obamacare, the Affordable Care Act (ACA), gains steam, there will be a monumental pressure on two Indian IT giants - Wipro and Cognizant. Wipro and Cognizant derive around 16% and 29% of their revenues, respectively, from the healthcare vertical as compared to 2.3% to 12% for its peers such as Tata Consultancy Services (TCS), Infosys and HCL Technologies.

In another development, Cyient Ltd has entered into a long-term agreement with Thyssenkrupp Elevator to support its MAX platform. Thyssenkrupp Elevator is a global market leader in passenger transportations system.

MAX is the world's first real-time, cloud-based predictive maintenance solution and a game changer for the elevator industry.

Cyient's advanced analytics and big data solutions will be integrated into MAX to help deliver predictive maintenance solutions.

Cyient Ltd share price is currently trading down by 0.2%

Moving on to news from stocks in banking sector. According to a leading financial daily, Canadian pension fund manager Caisse de Depot et Placement du Quebec is among suitors vying to buy a stake in Kotak Mahindra Bank Ltd.

Kotak Mahindra Bank is in discussions about the potential sale of more than 3% of the bank to the Caisse.

A sale would help Kotak comply with a central bank directive to cut his ownership in the lender to 30% by the end of June. Uday Kotak and related parties hold a 33.6% stake in Kotak Mahindra Bank, which is India's fourth-largest private-sector lender by assets.

Meanwhile, back in October, Canada Pension Plan Investment Board (CPPIB) has raised its stake in Kotak Mahindra Bank nearly by a per cent to 5.77%.

Shares of Kotak Mahindra Bank have gained 14% this year, giving it a market value of US$22.5 billion.

Kotak Mahindra Bank share price is currently trading up by 1% on the BSE.

Meanwhile, Indian government may give banks an incentive of up to Rs 10 for each transaction to encourage merchants to adopt digital modes of payment. According to a government official, the proposal is to provide an incentive of 0.25% on the value of a transaction - capped at Rs 10 - made on the biometric-based payment system Aadhaar Pay and UPI platform BHIM.

The incentive is also aimed at encouraging banks to onboard merchants for the new payments ecosystem and build the requisite infrastructure.

Bank stocks are presently trading in red with DCB Bank and Karnataka Bank leading the losses.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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