Sensex Finishes Flat Ahead of Fed Outcome; Idea Surges 9%

Wed, 15 Mar Closing

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Share markets in India finished flat as the sentiment turned tepid ahead of the outcome of the US Federal Reserve's meeting later in the day. At the closing bell, the BSE Sensex stood lower by 45 points, while the NSE Nifty finished down by 2 points.

Sensex Is Fairly Valued

If we look at the historical valuations of the Sensex, one thing becomes clear immediately. The market is not overvalued. Yes, individual stocks are overvalued, but not the entire market. However, the markets aren't cheap either. Interestingly, the Sensex P/E hasn't crossed 25 since mid-2008.If we were to tentatively consider a P/E of 25 as an upper limit, at least in the short-term, we would still get an upside of about 13% from current levels.

Here's why Sensex can rise 70% over next 2-3 years.

Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap finished up by 1% and 0.7% respectively. Gains were largely seen in realty stocks & auto stocks.

Telecom stocks finished the trading day on a firm note with Idea Cellular and Reliance Communications leading the gains.

Idea share price surged 9.6% in today's trade after reports stated that ATC was close to completing a buyout of the firm's tower business. As part of the deal structure, ATC may merge Idea's tower business with its India portfolio as well as the acquired business of Viom. Idea Cellular has seen strong movements ever since the merger with Vodafone was announced. It surged over 45% in the past three months.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.08%, while the Nikkei 225 & the Hang Seng fell 0.16% and 0.15% respectively. European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.30% while Germany's DAX is up 0.13% and France's CAC 40 is up 0.10%.

The rupee was trading at Rs 66.51 against the US$ in the afternoon session. Oil prices were trading at US$ 48.55 at the time of writing.

Bharat Heavy Electricals Ltd (BHEL) share price surged 3.1% in today's trade after it was reported that the company commenced commercial operation of its first 800 MW unit. The commercial unit has highest-rating coal-based supercritical thermal power plant.

The milestone was achieved for the first unit of the 2x800 MW Yeramarus thermal power station of Raichur Power Corporation (RPCL), in Raichur district of Karnataka. Significantly, the commercial operation of this unit also marks company's foray as a developer into the field of power generation.

Meanwhile, BHEL is positioning itself as a transportation solutions provider, particularly in crowded urban settings in an attempt to keep pace with the fast-changing electricity sector. The company wants to become a turn-key metro rail end-to-end solutions provider and also manufacture electric vehicles such as buses, cars, two-wheelers and boats.

While BHEL has signed an agreement with Ashok Leyland Ltd and Tata Motors Ltd for developing a propulsion system for buses, the public sector unit is also seeking technical collaboration to manufacture metro rail locomotives and has initiated separate talks with Hitachi Transportation Systems, Mitsubishi Heavy Industries and Skoda Transportation.

The government wants to increase the share of waterways transportation from 6% of freight transported in India to 10% by 2020.

With an order book of Rs 984 billion that has contracted by 10% compared to a year earlier, BHEL's order inflow has become a cause of concern. The company's paltry order inflow of about Rs 13 billion represents a steep 79% fall from a year ago.

The total order inflow for the nine months ended December was about Rs 65 billion. While the capital goods manufacturer has a manufacturing capacity of 20,000 MW per annum its order inflow has trickled to around 6,000 MW every year.

Moving on to news from economic sector. According to a leading financial daily, the US Trade Representative (USTR) in its voluminous annual report on trade has said that India's GDP growth along with indirect taxation reforms could support considerably more US exports to the country in future.

It also said that the Goods and Services Tax (GST) regime in India, could provide an impetus to the creation of a common internal market that significantly lowers transaction costs. USTR has stated that India's new National Intellectual Property Rights (IPR) Policy could protect US innovations.

It also pointed out that while these reforms are encouraging, there has also been a general trend of tariff increases in India, which reflects an active pursuit of import substitution policies and also said that the US will press India to make meaningful progress in relation to these ambitious goals in 2017. However, it noted that the existing Indian trade and regulatory policies have inhibited the development of a more robust trade and investment relationship.

The report further said that, the US Trade Representative will follow through with work plans agreed on during the US India Trade Policy Forum (TPF) in October 2016, which will include convening digital video conferences and in-person meetings on intellectual property rights, promoting investment in manufacturing, agriculture and trade in goods and services. It added that India and US have set a target of increasing bilateral trade to US$500 billion.

Tata Power share price finished on an optimistic note (up 1.7%) after Tata Power Solar doubled its capacity for module manufacturing in Bengaluru. The company launched a fully automated manufacturing unit with capacity for module manufacturing increasing from 200 MW to 400 MW and 65 per cent increase in capacity of cell manufacturing from 180 MW to 300 MW.

In one of the largest mergers and acquisition in the space of renewable energy, Tata Powers Co Limited had acquired renewable energy division of Welspun Enterprise at Rs 100 billion. Through the deal it has acquired 990 MW solar power project assets in India.

And here's a note from Profit Hunter:

IT stocks are the top losers for the day. TCS (-2.7%), Infosys (-2.30%), HCL Tech (-1.45%), and Wipro (-1.30%) are the bottom four stocks in the Nifty 50 Index.

In an earlier note, we told you the Nifty IT Index is trading in a descending channel and how it could test the channel's resistance line at 10,650. A few days back, the index broke above this line and made a high of 10,821.

Today, the index fell sharply by 1.65% and is just below the channel's resistance line. The index seems to have given a false breakout.

The RSI indicator, which measures the strength of the trend, is not going into the overbought territory of 70. This indicates weakness in price.

If this is indeed a false breakout, the Nifty IT Index might re-test the channel's support line. But if it gains some momentum, it could create a big trend in the index.

To identify these big moves, Apurva Sheth, research analyst, has launched a new trading service, Peak Profit Alert He intends to capture longer-term trends using his proprietary trading system, SCOREFAST^TM.

Click here and know more about this service.

Nifty IT Index - False Breakout?

 

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