Sensex Opens Strong; Metal and telecom Stocks Top Gainers

Fri, 29 Mar 09:30 am

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Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.7% while the Hang Seng is up 0.7%. The Shanghai Composite is trading up by 2.2%. US stocks climbed on Thursday as Treasury yields rose off 15-month lows, with investors optimistic about the latest round of US-China trade talks.

Back home, India share markets opened on a strong note. The BSE Sensex is trading up by 169 points while the NSE Nifty is trading up by 48 points. Both, the BSE Mid Cap index and BSE Small Cap index opened up by 0.6%.

All the sectoral indices have opened the day in green with metal stocks and telecom stocks leading the pack of gainers.

The rupee is currently trading at 69.12 against the US$.

In the news from airlines sector. As per an article in a leading financial daily, Jet Airways' top lender State Bank of India and its founder Naresh Goyal have reached out to private equity giant TPG Capital and US carrier Delta Air Lines to explore the possibility of a stake purchase in the beleaguered airline.

Meanwhile on Thursday, Jet informed the BSE that it has defaulted on repayments on external commercial borrowings, due on 28 March, raised for working capital purposes.

It attributed the default to "temporary liquidity constraints" and said it has engaged with the lender for the same.

State-run banks took over the board and management of Jet on Monday with 50.1% stake, Goyal's holding was reduced from 50.1% to 25.5%, Etihad Airways' share came down to 12% from 24% and public shareholders were left with 12.5%. Goyal resigned as chairman and board member.

Jet's lenders are now looking for a new buyer. The lenders hope to find a new buyer for Jet by June-end.

Jet, in the throes of acute financial distress, has defaulted on loan repayments, lease rentals and vendor payments. It has also delayed salaries, grounded planes and laid off staff.

But on Thursday, Jet told its travel agents that it is reinstating more than 60 domestic flights between March-end and April 25.

Note that, the entire aviation sector has been hit by fuel prices woes, depreciating rupee, and debt to fund aircraft purchases.

Hence, it is important to note that certain industries have poor economics compared to others.

Investors would do well to keep this in mind, particularly in the case of aviation.

Investors need to understand the industry dynamics before buying up aviation stocks.

While looking at the current demand-supply scenario in the aviation industry, it is important to look at how air passenger traffic is growing.

In February, domestic air passenger traffic reported its lowest monthly passenger traffic growth since January 2015. It registered a marginal annual growth of 5.6%.

Air Passenger Growth is Tapering off

Similarly, in January, the number of passengers flown by domestic airlines grew at 9.1% YoY, while in December, it increased by 13% YoY. This is way lower than the historical growth rate of 20% between 2014-2018 period.

A slowdown in passenger growth is due to several factors. These include frequent flight cancellations due to grounding of fund-starved Jet Airways' aircraft, pilot shortages faced by IndiGo, NOTAMs (notice to airmen) at various airports, and a rise in airfare etc.

In the last 5 years, we saw a surge of middle-class travelling by plane. But when the ticket price goes up, many of them prefer an alternate mode of transportation.

That shows the price sensitivity of the Indian consumer!

Moving on to the news from pharma sector. As per an article in a leading financial daily, Lupin has launched Fluocinonide ointment in the US market. It is used to treat inflammatory and pruritic manifestations.

Reportedly, the product is a generic version of County Line Pharmaceuticals LLC's Lidex ointment.

The ointment is indicated for relief of inflammatory and pruritic manifestations of corticosteroid responsive dermatoses.

According to IQVIA MAT January data, Fluocinonide ointment USP had annual sales of around US$15 million (about Rs 1 billion) in the US.

To know more about the company, you can access to Lupin's Q3FY19 result analysis and Lupin's 2017-18 Annual Report Analysis on our website.

Lupin share price opened the day up by 0.4%.

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

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

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