Indian Indices End Flat; Auto and Realty Stocks Witness Buying

Thu, 27 Jun Closing

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Indian share markets continued to witness volatility during closing hours and ended their day on a flat note.

Gains were seen in the auto sector and realty sector, while stocks from the energy sector and IT sector witnessed selling pressure.

At the closing bell, the BSE Sensex stood lower by 5 points (down 0.01%) and the NSE Nifty stood down by 6 points (down 0.05%).

The BSE Mid Cap index ended up by 0.4%, while the BSE Small Cap index ended the day up by 0.5%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 1.42% and the Nikkei was trading up by 1.19%, while the Shanghai Composite was trading up by 0.69%.

European markets were trading on a negative note. The FTSE 100 was down by 0.38%. The DAX was trading down by 0.02%, while the CAC 40 was down by 0.37%.

The rupee was trading at 69.10 to the US$ at the time of writing.

Speaking of Indian share markets, when it comes to stock market performance, multinational corporations (MNCs) have outperformed the broader market.

The Nifty has a MNC index. This index comprises 15 listed companies. The foreign shareholding in them is over 50% and/or the management control is vested in the foreign company.

As can be seen in the chart below, this Nifty MNC Index has outperformed the Nifty 50 index in the last five years.

Nifty MNC Index Outperforms the Benchmark Index

Why the outperformance?

Sarvajeet Bodas answers this question in a recent edition of The 5 Minute WrapUp. He writes...

• Generally, MNCs have a vast global experience. These companies have weathered the competition in many markets across the world.
  
  Also, MNCs generally have strong parentage. This helps create strong brands and gain market share.
  
  Not to mention MNCs have strong balance sheets. This brings stability during times of market volatility.
  
  Similarly, in the past, MNCs have demonstrated good capital allocation. Hence they, consistently delivered high returns on capital.
  
  Finally, MNCs typically have high standards when it comes to board composition, corporate governance, and operational efficiency. All this helps to maximise shareholder wealth.

In Smart Money Secrets, we have recommended such a company from the MNC space.

If you haven't subscribed to Smart Money Secrets yet, you can access the report by signing up here.

In the news from the banking sector, Axis Bank share price was in focus today as a report suggested that the lender was considering raising at least US$ 1.3 billion through a share sale to institutional investors.

From the finance sector, DHFL share price was also in focus today as the company said it has received the Securities and Exchange Board of India's (Sebi) approval to exit its mutual fund business by selling its 50% stake to Prudential Financial.

The company had entered an agreement with Prudential Financial to divest its 50% holding in DHFL Pramerica Asset Managers (DPAMPL). Of this 17.12% is held directly and 32.88% is held by its wholly-owned subsidiary, DHFL Advisory & Investments.

Speaking of DHFL, it was yesterday reported that the mortgage lender is yet to repay Rs 2.3 billion out of the total Rs 3.8 billion of commercial paper to a dozen investors.

This is the second time this month that the company has missed the repayment deadline on a set of outstanding bonds.

Earlier this month, DHFL defaulted on interest payment of Rs 8.5 billion on its non-convertible debentures, following which its credit rating was downgraded to default or 'D' by rating agencies CRISIL and ICRA.

The delay in repayment comes ahead of the meeting of lenders to be held in the first week of July to hammer out a rescue package that includes loan restructuring, fresh working capital support, inducting a new financial investor, and a new management team.

On June 17, The Economic Times reported that the Employees' Provident Fund Organisation (EPFO) had sought details of DHFL's plans for cash generation amid mounting concerns of default. The largest domestic institutional investor in debt assets sought to redeem half of its DHFL investments exercising the 'put option', an exit route given to investors before scheduled maturities.

EPFO invested about Rs 13 billion in debt securities sold by DHFL. When EPFO made the investment in 2014-15, the company's debt was rated 'AAA' by CARE. As per rules, EPFO cannot invest in any debt securities rated below 'AA+'. But pension and insurance funds such as EPFO are not required to show mark-to-market losses.

Over the past few months, the company has sold retail loans worth Rs 300 billion via securitization. It has also sold several of its strategic retail assets, including affordable housing arm Aadhar Housing Finance, educational loan business Avanse and DHFL Pramerica Asset Managers.

In January, DHFL sold Rs 13.8 billion of wholesale loans to foreign alternative investment management fund Oaktree Capital, which buys distressed loan portfolios at a discount.

As per the data, State Bank of India (SBI) is the largest lender to DHFL with a total exposure of around Rs 100 billion.

It would be interesting to see how this pans out ahead for DHFL. Meanwhile, we will keep you updated on all the developments from this space.

Apart from the above, stocks from the sugar sector stocks witnessed buying interest today. Gains were seen ahead of Union Budget 2019 which is scheduled to be announced on July 5.

Also, news that the monsoon covered entire country this week also aided the rally.

Rajshree Sugars, Uttam Sugar, Balrampur Chini, Dalmia Sugar were among the top gainers from the sector.

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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