Indian Indices End on a Positive Note; Oil & Gas and IT Stocks Witness Buying

Tue, 2 Jul Closing

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Indian share markets witnessed buying interest during closing hours and ended marginally higher. Gains were seen in the oil & gas sector and IT sector, while realty stocks and healthcare stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 130 points (up 0.3%) and the NSE Nifty closed higher by 45 points (up 0.4%). The BSE Mid Cap index ended the day up by 0.4%, while the BSE Small Cap index ended on a flat note.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 1.2% and the Shanghai Composite was down by 0.1%. The Nikkei 225 was up 0.1%.

The rupee was trading at 68.98 against the US$.

Speaking of the stock markets, the current pattern of the Indian stock market very closely resembles 2013.

Back then too, Sensex was relatively flat while mid and small caps underperformed by a huge margin.

Only this time, the divergence is larger.

How Long Will this Sensex Outperformance Last?

While the 2013 correction was due to global macro issues, the correction in mid and small caps are due to factors back home.

Corporate governance issues leading to auditor exits plagued many mid and small caps in 2018. Then, we had the IL&FS impact leading to the NBFC crisis.

Will this Sensex outperformance continue?

Co-head of research, Tanushree Banerjee answers this question in one of the recent editions of The 5 Minute WrapUp. Here's an excerpt of what she wrote:

• But when I think of safe stocks, I think long-term about the businesses rather than how the Sensex will perform.
  
  I think of businesses that will be a part of India's long-term growth story. I strongly believe these businesses stand to do well irrespective of the movement of the Index.

Also, Tanushree recently talked about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times...

You can read more on these 3 opportunities here: Defence boom, Infrastructure sector reforms and Electric Vehicle Disruption.

In the news from the finance sector, DHFL share price was in focus today. The stock of the housing finance company witnessed buying interest today after large lenders to the debt-laden firm agreed to sign an inter-creditor agreement (ICA) on July 5 and considered a resolution plan for the beleaguered firm.

Bankers to DHFL met on Monday and agreed in principle to sign an ICA which is mandatory for any revival plan according to the new framework for restructuring of stressed loans which came into effect from June 7.

Last week, the company 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.

It was reported last week 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.

Earlier last 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.

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.

In the news from the pharma space, Alembic Pharma share price was also in focus today. The stock of the company witnessed buying interest after the company said it has received approval from the US health regulator for Febuxostat tablets, used to lower high levels of uric acid in adults who have gout.

The approved product is therapeutically equivalent to the reference listed drug Uloric tablets of Takeda Pharmaceuticals USA, Inc.

Strides Pharma share price was also in focus today as the company's step-down subsidiary has signed the definitive agreements for sale of its entire Australian business to Arrow Pharmaceuticals upon receipt of all requisite approvals.

Earlier this year, Strides Pharma Science had decided to exit its investment in Arrow Pharmaceuticals for approximately Rs 19 billion.

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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