Indian Indices Trade Lower; Realty & Banking Stocks Drag

Mon, 5 Aug 12:30 pm

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Share markets in India are presently trading lower amid weak global cues. Asian shares suffered their steepest daily drop in nine months today, as US-China trade tensions sent the yuan slumping to a more than decade low.

Barring IT sector, all sectoral indices are trading on a negative note with stocks in the realty sector, energy sector and banking sector witnessing maximum selling pressure.

The BSE Sensex is trading down by 491 points (down 1.3%), while the NSE Nifty is trading down by 143 points (down 1.3%). The BSE Mid Cap index is trading down by 1.4% and the BSE Small Cap index is trading down by 2.1%.

The rupee is trading at Rs 70.38 against the US$.

Speaking of Indian share markets, note that continuous selling by foreign investors post the Union Budget, ongoing US-China trade tensions and corporate results for June 2019 quarter that failed to enthuse investors have dented the overall market sentiment.

The decline in small-cap segment has been sharper since then, with the BSE Smallcap index hitting its lowest level since February 2017.

But Richa Agarwal says this fall currently offers the best bargains to the market.

In the below video, she talks about picking right stocks to benefit from the upcoming rebound.

To know more about smallcaps, read One Stock Crorepati, Best Stock to Buy, Falling Smallcap Stocks, Smallcap Stocks Under Modi 2.0, Crorepati stocks.

Moving on, market participants are tracking Nesco share price, Dilip Buildcon share price, KEI Industries share price, and Torrent Power share price as these companies are set to announce their June quarter (Q1FY20) results later today.

You can read our recently released Q1FY20 results: Ceat, Apollo Tyres, ITC, Nestle.

In news from the realty sector, US-based private equity giant Blackstone Group is set to acquire the remaining 50% stake in Indiabulls Real Estate's commercial properties for around Rs 48 billion.

This will give Blackstone full control of the portfolio and further strengthen its position as the country's largest commercial property owner.

Earlier in March 2018, Blackstone had concluded a similar deal for a 50% stake in this portfolio for nearly Rs 47.5 billion. Indiabulls is planning to utilize the proceeds from this deal to repay its debt and bring it down to zero.

As per an article in The Economic Times, the transaction is part of the Indiabulls Group's strategy of exiting real estate completely and focusing on financial services as it seeks to merge with Lakshmi Vilas Bank.

Here's an excerpt from the article:

• The transaction is expected to be concluded over the next few weeks. Both the parties have agreed in principle to conclude the deal. Indiabulls is expected to present the transaction to its board soon.
  
  The private equity firm is expected to add the assets to the portfolio of Embassy Office Parks Real Estate Investment Trust (REIT), its joint venture with Bengaluru-based realty developer Embassy Group.

Embassy Office Parks listed India's maiden REIT in April. It has 33 million square feet of office and hospitality assets, comprising seven business parks and four city-centric buildings in Mumbai, Bengaluru, Pune and Noida. The REIT raised Rs 47.5 billion through the issue that was subscribed 2.58 times.

In June, Embassy Group entered into an agreement to acquire Indiabulls' promoter Sameer Gehlaut's entire 39.5% stake in listed company Indiabulls Real Estate for Rs 27 billion.

Indiabulls Real Estate share price is presently trading down by 13%.

Note that, the real estate sector in India has been facing a lot of obstacles lately.

Due to all the headwinds, the number of developers has reduced, and this has created consolidation in the market.

The chart below shows a sharp decline in the number of developers in major Indian cities.

Supply-Side Consolidation in the Real Estate Industry

Typically, such a reduction in investment in an industry, i.e. contraction of supply, paves the way for a recovery of profits.

From a supply perspective, the competitive intensity has reduced due to leveraged balance sheets of many developers.

This, in turn, has resulted in subdued launches and stalling of existing projects, thus overall reducing inventory and consolidation in the sector.

With this, the share of organized market players is expected to go up in the medium to long term.

This is a huge opportunity for long term serious players in the sector.

Moving on to news from the FMCG sector, Bata India is planning to add around 100 stores in the 2019-20 fiscal, while downing shutters of 25-30 non-viable outlets.

The company is also looking to open 500 franchised stores over a period of five years. The company had opened 71 new retail and 51 franchised stores and renovated 47 outlets across India in 2018-19.

Company's net profit increased by 22.5% to Rs 1,009.7 million in the quarter ended June 2019 as against Rs 824.1 million during the previous quarter ended June 2018.

Sales also rose 10.6% to Rs 8,821.6 million in Q1FY20 as against Rs 7,973 million during Q1FY19.

Bata India share price is presently trading up by 1.9%.

To know more about the company, you can read Bata India's latest result analysis on our website.

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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