Indian Indices Witness Volatility, DHFL Saga, and Top Stocks in Focus Today

Wed, 21 Aug Pre-Open

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India share markets traded on a volatile note yesterday and ended their trading session marginally lower.

At the closing bell yesterday, the BSE Sensex stood lower by 74 points (down 0.2%) and the NSE Nifty closed down by 37 points (down 0.3%).

Both, the BSE Mid Cap index and the BSE Small Cap index ended the day down by 0.6%.

Sectoral indices ended on a mixed note with stocks in the metal sector and energy sector witnessing most of the selling pressure. Stocks from the auto sector and IT sector ended on a positive note.

The Indian rupee witnessed selling pressure against the US dollar yesterday. The domestic unit opened on a weak note and fell 23 paise to 71.66 against the US dollar in early trade.

Most of the losses were seen amid rising crude oil prices and persistent foreign fund outflows.

On Monday, the Indian rupee tumbled 29 paise to close at an over six-month low of 71.43 against the US dollar.

Note that Indian rupee became Asia's worst performing currency this month. For the common man, the falling rupee is going to hit where it hurts the most - the pocket.

In the video below, Vijay Bhambwani explains what's behind the fall in rupee and how much can it fall further:

Top Stocks in Focus Today

From the pharma sector, Dr. Reddy's Laboratories share price will be in focus today as the company has launched Versavo (bevacizumab), a biosimilar of Roche's Avastin in India, indicated for the treatment of several types of cancers.

The company now has six biosimilar products commercialized in India and various emerging markets and an active development pipeline of several biosimilar products in the oncology and immunology space.

From the banking sector, Yes Bank share price will also be in focus today. Shares of the lender witnessed selling pressure yesterday after the risk and audit committee of CG Power and Industries said that were some unauthorized transactions carried out by 'certain employees' of the company.

Yes Bank, which holds 12.79% stake in CG Power, witnessed huge selling on the back of the above announcement.

From the IT sector, market participants will be tracking Wipro share price as the company has entered into a strategic partnership with the Indian Institute of Science (IISc), India's premier public establishment for research and higher education in science and engineering, to conduct advanced applied research in autonomous systems, robotics and 5G space.

DHFL Defaults on Obligations Worth Rs 15.7 Billion

In news from the finance sector, Dewan Housing Finance Corporation (DHFL) said it has defaulted on its financial repayment obligations worth Rs 15.7 billion with regard to issuance of bonds and commercial papers.

Shares of the company witnessed huge selling pressure yesterday on back of the above news.

In a regulatory filing, the company said that the defaults involve three cases regarding interest payment on non-convertible debentures and commercial papers (CPs).

The non-banking financial company (NBFC) said it has defaulted on Rs 469.2 million towards interest amount on secured NCDs (9.92% and 9.40%) issued through a public issue for multiple tenors of amount involving interest of Rs 3,637.7 million and principal amount of Rs 10,599.1 million. Defaults of Rs 1 billion occurred on CPs.

Note that the beleaguered NBFC has not been able to fulfil its obligations towards debt repayment in the recent past and there have been several cases of defaults on commercial papers and bonds.

Reports state that the company is estimated to be sitting on a debt-pile of over Rs 900 billion.

On Monday, the stock of the company climbed more than 10% after lenders agreed on a three-level resolution plan that includes conversion of debt to equity and issuance of nonconvertible debentures.

The restructuring plan being worked out by lenders also includes conversion of some loans into non-convertible debentures, instruments that will be long term in nature and give the company some breathing space on repayments.

Mutual funds that have exposure to the company have also written to the markets regulator, seeking permission to sign an inter-creditor agreement (ICA) with lenders to join the resolution process in keeping with the central bank's June restructuring guidelines.

How this all pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

From the IPO Space...

In news from the IPO space, the initial public offering (IPO) of Sterling and Wilson Solar made a weak debut yesterday. The stock of the company opened at Rs 700, down 10.25% from its issue price of Rs 780.

The company's Rs 31.3 billion IPO was open for subscription during 6-8th August with a price band of Rs 775-780 a share.

The IPO comprised entirely of an offer for sale (OFS) of 40.3 million shares.

SWSL is an end-to-end solar EPC solutions provider and was the world's largest solar EPC solutions provider in 2018 based on annual installations of utility-scale Photo-voltaic (PV) systems of more than 5 megawatt (MW).

The company provides EPC services primarily for utility-scale solar power projects with a focus on project design and engineering. It also provides operations and maintenance (O&M) services.

The company operates in around 26 countries and is the largest solar EPC solutions provider in each of India, Africa and the Middle East.

As of March 31, the company's order book stood at Rs 77.4 billion, which includes letters of intent worth Rs. 39.1 billion for solar power projects for which it has won the bid but has not yet executed definitive.

Ankit Shah, in his premium newsletter Equitymaster Insider, has shared the detailed note of the company's IPO. You can read more about it and the company here: Sterling and Wilson Solar Ltd IPO: Apply or Avoid?

Speaking of IPOs, the first half of 2019 hasn't seen a lot of activity in the IPO market.

There have been just 8 IPO on the main board, raising as much as Rs 55.1 billion, compared with 24 that raised Rs 309.6 billion in the year earlier period.

Despite lackluster activity in India's primary markets, there have been attractive money-making opportunities for attentive investors.

Ankit Shah recommended applying to the IPO of Polycab India and the IPO of IndiaMART InterMESH.

Both IPOs were subscribed many times over. And both gave handsome double-digit returns on the listing date.

At Equitymaster, we believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

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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