Sensex Hits Fresh Record High; Banking and Realty Stocks Witness Huge Buying

Wed, 6 Nov Closing

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Indian share markets witnessed huge buying interest during closing hours today and ended their day on a positive note. The Sensex hit fresh intraday record high, while the Nifty reclaimed the 12,000 level for the first time since June 11.

At the closing bell, the BSE Sensex stood higher by 221 points (up 0.6%) and the NSE Nifty closed higher by 44 points (up 0.4%).

The BSE Mid Cap index ended up by 0.2%, while the BSE Small Cap index ended the day down by 0.4%.

On the sectoral front, gains were seen in the realty sector and banking sector. Telecom sector and consumer durables sector, on the other hand, witnessed huge selling.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng stood up by 0.02% and the Nikkei was trading up by 0.2%, while the Shanghai Composite was trading down by 0.4%.

European markets were trading on a negative note. The FTSE 100 was down by 0.24%. The DAX was trading down by 0.16%, while the CAC 40 was trading flat.

The rupee was trading at 70.99 to the US$ at the time of writing.

Speaking of the Sensex touching record high, how expensive is the Sensex at current levels? What has the trend been in recent years?

It would be interesting to see how the valuation of the index has moved over the last five years.

The chart below maps the price to earnings ratio of the Sensex from October 2014 to now.

How Pricey Is the Sensex Now?

Here's what Ankit Shah wrote about this in a recent edition of The 5 Minute WrapUp...

• It is worth noting that the Sensex has gained 44% over the last five years, compounding at an annual rate of 7.6% (excluding dividends).
  
  Not quite impressive.
  
  During the same period, the Sensex price to earnings ratio has mostly been in a rising trend, except some intermittent declines.
  
  Between October 2014 and now, the gain in the Sensex price to earnings ratio is 42%. That means that the gains in the index have mostly come from expansion in the valuation multiple, and just meagerly from increases in earnings.

So, before taking the current market bullishness for granted, do weigh in the fact that the Sensex is quite expensively priced.

Also, amid the mood swings of Mr. Market witnessed lately, Tanushree Banerjee in the video below talks about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times.

Tune in to find out more...

In the news from the pharma space, Cipla share price was in focus today as the company posted 25% year-on-year (YoY) rise in consolidated profit at Rs 4.7 billion for the quarter ended September 30.

The pharma major had posted a profit of Rs 3.7 billion in the corresponding quarter last year.

Revenue during the quarter increased 8% YoY to Rs 42.6 billion against Rs 39.4 billion in the same period last year.

Ebitda increased 21% to Rs 9 billion in the September quarter.

Research and development (R&D) investment stood at Rs 2.9 billion, or 7% of sales, during the quarter.

The company said that South Africa private business delivered growth of 13% on a YoY basis in local currency and the US business delivers US$ 135 million to grow at 25%.

Umang Vohra, MD and Global CEO of the company said that the company's home markets continued to bode well. India business recorded robust performance in trade generics and across all key therapies in branded business while in South Africa, the private market business outpaced the market significantly.

Moving on to the news from the consumer products sector, Godrej Consumer Products Ltd (GCPL) share price was also in focus today as the company reported 28.3% YoY decline in consolidated profit after tax at Rs 4.1 billion for the second quarter ended September 30.

Consolidated sales during the period under review stood at Rs 26 billion as against Rs 26.4 billion in the year-ago period, a decline of 1.3%.

During the period ended September 30, there has been sale of certain brands within its entities that will derive benefits of future tax deductions for the group.

Consequently, a deferred tax asset amounting to Rs 1.1 billion has been recognised in the consolidated financial results.

Commenting on the performance, GCPL Executive Chairperson Nisaba Godrej said that the company delivered a steady performance in the second quarter of fiscal year 2020. Its India business delivered a robust volume growth of 7%, broad based across categories, amidst a general slowdown in staples consumption.

In value terms, the company said its sales in India grew by 1% to Rs 14.9 billion, while volume growth was 7% led by new product launches, effective marketing campaigns and consumer offers.

Household insecticides revenue in India was at Rs 6.8 billion, soaps at Rs 4.9 billion, hair colour at Rs 1.6 billion, while other categories stood at Rs 1.7 billion.

On the international front, the company's international business clocked net sales of Rs 11.4 billion, up 4%.

Speaking of quarterly results and corporate profits, economic growth (GDP) and corporate profit growth hardly go hand in hand.

Over the past few years, the share of corporate profits to GDP has steadily declined.

As per Tanushree Banerjee, the revival of capex cycle may cause corporate profits to soar much faster than the GDP growth. Investors who stay focused on macro numbers may miss this bus.

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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