Sensex Opens Over 220 Points Up; Automobiles and Metal Stocks Lead

Fri, 15 Nov 09:30 am

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Asian share markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.1% while the Hang Seng is up 0.3%. The Nikkei 225 is trading up by 0.7%. Meanwhile, the benchmark S&P 500 stock index posted a slim gain to end with a record closing high on Thursday, as a dour forecast from tech stalwart Cisco Systems was offset by a strong report from big box retailer Walmart.

Back home, India share markets opened higher. The BSE Sensex is trading up by 223 points while the NSE Nifty is trading up by 55 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.4% and 0.3% respectively.

Barring realty stocks, all sectoral indices have opened the day in green with automobiles stocks and metal stocks witnessing buying interest.

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...

Moving on, the rupee is currently trading at 71.95 against the US$.

The rupee, on Thursday, clocked its first gain after five sessions, closing 13 paise higher at 71.96 against the US dollar in line with domestic equities.

A day after plunging below the psychological 72-level in over two months, the domestic currency opened on a positive note.

As forex market participants weighed a range of macroeconomic factors posing challenges, the currency turned volatile traded in the range of 71.85 to 72.24 to the US dollar.

It finally settled at 72.93, showing a gain of 15 paise over its previous close. Meanwhile, stronger US currency against its key rivals and surging crude oil prices, capped the rupee's gains to some extent.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

Moving on to the news from the pharma sector. As per an article in a leading financial daily, Natco Pharma commenced commercial operations by its Finished Dosage Formulations (FDF) facility in Visakhapatnam, which is a key part of its capacity expansion plans.

The facility was a part of the Special Economic Zone (SEZ) and intended to cater primarily to the US and other international markets.

The Vizag facility is a key part of Natco's capacity expansion plans for its pipeline of products and diversification into different geographies.

From capability perspective, this facility will focus mostly on oral solid dosages (tablets and capsules), including a cytotoxic block for products in the oncology segment.

An application with the US Food and Drug Administration (USFDA) is already filed for site transfer of the first product and for a regulatory audit, the reports noted.

Natco Pharma share price opened the day up by 1%.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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