Sensex Hits Fresh Record High; Vodafone Idea Among Top Gainers

Wed, 20 Nov 12:30 pm

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After opening the day on a positive note, share markets in India continued their momentum to hit a fresh record high.

In the morning trade, the BSE Sensex rallied more than 300 points to hit a fresh record high of 40,816, while the NSE Nifty broke above its crucial resistance level of 12,000.

Presently, the BSE Sensex is trading up by 305 points, while the NSE Nifty is trading up by 87 points.

The BSE MidCap index is trading up by 0.4%, while the BSE SmallCap index is trading up by 0.3%.

Sectoral indices are trading on a mixed note with stocks in the healthcare sector and energy sector witnessing maximum buying interest.

The rupee is trading at Rs 71.67 against the US$.

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 banking sector, Yes Bank share price is in focus today as the private sector lender reported a lower net profit of Rs 10.8 billion for the financial year 2018-19 against Rs 17.2 billion announced earlier due to higher non-performing assets (NPAs) assessed by the Reserve Bank of India (RBI).

The divergence in net NPAs of the bank - the difference in bad loans reported by the bank and the assessment done by the RBI - stood at Rs 22.9 billion for 2018-19.

The lender in a statement said the adjusted (notional) net profit after tax for the year ended March 31, 2019 after taking into account the divergence in provisioning was at Rs 10.8 billion.

The divergence in provisioning was at Rs 9.7 billion.

Note that the Indian stock market regulator has put in place tighter disclosure norms, directing all listed banks to disclose any divergence in bad loan provisioning within 24 hours of receiving RBI's risk assessment report, rather than waiting to publish the details in their annual financial statements.

In another development, Yes Bank yesterday informed the exchanges that Rana Kapoor and promoter entities Yes Capital and Morgan Credits sold their remaining 0.8% stake in bank.

In September, the promoter entities had sold a combined 2.75% in YES Bank through the open market process.

Note that Yes Bank is in need of money to stay compliant with RBI's capital adequacy norms and create enough buffers to provision against bad loans in the coming quarters.

As of the September quarter, Yes Bank's tier I capital adequacy ratio stood at 11.5% against the regulatory requirement of 8.875%.

Its common equity tier 1 capital stood at 8.7%, marginally above the regulatory requirement of 7.375%.

The bank has met at least half-a-dozen large private equity firms and about a dozen foreign family offices since August.

We will keep you updated on all the developments from this space.

In the news from the telecom sector, Vodafone Idea share price and Bharti Airtel share price are witnessing buying interest today as both the companies said they will raise tariffs in December.

Both companies decided to increase prices with effect from December 1, 2019, but have not disclosed the amount of hike.

Vodafone Idea said that to ensure that its customers continue to enjoy world-class digital experiences, the company will suitably increase the prices of its tariffs effective December 1, 2019.

It added that the acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high-level Committee of Secretaries (CoS) headed by the Cabinet Secretary is looking into providing appropriate relief.

The company said mobile data charges in India were by far the cheapest in the world even as the demand for mobile data services continues to grow rapidly.

Bharti said the telecom sector was highly capital intensive with fast-changing technology cycles that require continuing investments. It is, therefore, extremely important that the industry remains viable to support the vision of Digital India. Accordingly, Airtel will appropriately increase price offerings in the month beginning December, the company said.

Note that both incumbent telcos, post the Supreme Court adjusted gross revenue (AGR) ruling, provided for the licence Fee and SUC related dues (including interest and penalties) in Q2FY20, which made for a visibly ugly earnings report card.

As a result, Bharti Airtel reported a loss of Rs 230.4 billion in Q2FY20 and Vodafone Idea's loss stood at Rs 509.2 billion for the quarter.

However, the key positive takeaway has been the amplified talks of government measures to support industry and indicative intent as suggested by media as well as Vodafone Idea (VIL).

How these developments pan out in the coming month remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

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

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