Sensex Opens Marginally Lower; Telecom & Realty Stocks Drag

Mon, 9 Dec 09:30 am

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Asian share markets are higher today, catching some of Wall Street's momentum after surprisingly strong US jobs data. US job growth increased by the most in 10 months in November as the healthcare industry boosted hiring and production workers at General Motors returned to work after a strike.

The Shanghai Composite is down by 0.1%, while the Hang Seng is up 0.2%. The Nikkei 225 is trading up by 0.4%.

Back home, India share markets have opened the day on a negative note. The BSE Sensex is trading down by 104 points while the NSE Nifty is trading down by 26 points.

The BSE Mid Cap index and the BSE Small Cap index have opened the day down by 0.2% and 0.3%, respectively.

Sectoral indices have opened the day on a mixed note with stocks in the metal sector and auto sector witnessing buying interest, while realty stocks and telecom stocks are trading in red.

Speaking of the Sensex above 40,000 levels, how expensive is the Sensex? 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 one of the editions 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.

In news from the currencies space, the rupee is trading at Rs 71.25 against the US$.

The domestic currency opened lower by 9 paise at 71.29 per dollar versus Friday's close of 71.20.

Foreign portfolio investors (FPI) turned net sellers in December with a net outflow of Rs 2.4 billion from the capital markets amid subdued economic data.

According to the depositories data, foreign investors pulled out a net sum of Rs 16.7 billion from equities.

However, FPIs invested Rs 14.2 billion on a net basis in the debt segment, resulting in a total net outflow of Rs 2.4 billion so far in December.

Note that FPIs had been net buyers for two months to November. They invested Rs 160.4 billion in October and Rs 228.7 billion in November on a net basis.

Speaking of the stock markets and Indian economy, smallcap analyst Richa Agarwal talks about the ongoing economic slowdown an upcoming rebound in the small cap space, and her number 1 stock pick for 2020 in the video below.

Tune in...

In news from the telecom sector, Bharti Airtel share price is in focus today.

Bharti Telecom, a promoter of Bharti Airtel, has sought government nod for the infusion of Rs 49 billion investment from Singapore-based Singtel and other foreign entities.

Reports state that this move would make the country's oldest private telecom operator a foreign entity.

The fund infusion will enhance foreign stake holding in Bharti Telecom to over 50% that will make it a foreign-owned entity. At present, Sunil Bharti Mittal and his family own around 52% stake in Bharti Telecom.

Reports also state that the Department of Telecom (DoT) is expected to approve this investment this month.

Note that earlier this year, the DoT had returned Bharti Airtel's FDI application as the company had not provided clarity on the foreign investor.

Last week, the company's board approved a proposal to raise US$ 3 billion through QIP, stake sale and debt papers as the company owes AGR dues of Rs 430 billion to the government.

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

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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