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(via Tanushree is Finding Safe Stocks in This Market Crash)

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(via Liquidity Crisis amid IL&FS Fiasco)

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Sensex Down 180 Points; Realty Stocks Tank

After opening the day flat share markets in India are trading on a negative note and are presently trading below the dotted line. Sectoral indices are trading on a mixed note, with stocks in the realty sector and stocks in the capital goods sector witnessing maximum selling pressure.

The BSE Sensex is trading down by 182 points (down 0.5%) and the NSE Nifty is trading down by 52 points (down 0.5%). Meanwhile, the BSE Mid Cap index is trading down by 1.4%, while the BSE Small Cap index is trading down by 1.82. The rupee is trading at 72.64 to the US$.

In news about the economy, the government raised import duty on various items in an attempt to curb the widening current account deficit.

India raised import duty on a range of items including air-conditioners, refrigerators, washing machines, footwear, jewellery, furniture fittings and tableware besides imposing it on aviation turbine fuel (ATF).

Basic customs duties have been raised on 19 tariff lines that accounted for an import bill of Rs 860 billion in FY18 by 2.5-10%. Basic customs duty of 5% has been imposed on ATF. The prices of jet fuel will be increased by Rs 2,000 per kilolitre from Thursday, oil refiners have communicated to airlines.

The increased duty is likely to yield about Rs 40 billion in revenue.

India's current account deficit deteriorated to 1.9% of GDP in FY18 from 0.6% in the year before and is forecast to rise to around 2.8% in the current year. Given the uncertain global environment, emerging economies running high current account deficits have seen their currencies depreciate sharply amid interest rate increases by the US Federal Reserve, higher crude prices and an intensifying global trade war.

To add to the woes, the Indian rupee is down about 13% since January.

Talking about currency wars and the falling rupee, we did a small exercise to understand the impact of the weak rupee on the markets.

Should You Be Worried About the Rising Dollar?

India is a net importer. This means if the rupee is weak, the cost of imports increases and value of the export decreases - resulting in a widening current account deficit.

A high current account deficit also impacts the government's spending power.

Also, companies which import raw material witness pressure on their margins and profitably.

So, this looks quite negative on the face of it. So, it's not surprising that markets get volatile when the currency depreciates.

Look at Indian rupee against the dollar from 1990. It has deprecated at a compounded annual rate of 5%.

Yes, the dollar has been on a winning streak from the beginning.

And despite that... the BSE Sensex has returned 14% compounded annually since 1990.

Thus, the falling rupee can bring volatility to the market in the short-term. But in the long-term, our market should be fine.

This is exactly what we keep in mind when picking stocks for Smart Money Secrets subscribers. I cut out the noise of short-term disruptions and look at the long-term picture beyond.

Moving on to news from stocks in the auto sector. Hero Motocorp share price is in focus today after the company announced price hikes for its products.

The country's largest two-wheeler manufacturer said that it will increase prices of its entire range of products by up to Rs 900 with effect from 3 October this year.

The company is doing so to offset the impact of rising input costs and a weakening rupee.

The price hike will translate to an increase of up to Rs 900, although the exact quantum of the increase will vary, basis the model and the specific market.

Notably, the company currently sells a range of bikes and scooters priced between Rs 40,000 and Rs 100,000.

Hero Moto Corp had taken a price of hike of up to Rs 500 last month as well.

In August 2018, Hero MotoCorp reported sold 685,047 units of motorcycles and scooter, witnessing a growth of just 1%, as compared to 678,797 units sold during the same month last year.

At the time of writing, Hero Motocorp share price was trading up by 0.3%.

This article was originally published in English at www.equitymaster.com

Read the complete Indian stock market update. For the terms of use, go here.

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Sensex Opens Flat; Energy & IT Stocks Gain

Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.3% while the Hang Seng is down 0.1%. The Nikkei 225 is trading down by 0.1%. On Wednesday, a Wall Street rally collapsed and stocks turned negative shortly before the market close after investors reassessed the Federal Reserve's policy statement and reduced their risk as they weighed how long the US central bank would continue to raise interest rates.

Back home, India share markets opened flat. The BSE Sensex is trading up by 28 points while the NSE Nifty is trading up by 8 points. The BSE Mid Cap index and BSE Small Cap index both opened the day down by 0.1%.

Barring FMCG stocks, all sectoral indices have opened the day in green with information technology stocks and energy stocks witnessing maximum buying interest.

The rupee is trading at Rs 72.98 against the US$.

In the news from the global markets. The US Federal Reserve raised interest rates on Wednesday and left intact its plans to steadily tighten monetary policy, as it forecast that the US economy would enjoy at least three more years of growth.

Fed policymakers lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2% to 2.25%. The US central bank still foresees another rate hike in December, three more next year, and one increase in 2020.

That would put the benchmark overnight lending rate at 3.4%, roughly half a percentage point above the Fed's estimated "neutral" rate of interest, at which rates neither stimulate nor restrict the economy.

That tight policy stance is projected to stay level through 2021, the timeframe of the Fed's latest economic projections.

Meanwhile, the US Treasury yield curve flattened and the US dollar briefly weakened against a basket of currencies. US stocks initially extended gains but fell later in the trading session, with bank and financial stocks getting hit hard.

The Fed sees the economy growing at a faster-than-expected 3.1% this year and continuing to expand moderately for at least three more years, amid sustained low unemployment and stable inflation near its 2% target.

How does a US interest rate hike affect Indian investors?

The instant effect is foreign money moving out of India's vaults. This means a slight correction in the share market in India, albeit temporarily.

While this might provide a good buying opportunity in long-term stocks, the main thing to look forward would be capex and earnings trends.

In the end, Indian investors are better off staying informed about the corporate earnings revival than Fed rate hikes.

It is also worthwhile to note that the Indian stock market has done relatively well during the last period of rate hikes by the US Fed.

Take 2003-2006 for example...

Between 2003 and 2006, the US Fed rate moved from 1% to 5.25%.

Sensex's Staggering Performance Despite the Fed Rate Hikes

Despite this, the Sensex rose from 3,500 levels to more than 10,000 during the same period. This increase was supported by strong earnings growth.

So, in the long term, rate hikes (triggered by economic growth) have proved good for the Indian markets. In fact, earnings growth is at the heart of Tanushree's prediction of Sensex 100,000.

Moving on to the news from banking sector. As per an article in a leading financial daily, the State Bank of India (SBI) will sell a 4% stake in its subsidiary, SBI General Insurance Company Ltd for Rs 4.8 billion (US$66 million) in a transaction that will value the latter at over Rs 120 billion.

The partial stake sale was approved by the board of the country's largest bank on Wednesday.

Reportedly, the SBI will sell 8.6 million shares to Axis New Opportunities AIF (alternative investment fund) - I, represented through its investment manager Axis AMC Ltd, which will purchase 1.65%.

Similarly, PI Opportunities Fund-I, an AIF of Premji Invest, will acquire 2.35% from the SBI.

The PSU bank said it will hold 70% in SBI GI after the transaction, while its joint venture partner IAG International Pty Ltd will continue to hold 26%.

SBI GI is one the fastest growing large private insurer with a gross direct written premium of Rs 35 billion. It has wide offerings with a balanced product mix and multi-channel distribution that includes bancassurance, direct, brokerage and agency.

SBI share price opened the day up by 1.1%.

By the way, in our latest edition of the stock market podcast, Apurva Sheth, our lead Chartist and Editor of the premium newsletter, Profit Hunter Pro joins us to share his technical view on the massive stock market crash that we witnessed on Friday. He also talks about the stocks that could create value in such times. Listen in... visit SoundCloud, iTunes or Stitcher.

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

This article was originally published in English at www.equitymaster.com

Read the complete Indian stock market update. For the terms of use, go here.

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Asian stock markets opened in red today after a new round of US-China trade tariffs kicked in. Meanwhile, the S&P 500 and the Dow closed lower on Monday as market participants awaited a widely-expected interest rate hike by the Federal Reserve. While oil prices jumped after top producers including Russia ruled out boosting crude output.

Back home, India share markets opened flat. The BSE Sensex is trading down by 50 points while the NSE Nifty is trading down by 30 points. The BSE Mid Cap index and BSE Small Cap index opened the day down by 0.4% & 0.7% respectively.

Barring healthcare stocks, capital goods stocks and energy stocks, all sectoral indices have opened the day in red with bank stocks and realty stocks witnessing maximum selling pressure.

The rupee is trading at Rs 72.98 against the US$.

In the news from the economy. As per an article in a leading financial daily, the Reserve Bank will conduct open market operations (OMO) on Thursday to purchase government bonds to infuse liquidity of Rs 100 billion.

Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the RBI has decided to conduct purchase of government securities under OMO.

The purchase will happen through multi-security auction using the multiple price method, the reports noted.

As part of the OMOs, the RBI will purchase government securities maturing in 2020 bearing interest rate of 7.8%, 2022 (8.2%), 2025 (7.72%), 2027 (6.79%) and 2031 (6.68%).

The RBI said it has the right to decide on the quantum of purchase of individual securities and can also accept offers for less than Rs100 billion.

Note that, OMOs are the tools which can be used to either inject or drain liquidity from the system. It is employed to adjust rupee liquidity conditions in the market on a durable basis.

The RBI and capital markets regulator on Sunday said they were closely monitoring activities in the financial markets and ready to take appropriate actions, if required, following a sharp meltdown on Friday in equity and debt markets.

The stock market is on the roil for past week on the back of debt defaults by diversified IL&FS group.

There are also worries about NBFCs even though the country's largest lender SBI assured lending support to the NBFC sector.

Several NBFC stocks came crashing down on Friday, Dewan Housing Finance Corporation Ltd. being the leader of the pack. Nearly Rs 81.3 billion worth of the company's market cap got wiped out in a single session.

Housing finance companies came under sudden heavy selling pressure as interest rates on their debt spiked.

Housing Finance Stocks Take a Beating

There are concerns that the defaults by IL&FS could cause a contagion in the Indian financial sector.

In our latest edition of the stock market podcast, Apurva Sheth, our lead Chartist and Editor of the premium newsletter, Profit Hunter Pro joins us to share his technical view on the massive stock market crash that we witnessed on Friday. He also talks about the stocks that could create value in such times. Listen in... visit SoundCloud, iTunes or Stitcher.

Moving on to the news from IPO space. Aavas Financiers Ltd's initial public offering (IPO) to raise up to Rs 17.3 billion opens today, amid the mayhem in the non-banking finance companies (NBFCs) space.

Aavas, earlier known as AU Housing Finance, was the mortgage lending business of Jaipur-based small finance bank AU Small Finance Bank Ltd. In February 2016, Partners Group and Kedaara Capital had acquired it for Rs 9-10 billion.

Aavas has fixed its price band at Rs 818-821, aiming to raise up to Rs 17.3 billion at the upper end of the price band.

Speaking of IPOs, the stock market is gearing up for a burst of IPO activity.

According to EY India IPO Readlines survey report, globally, Indian exchanges recorded the highest IPO activity as the country saw 90 IPO launches that raised US$ 3.9 billion in the first half of this year.

Meanwhile the amount raised by SME IPOs in 2017 stood at Rs 17.9 billion. This is more than three times the amount raised in 2016. The number of SME IPOs launched also doubled from 66 to 132.

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 how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

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

This article was originally published in English at www.equitymaster.com

Read the complete Indian stock market update. For the terms of use, go here.

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(via Apurva Sheth’s Technical Take on Sensex’s Sudden Crash)

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(via Will Modi’s Economic Review Meet Resolve Rupee Woes?)

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