Markets have been on a downward spiral since August 2 when the Nifty50 hit a high of 10,137 levels in intra-day deals. Since then, the index has tanked nearly 4%, or around 400 points to 9,737 levels in intra-day deals on Friday.
The recent fall has been triggered by rising geopolitical tension across the globe – one, between India and China on the Doklam standoff, and two the developments with North Korea and the United States. That apart, Sebi’s order to ban trade in 331 suspectedshell companies also dented sentiment, as did sub-par second quarter results of select companies.
Given the developments, analysts say there could be more pain in store for the markets that have recently taken cognizance of the developing geopolitical situation. Though they do not wish to predict how deep and long this correction could last, experts do caution that the fall is beyond anyone’s control as it is driven by geopolitical reasons.
“Global events that are beyond market control have triggered the recently fall. If there is more action over the weekend, the markets will continue to fall in the coming week as well. A lot depends on the geopolitical front and to that extent predicting the road ahead for specific index levels is risky,” says Jayant Manglik, president retail distribution at Religare Securities.
Since its recent high on August 2,investor wealth as measured by market-capitalisation (market-cap) of the Nifty 50 companies till August 10 has dipped by over Rs 1,47,600 crore, ACE Equity data show.
China Market valuations have risen considerably over the past few quarters both in the frontline indices like Sensex or Nifty and in the midcap smallcap indices. The current equity market valuations are factoring in a robust recovery in earnings growth. Retail investors are worried whether the valuations would sustain at current levels. This depends on how soon and robust the earnings recovery is and how sustainable it will be.
While optically,the markets may seem to be expensive going by historical standards, bulls say that price-to-earnings (P/E) multiples are inversely correlated with the cost of capital.
Further, markets typically top out at times the economy is overheated and there is a general euphoria in the markets.
Index composition/changes and index earnings composition are other parameters to check whether the markets are really overvalued or not.The truth lies somewhere in between. If the economy is close to a bottom and corporate earnings are slated to recover soon, then the P/E ratios will look reasonable going forward.
However, in the case of earnings recovery being delayed, the markets may be expensive and may remain sideways for an extended Read More
Nitish Kumar decision to snap ties has come as a jolt to the Grand Alliance, or the ‘Mahagathbandhan’ as it was popularly known, but the markets will take this development as a long-term positive for the Narendra Modi – led National Democratic Alliance (NDA) government, feel analysts.Reacting to key domestic and global developments, themarkets gained ground on Thursday, with the S&P BSESensex rallying nearly 220 points to 32,602 levels and the Nifty50 index gaining 66 points to 10,087 levels.
In post market hours on Wednesday, Nitish Kumar quit as the Chief Minister of Bihar, ending the two-year old ‘Mahagathbandhan’ that included his party – the Janata Dal (United), or the JDU, Rashtriya Janata Dal (RJD’s)Lalu Yadav and the Congress.
The move, analysts say, will be seen as a long-term positive by the markets and will strengthen the government’s bargaining power in the Rajya Sabha, the Upper House of Parliament.
A loss in Bihar was the biggest setback for Narendra Modi after his party formed the government in 2014. Nitish forming a government again and forming an alliance with the BJP will give more fire power to the latter in the Rajya Sabha. This augurs well for the overall policy reform agenda of the government. It is a blessing in disguise for the markets,” says A K Prabhakar, head of research at IDBI Capital
Shares of Wipro, country’s third largest software services firm, hit a 52-week high of Rs 291 on Friday, up over 8% after the IT major announced a share buyback of Rs 11,000 crore entailing 34.3 crore equity shares at Rs 320 apiece.
buyback price is 24% higher than the average price of the stock for the past six months, which analysts believe is attractive and investors can consider tendering their shares. “The proposed buyback has been done at an attractive price. It will see the stock rally in the immediate term. I think investors can tender their shares,” said Sarabjit Kour Nangra, VP Research- IT at Angel Broking.
Brokerage HDFC Securities also suggests investors tender their shares. Going ahead, the brokerage feels organic growth for the company will remain a challenge and investors will be better off utilising the current opportunity to exit the stock .
“Organic growth engine for Wipro remains a challenge. Some pockets have shown improvement in the last couple of quarters. Digital revenue is growing strongly, but these are not enough to backfill the loss from legacy. We currently have a neutral rating on the stock, and we recommend shareholders to tender shares,” point out Amit Chandra and Apurva Prasad of HDFC Securities in a result analysis Read More
The government has ordered Reliance Industries (RIL) to pay a penalty over an arbitration award on its Panna Mukta and Tapti (PMT) oil field, the company has informed BSE in a statement on Tuesday. The company, however, said the notice was premature.
“RIL as part of the contractor for Panna Mukta and Tapti production sharing contracts, has been notified by [the] Government of India (GOI) of its computation of the purported share of GOI’s Profit Petroleum and Royalty alleged to be payable by the contractor pursuant to the GOI’s interpretation of Arbitration Tribunal’s final partial award dated 12 October 2016,” RIL said in its statement to BSE.”Government’s demand notice is premature. The quantification of liabilities (if any) of the parties arising out of the partial award have to be determined by the Arbitration Tribunal after the Parties have made their respective submissions on quantification,” it adds further.
An RIL executive said the amount was still to be decided by the arbitration court though media reports quoted a figure of $3 billion as penalties. RIL and Shell hold 30 per cent stake each in PMT fields while the remaining is with state-owned Oil and Natural Gas Corp (ONGC).
- In October 2016, a London-Based arbitration plan ruled in favour of the Centre on recovery cost from RILand BG Group (now part of Shell) for the PMT oilfields. This was an interim award and final arbitration award was to follow procedural. .Read More