Markets continued the strong rally throughout the week ending 15th Jan 2021. Bulls are trying to justify the rally by citing bullish cues, just like bears who are fancying a sudden fall in the markets.
The discussion around the price-to-earnings ratio (PE ratio) of Nifty 50 is intensifying. A lot of statistical analysis on the PE ratio is doing rounds on social media.
Let’s have a brief look at the NIFTY50 Index PE during this week.
Table: Nifty50 PE During This Week | Source: Official Nifty Website
Amid all the noise, Nifty opened the week on a strong note at 14474, made a high at 14653, a low at 14383, and finally settled at 14433. The opening as on Friday seems weak if one goes by the rules of technical analysis.
On the other hand, something unusual happened which caught the eyes of every single investor in the market.
The Securities & Exchange Board of India (SEBI) banned CNBC Awaaz anchor, Mr Hemant Ghai, from the capital markets. As per the regulatory authority, he and his family pocketed around Rs.3 Crore between January 2019 and May 2020 by dealing in stocks that were being recommended on Stock 20:20, a popular TV show on CNBC Awaaz.
Without commenting on the specific topic more, we wish to highlight the strong commitment shown by SEBI towards protecting minority investors.
This decision by SEBI may or may not put a permanent stop on unfair practices. However, it goes a step further in bringing these practices to the notice of retail investors.
The onus of not falling prey to such practices lies on the individuals first. Is there a point in blaming the regulators if lessons are not taken from these instances?
Now, let’s talk about earnings season.
Earnings season for the Q3 FY’21 has begun with a strong set of numbers from the IT behemoth, TCS. On similar lines, a good set of numbers was reported by Infosys. A very strong set of numbers was reported by Tata Elxsi. The stock price has shown handsome gains in the week gone by.
TCS Stock Price Movement | Source: Google Finance
TATA Elxsi Stock Price Movement | Source: Google Finance
In the core sectors, notable results have been announced by Tata Steel Long Products (TSLP). TSLP is a speciality steel production company. Given the cyclical nature of the steel business, it is tough to say whether the earnings momentum would continue in the metals space or not. However, the recent rally in metal stocks has factored in the near-term earnings potential of metal companies at least to a small extent.
Companies belonging to the Tata group performed well in the week gone by.
The sentiment remains upbeat followed by stellar results from TCS, Tata Steel Long Products and Tata Elxsi. Tata Motors has gained more than 30% in the last one week. Value investors in the company have a lot to cheer about this weekend!
Another auto company, Mahindra & Mahindra reclaimed Rs. 1 Trillion market capitalization after its stock rallied 5% on 13th January 2021. Ashok Leyland too reported a surge in stock price after it reported a strong December sales jump of around 14%.
In the last one month, stocks of commercial automaker have surged around 30%. On the contrary, the Nifty Auto index has risen around 11% during this period.
Moving to the bond market, India’s 10Y bond yield ended the week at 5.98%.
Yields have bounced back from the 5.75% mark twice in the last 3 months. Going into the next week, it will be interesting to track the 10Y yields, as the price of gilts (Government bonds) depends to a large extent on the prevailing interest rates.
Even private equity players are not behind. The race by private equity players to acquire a controlling stake in bulk drug manufacturers is intensifying. Blackstone, CVC Capital & Warburg Pincus are keen to acquire a controlling stake in the Hyderabad based Suven Pharmaceuticals.
The current promoters hold about 60% stake in the company and are looking to bring it down to 30%. The promoters are eventually looking to sell their stake entirely.
Pharma companies have run up in 2020, bringing their valuations to an attractive level.
Private equity investors showing their willingness to acquire pharma and chemical companies at these valuations is encouraging for the minority shareholders in these companies.
Data to look for in the coming week
|22-Jan||Foreign exchange reserves 15th Jan||586.1 B||N/A|
Thank you, until next time. Wish you a joyful & profitable next week!