Share markets in India are presently trading near the dotted line. Sectoral indices are trading on a mixed note with stocks in the energy sector and power sector witnessing maximum buying interest. Stocks from the realty sector are trading in the red.
The BSE Sensex is trading up by 12 points (up 0.03%), while the NSE Nifty is trading up by 15 points (up 0.1%). The BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.3%.
The rupee is trading at 69.69 to the US$.
In the news from global financial markets, US President Donald Trump said that he does not expect much progress from trade talks with China this week.
As per the news, Trump said that he had no time frame for ending the trade dispute with China.
The talks in Washington between the US and China come as new US tariffs on US$ 16 billion of Chinese goods take effect on Thursday this week.
Note that earlier this month, the Trump administration announced to impose 25% tariffs on imports of 279 items from China amounting to US$ 16 billion.
This is the second tranche of such tariffs and is set to come into effect on August 23. The US Trade Representative said that the move is a part of the US' response to China's unfair trade practices related to the forced transfer of American technology and intellectual property.
US had already imposed tariffs on US$ 34 billion worth of goods on July 6 but held off on a final US$ 16 billion in goods as a result of concerns from US companies.
How this trade war pans out remains to be seen. Meanwhile, we will keep you updated from all the developments from this space.
From the IT sector, HCL Technologies share price is in focus today. The stock of the company is witnessing buying interest as the company's shareholders approved a Rs 40 billion share buyback proposal.
The buyback is part of the company's strategy to return more than 50% of its net income to the shareholders. As per the company filing, HCL Technologies said that 99.59% shareholders had voted in favor of the proposal.
The board of the company has fixed August 31 as the record date for the buyback offer.
Apart from HCL Technologies, L&T share price is also in focus today following the news of its buyback plan. As per the company filing, the meeting of the board of directors is scheduled on coming Thursday to consider a proposal for buyback of equity shares.
Speaking of buybacks, the number of buyback offers in 2017-18 were at an all-time high. Never, in the last two decades, had Indian markets seen fifty-nine companies announcing buyback plans.
But what is truly surprising is that unlike in the past, the buybacks this time seem skewed in favor of short-term investors rather than long-term ones.
Who Benefits from Such Buybacks?
Here's what Tanushree Banerjee, Co-head of Research at Equitymaster, wrote about it in The 5 Minute WrapUp...
- Look at the history of buybacks since 2002. Logically promoters should offer to buyback shares at a premium when the stock is undervalued. And this logic held true until recently. The number of buybacks peaked when market valuations were low. And in times of peak valuations (like 2007 and 2011), promoters refrained from doing so.
But not this time. The trend of rising buybacks in the last two years, resembles the sentiment of a momentum investor. The appetite to buy shares kept rising with the rising markets. And the latest buybacks of stocks like TCS and MOIL, came at a time, when neither the broader index (Sensex) nor the stocks themselves, are undervalued.
You should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.
As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:
- The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.
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