Indian share markets witnessed selling pressure in the afternoon session amid mixed Asian markets. At the closing bell, the BSE Sensex closed lower by 150 points and the NSE Nifty finished lower by 60 points.
The S&P BSE Mid Cap finished up by 0.5% while S&P BSE Small Cap finished up by 0.8%. Losses were largely seen in FMCG stocks, oil & gas stocks and metal stocks.
We generally refer to PE or price to earnings ratio to gauge whether the market is undervalued or overvalued. If we go by this ratio, the Indian market is clearly in overvaluation territory.
There is still another ratio, which is frequently used to evaluate the valuations. The market capitalization to GDP ratio. It is one of Buffett's favorite indicators of broader market value. The market cap of all the listed companies in the country divided by the gross domestic product (GDP) of the country gives us this ratio.
Market Cap to GDP Ratio Close to 100%
The idea behind this ratio is simple. Stock prices are derived from expected earnings for corporates and GDP represents revenue of the country. This gives investors an estimate of whether the two are moving in tandem. A ratio above 100% shows overvaluation and one below 50% shows that the market may be undervalued.
Even this ratio is showing valuations reaching its peak levels. India's market cap to GDP ratio reached 95%. This ratio was more than 100% after the 2007 bull run. Stock prices had seen a significant meltdown after that amid the global financial crisis.
Asian stock markets finished mixed as of their recent closing prices. The Hang Seng gained 0.34% while the Nikkei 225 was higher by 0.12%. The Shanghai Composite was even. European markets are higher today with shares in Germany leading the region. The DAX is up 0.76% while France's CAC 40 is up 0.54% and London's FTSE 100 is up 0.26%.
Rupee was trading at Rs 64.93 against the US$ in the afternoon session. Oil prices were trading at US$ 61.03 at the time of writing.
In news from airline stocks, Jet Airways share price finished the day up by 1% on the BSE after it was reported that the company will introduce an additional 144 weekly flights as part of its summer schedule, starting March-end.
As part of the new schedule, Jet Airways will strengthen connectivity between the country's capital and the northeastern region.
Jet Airways' move to increase flights comes after the country's aviation regulator Directorate General of Civil Aviation (DGCA) grounded 11 Airbus A320Neo aircraft, powered by Pratt & Whitney engines, belonging to IndiGo and GoAir, causing both airlines to cancel several flights over the last two days.
Moving on to news from software sector. As per an article in a leading financial daily, Wipro will divest its hosted data centre services business to Chicago-based hybrid IT services provider Ensono for US$405 million (about Rs 26.5 billion).
Wipro said it will transition eight data centres and over 900 employees to Ensono. The acquisition significantly expands Ensono's geographic footprint and global service capabilities.
Hosted data centre services is one of the three businesses that became a part of Wipro when it acquired Infocrossing Inc in 2007.
The other two businesses -- Medicare & Medicaid services in the health insurance space and ERP implementation services -- have been integrated with other Wipro businesses and are not part of this divestment, the reports noted.
As part of the agreement, Wipro will make an investment of US$55 million in Ensono's combined entity. The two have signed a long-term partnership agreement to jointly address the hybrid IT need for Wipro's new and existing enterprise customers.
Last year, Ensono acquired Attenda, a UK-based pure-play provider of critical applications and hybrid IT-managed services.
Wipro share price finished the day down by 0.5%.
In another development, as per an article in The Livemint, Infosys will set up a new technology and innovation hub in Hartford, Connecticut, and hire 1,000 American workers in the state by 2022.
Last year, Infosys had announced setting up of four such hubs and hiring about 10,000 locals in the US over the next two years.
The move was also seen as a bid to woo the Trump administration that has been critical of outsourcing firms for "unfairly" taking jobs away from the US workers. The hub in Connecticut will have a special focus on insurance, healthcare, and manufacturing.
Infosys share price finished the day up by 0.6% on the BSE.
In news from the economy, the global credit rating agency, Fitch Ratings in its latest 'Global Economic Outlook' has forecasted that the Indian economy is likely to grow at the rate of 7.3% in the next fiscal (FY19) and further to 7.5% in FY20, highlighting waning influence of one-off policy-related factor.
However, for the current fiscal year, the rating agency predicted lower growth rate of 6.5% as compared to Central Statistics Office's (CSO) estimation of 6.6%.
Fitch noted that the currency in circulation is back to pre-demonetisation level in mid-2017 and is now increasing steadily, similar to the previous trend. Besides, it also highlighted that Goods and Services Tax (GST) led disruptions have slowly diminished.
It further listed various initiative reforms taken by the government for the sectors like infrastructure and banking and noted that policies come on top of substantial road construction plans and a bank recapitalization plan would also support the country's growth in the medium term.
On inflation front, the rating agency said that headline inflation picked up, due to accelerating food prices and it expects the Reserve Bank of India to start raising interest rates next year as growth gains further traction.
And here's a note from Profit Hunter
Shriram Transport Finance is among the most active stocks in the market today - up 6%.
The last time we reviewed the stock, it had broken above the significant resistance level of 1,300 which indicated strength. It went on to rally after the break out and touched a life-time high of 1,546 in January 2018. It corrected back to 1,300 level which acted as a strong support for the stock (previous resistance now support).
The stock also formed a small inverse head and shoulder pattern at the support level. All of this pointed to a strong bounce in the counter. As a result, the stock rallied strongly from 1,300 level and today it is 6% up with healthy volumes.
So does this indicate that the stock in now ready to achieve a new life-time high? Let's wait and watch...
Shriram Transport Soared 6% for the Day
Comments
Log in or sign up to join the conversation.