Indian share markets continued to trade on a weak note during the noon session. Losses were largely seen in PSU stocks, metal stocks and energy stocks.
The BSE Sensex is trading lower by 150 points and the NSE Nifty is trading down by 62 points. Meanwhile, the BSE Mid Cap index is trading up by 0.1% & the BSE Small Cap index is down by 0.1%. The rupee is trading at 64.96 to the US$.
The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it's relatively high.
The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued
FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India's GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.
Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38% when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.
The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.
In news from pharma sector, as per an article in The Livemint, Torrent Pharma Ltd is likely to raise at least Rs 15 billion by selling shares to institutional investors, as it prepares a bid for the generic drugs unit of France's Sanofi. Torrent Pharma is readying a €2 billion (Rs 160 billion) binding bid for Sanofi's unit Zentiva NV
The proposed fundraising will help the pharma company strengthen its balance sheet as it looks to absorb yet another major asset.
Earlier during the month, Torrent told that its shareholders had approved raising as much as Rs 50 billion of equity capital through a qualified institutional placement (QIP) and other routes.
Reportedly, Torrent has a strong track record of growing through acquisitions and therefore it should not see much difficulty in convincing investors to participate in its QIP. In January, the company announced the acquisition of US-based generic pharmaceuticals company, Biopharm Inc (BPI). BPI is a maker of oral solutions, suspensions, and suppositories.
Torrent pharma share price was trading down by 0.6% at the time of writing.
Moving on to news from the energy sector. As per an article in The Hindu Business Line, IndianOil Corporation Ltd and Tata Motors have launched the trial demonstration of the country's first hydrogen fuel cell bus.
The project is being executed under the partial financial support from the Department of Science & Industrial Research, Ministry for Science & Technology and the Ministry for New and Renewable Energy.
The vehicle will be fuelled at the country's first hydrogen dispensing facility at R&D Centre of IndianOil. It will be subjected to long duration trials to understand the durability and efficacy of the fuel cell technology for mobility applications.
IOC share price was trading down by 2.8% on the BSE.
In news from the economy, days after the Trump administration hiked import tariffs on steel and aluminum products, the Commerce and Industry Minister Suresh Prabhu has said that India will take up this issue with the US authorities.
He said that the measures are unfortunate and they will take up these issues with US counterpart and added that he will try to explain to them the necessity for working together through multilateral trading platform as well as bilateral trading platform.
As India exports steel and aluminum products worth about US$1.3 billion a year to America, the ministry is studying the impact of duty hike. Exports of these products to the American market will become expensive and could impact the competitiveness of domestic items, with hike in tariffs by the US government.
Major steel exporters to the US comprise Canada, Brazil, South Korea, Mexico and Russia which together account for close to 60% of the shipments, while India exported close to 0.9 MT steel to America in 2017.
Metal stocks were trading in red with Vedanta share price and NMDC share price leading the losses.
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