Share markets in India have extended early morning losses and are presently trading deep in the red.
Sectoral indices are trading on a mixed note with stocks in the realty sector and banking sector witnessing maximum selling pressure, while IT stocks and telecom stocks are witnessing buying interest.
The BSE Sensex is trading down by 401 points (down 1%), while the NSE Nifty is trading down by 118 points (down 1%). The BSE Mid Cap index and the BSE Small Cap index are trading down by 1.5%.
The rupee is currently trading at Rs 70.67 against the US$.
Speaking of stock markets in general, the market is typically focused on the most recent star performers.
You will often find the likes of HUL or HDFC Bank being the market darlings for never having a disappointing quarter.
But it is rare to find companies that thrive through most of their survival period.
Tanushree Banerjee shares a few of her thoughts on this. Here's an excerpt of what she wrote in today's edition of The 5 Minute WrapUp...
- It is rare to find companies that survive for decades. It's even rarer to find ones that thrive through most of their survival period.
So, if you do not wish to pay steep valuations for the market darlings, you need to look for the companies with history and consistency on their side.
And they shouldn't be too conspicuous to the market either.
I am talking of companies like Hawkins and City Union Bank. They have a track record of paying dividends for decades.
The dividends such companies pay are especially helpful at a time when globally interest rates are headed lower.
And, as seen in the chart below, 'risk-free returns' from debt seem to have gone missing.
Inflation-Adjusted Risk-Free Returns Are Negligible Globally
So, should you ignore the big bluechips while chasing dividend stocks?
As per Tanushree, big money is made over the long term, not by making more in the good years but by losing less in the bad years.
In news from the finance sector, Dewan Housing Finance Corporation (DHFL) has submitted a draft resolution plan, proposing to convert debt to equity while seeking to sell assets and raise more capital.
The housing finance company, which held its annual general meeting on Saturday, put forth various proposals before its shareholders. The firm has sought approval for conversion of debt into equity, or new debt instruments, as part of the resolution plan.
Other proposals put forth were to increase the authorised share capital of the company from Rs 8.3 billion to Rs 10.9 billion.
According to the draft resolution plan, 2.3% exposure to various categories of lenders will be converted into equity. The remaining loans will be converted into new loans with 9, 10, and 21-year tenures.
As per an article in The Economic Times, lenders may convert part of DHFL's debt into 51% equity while non-bank entities such as mutual funds face losses of 40% or more.
Non-bank entities will only get a share of the liquidation value as they're not part of the creditors' consortium as per the plan.
Here's an excerpt from the article:
- The company, which announced the appointment of Vaijinath MG, a former Chief General Manager of State Bank of India as its CEO, has assumed a price of Rs 54 per share for debt conversion into equity by lenders to acquire 51% in the company.
State Bank-led lenders are expected to complete a debt resolution plan quickly so that fresh funds start flowing in.
The company also said that in the past 12 months, it has repaid obligations of nearly Rs 450 billion, which is nearly 40% of its current balance sheet size.
Note that DHFL has been looking at various ways to emerge from the stress which first came to light in September last year following the collapse of Infrastructure Leasing and Financial Services.
DHFL share price is presently trading down by 7%.
Moving on to news from the pharma sector, the United States Food and Drug Administration (USFDA) has completed current good manufacturing practices (cGMP) inspection at Cipla's Goa manufacturing facility.
The inspection was conducted from September 16 to September 27, 2019 and ended with 12 observations, none of which are related to data integrity.
To know more about the company, you can read Cipla's latest result analysis and Cipla's 2018-19 annual report analysis on our website.
In other news, Glenmark Pharma has received shareholders' approval to raise up to US$ 200 million through issuance of debt securities. The proposal was approved at the company's annual general meeting held on September 27, 2019.
According to the proposal, the company plans to raise up to US$ 200 million in Indian or international markets through bonds, debentures or other debt securities in one or more tranches.
Cipla share price and Glenmark Pharma share price are presently trading down by 3.7% and 3%, respectively.
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