Indian share markets are trading just above the dotted line in the noon session following amid mixed global markets. Consumer Durables stocks and bank stocks witness majority of the buying momentum while losses were largely seen in energy stocks and software stocks.
The BSE Sensex is trading higher by 93 points and the NSE Nifty is trading up by 9 points. Meanwhile, the BSE Mid Cap index is trading up by 0.2% & the BSE Small Cap index is up by 0.1%. The rupee is trading at 65.13 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.
Fortis Healthcare share price was trading up by 1.5% after it was reported that a Manipal Hospital Enterprises-TPG consortium has proposed a two-step transaction that will involve Fortis Healthcare hiving off its hospital's portfolio into a separate listed entity that will then be merged with the acquirer, besides taking over the SRL Diagnostics unit.
As per the reports, under the proposed transaction, listed Fortis Healthcare is set to hive off its healthcare division into a separate listed entity that will be merged with Manipal Hospital, in which US-based private equity fund TPG owns about 20%.
In the second leg of the transaction, Manipal-TPG is likely to acquire a 51% stake in SRL Diagnostics at an equity value of Rs 36 billion from the existing private equity investors and Fortis Healthcare.
The two-stage transaction will make Fortis Healthcare a pure-play holding company with a stake of around 40% in SRL Diagnostics and shares in the merged entity to be formed after combining its healthcare division with Manipal Hospital.
In news from power sector, Tata Power Co. Ltd said its board of directors has approved the sale of its stake in Tata Communications and Panatone Finvest to Tata Sons and its affiliates. Panatone Finvest holds 30.1% of Tata Communications.
The move is a part of the Company's plan to monetize its non-core assets and improve the balance sheet to set the stage for next phase of growth. The estimated realization will be about Rs. 21.5 billion and is subject to shareholders approval.
Tata Power share price was trading down by 0.7% at the time of writing.
In another development, Bharat Heavy Electricals (BHEL) has won an order for setting up a 75 MW Solar Photovoltaic (SPV) Power Plant on Engineering, Procurement and Construction (EPC) basis, in Gujarat. Significantly, this will be the company's largest Solar PV project till date.
With this order, the company's solar portfolio has risen to 545 MW. It is presently executing over 150 MW of ground-mounted and rooftop Solar PV projects across the country.
BHEL share price was trading up by 0.3% on the BSE.
In news from Indian economy, amid fears of a global trade war after protectionism measures imposed by the US, Commerce and Industry Minister Suresh Prabhu has said that India needs to explore ways to improve exports. He also noted that the world is facing serious challenges with the US taking very strong measures against all its major trading partners including China.
The Minister further urged all to take initiatives to promote exports, in line with the government's focus on promoting shipments. He also said that they are trying to explore new markets and products by doing market research.
He added that India is also meeting leaders of some African countries to promote exports in the region.
Meanwhile, with India's exports taking a hit, the industry chamber Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its latest report has said that the country's economy may be impacted if global trade war escalates further into a 'full-scale global trade war'.
The Industry body added that it may reflect in enlarging the country's current account deficit (CAD) and it will impact Gross Domestic Product (GDP) growth as well.
Besides, the chamber suggested the government to formulate a backup plan which should include opening bilateral trade with key trading partners while taking precautions that we remain WTO compliant. It further said that if market confidence is eroded, there would be an outflow of portfolio investment taking a toll on the dollar rates.
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