Market Update

Saturday 4 November 2017

Best Advisory Company; IPO market has turned red hot; stocks may cool down

Best Advisory Company | Bullion Market Tips

IPO market has turned red hot; stocks may cool down

The domestic market has kept up the momentum, rapidly discounting the earnings seasons. Strangely, the market responded to the results of Bharti Airtel BSE -0.32 %, and the stock rose to a decade’s high in spite of the company’s profits for the quarter declining 77 per cent. The company also announced Rs 25,000 crore capex, which will further add to its already heavy debt burden of Rs 1,00,000 crore.

Best Advisory Company
Telecom was the only sector languishing, but it has suddenly sprung up into action. The other laggards were the PSU banks, which in the previous week skyrocketed 40 per cent. 

Are these signs of a market top? 
Coal India received a notice from the Odisha government to pay Rs 20,000 crore for violation of mining rules in pursuant of the Supreme Court decision. However the market ignored the event, which in normal circumstances would have led to a massive fall in the stock price. 

Such behaviour indicates an euphoric state of market. Auto sales numbers were mixed, but disappointing. Two-wheeler giants Hero MotoCorp BSE -1.13 % and Bajaj Auto BSE -0.48 % reported flat sales but TVS’s numbers grew 20 per cent. 

Maruti numbers were more or less flat; which was a sign of big worry: is the economy slowing down at the ground level? One more quarterly result will give clarity. October passenger vehicle sales growth was very discouraging at 4 per cent. Whether a larger slowdown is creeping in the auto sector, one has to be very careful. This is one direct barometer working at the ground level to measure the health of the economy. 

Apollo Tyres BSE -0.30 % has reported a 45 per cent decline in profits by suggesting that all is not well with the sector as the government had earlier imposed anti-dumping duty on large tyres. In spite of all that, its profits have declined. Investors should now adopt a wait-and-watch approach on the entire auto industry and should not commit fresh funds at these levels.

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