With eye on monsoon, GST, markets likely to be range-bound this week
Markets may react to Sensex composition reshuffle, wherein Kotak Mahindra Bank will replace GAIL India and Tata Motors DVR will be included as an additional stock
Mumbai: The markets are expected to be range-bound this week, even as they will closely watch the progress of monsoon and the implementation of goods and services tax (GST) on 1 July.
On Monday, the markets may react to the S&P BSE Sensex composition reshuffle, wherein Kotak Mahindra Bank (KMB) will replace GAIL India and Tata Motors differential voting rights (DVR) will be included as an additional stock in the benchmark.
Kotak Mahindra will be included in the benchmark with 3.5% weight, and thus, will be among the top 10 stocks by weight. Tata Motors DVR will enter with 0.5% weight, helping maintain the weight of the auto sector in the benchmark. With the exit of GAIL, Oil & Gas index stands to lose the most in terms of weight, while the sectors with least impact will be utilities, PSU banks, telecom and metals. Banking, financial services and insurance (BFSI) will have a weight of 36.1% post the reshuffle, which will be almost equivalent to the combined weights of consumer, IT and auto.
According to Motilal Oswal Securities Ltd, Sensex earnings per share (EPS) for FY18 and FY19 will see a downgrade of 1.5% and 1.4%, respectively, primarily due to a higher increase in free float market capitalization of 2.7% compared to a rise of 1.1% and 1.3%, respectively, in free float net profit in both the fiscal years.
“We now estimate Sensex EPS at Rs1,557 for FY18 and Rs1,895 for FY19. The Sensex trades at a price to earnings (PE) of 19.7 times on FY18E earnings based on current composition; this will expand to PE of 20 times post the reshuffle,” the brokerage firm said in a 16 June report.
Banks and financial stocks are likely to be in focus on Monday as the Prime Minister’s Office has called a meeting of senior officials of the ministries of finance and corporate affairs to review the progress of resolving stressed assets. The Reserve Bank of India is expected to chalk out detailed measures to deal with bad loans that is plaguing the sector.
Meanwhile, according to news reports, India Meteorological Department (IMD) has said that monsoon is likely to advance in more parts of Maharashtra, Gujarat, West Bengal, Odisha, Jharkhand and Bihar in the next three to four days.
Vijay Singhania, founder-director, Trade Smart Online, said, “With no major new trigger this week, the markets will continue to remain a very stock-specific market now and it will continue to trade in a tight range until there is a trigger. On-going progress on implementation of GST and monsoon will be the two near-term factors that will drive markets.”
Decks are cleared for rolling out the crucial GST in the country on 1 July. The GST Council on Sunday gave companies more time to file detailed returns for the first two months of July and August and also cleared anti-profiteering rules, reported Mint on Sunday.
In the primary markets, a lot of action will be seen with three initial public offerings (IPO) this week. Central Depository Services Ltd (CDSL) will open for subscription on Monday with a price band of Rs145-149 per share aiming to raise Rs524 crore. The company on Friday raised Rs154 crore from anchor investors. After the IPO, BSE’s stake in CDSL will fall from 50.05% to 24%. CDSL is one of India’s two depositories.
GTPL Hathway, part of Hathway Cable and Datacom Ltd, will be open for public subscription from 21-23 June. It plans to raise up to Rs485 crore through its IPO which comprises fresh issue of shares worth Rs240 crore and the remaining through OFS of up to 1.44 crore shares in the price band of Rs167-170 a share.
Au Small Finance Bank Ltd may also launch its around Rs2,000 crore IPO this week.
Among global events, the UK is expected to formally kick-start Brexit talks and detail out plans on removing the country from the European Union.