Sensex Close Marginally Lower; Pharma, Bank Stocks Slump

Indian share markets recovered in the final hour of trade and finished flat. At the closing bell, the BSE Sensex stood lower by 33 points, while the NSE Nifty finished down by 5 points.

Stocks in the NSE Nifty Index corner nearly 20% of the market capitalization of all listed stocks in India. Naturally, its valuations are a good indicator of market sentiments.

Returns from NSE Nifty at Over 22x PE Multiple

Turns out, the current valuation of the index – more than 22x – is rare. Over the past two decades, the NSE Nifty has traded above 22x only nine times. And when it does, buying even the biggest blue chips has come with a huge downside for long-term investors. On five out of the nine occasions, the index lost money over a two-year period.

So the historical data suggests there is currently a 60% chance of losing money in bluechip stocks.

Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap finished down by 0.5% and 0.2% respectively. Losses were largely seen in auto stocks, bank stocks and pharma stocks.

Bank stocks were among the biggest losers after Morgan Stanley downgraded a slew of large Indian lenders, citing expectation of weak earnings. Axis Bank share price fell 3.3% and ICICI Bank share price lost 1.1%.

Divi’s Laboratories share price fell almost 20% following an import alert issued by the USFDA on products manufactured at its Visakhapatnam unit.

Separately, Dr Reddy’s Laboratories share price (down 4.4%) slipped to its 52-week low after it said the US drug regulator issued a Form 483 with 13 observations for the company’s formulation manufacturing facility at Duwada, Visakhapatnam.

Asian stock markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.37% and the Shanghai Composite rose 0.33%. The Nikkei 225 lost 0.34%. European markets are mixed. The CAC 40 is higher by 0.25%, while London’s FTSE 100 is off 0.19%. Shares in Germany are unchanged with the DAX at 12,052.70.