Sensex Ends 106 Points Lower; Banking Stocks Witness Selling

Thu, 10 Jan Closing

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Indian share markets witnessed selling pressure during closing hours to end the day marginally lower. Sectoral indices ended on a mixed note with stocks in the consumer durables sector and healthcare sector witnessing buying interest while banking stocks and oil & gas stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood lower by 106 points (down 0.3%) and the NSE Nifty closed down by 34 points (down 0.3%). The BSE Mid Cap index ended the day up by 0.5% while the BSE Small Cap index ended the day up by 0.2%.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 0.9% and the Shanghai Composite was down by 0.5%. The Nikkei 225 was down 2.8%.

The rupee was trading at 70.52 against the US$.

Note that while the markets are witnessing selling pressure lately, the SIP flows in to Indian stock markets are on the rise. Have a look at the chart below. It plots the month SIP contributions over the 31-month period between April 2016 and October 2018.

SIPs Continue to Rise Despite Market Correction

During the above period, SIP contributions have grown from Rs 3,122 crore in April 2016 to Rs 7,985 crore in October 2018, growing at compounded annual rate of 46%.

As per an article in The Economic Times, the share of equity investments in India's household assets has reached a decade high following rising acceptance of mutual fund investments among retail investors.

Here's an excerpt from the article:

• Data from RBI, AMFI, IRDA and MOSPI, compiled by CLSA, show that equity's share in the country's household assets increased to 4.6% in FY18, the highest since FY08. It had dropped to 2.2% in 2014 and has been gradually improving since then.

Currently, there are about 2.49 crore SIP accounts through which investors regularly invest in various Indian mutual fund schemes. As per AMFI data, the mutual fund industry added an average of about 10.05 lakh SIP accounts each month during the financial year 2018-19, with an average SIP size of about Rs 3,200 per SIP account.

Here's what Ankit wrote about it in one of the recent editions of The 5 Minute WrapUp...

• As I've shown you some of my earlier editorials (here, here and here), there's a structural change in the Indian stock markets. Domestic investors have emerged as key players in the Indian markets.
  
  But there are a few questions that need to be answered...
  
  Is this flood of domestic liquidity entering the markets a temporary fad? Or is there some element of long-term sustainability to it?
  
  To answer these questions, the most reliable piece of data is SIP flows.
  
  First, let me quickly explain what SIP is all about.
  
  SIP stands for Systematic Investment Plan. It is an investment plan offered by mutual funds where in one can periodically invest a fixed amount in a mutual fund scheme. It is similar to a recurring deposit where in you deposit a certain amount every month.
  
  SIP is a convenient method of investing in mutual funds through standing instructions to debit your bank account every month.
  
  This not only saves you a lot of hassle, it also helps in averaging your costs and investing in a disciplined manner without worrying about timing the market.
  
  For these reasons, SIPs have been gaining popularity among Indian mutual fund investors.
  
  The liquidity pouring into the markets through SIPs is relatively stable, reliable, and long-term money.

If the trend in SIP inflows remains steady, it will provide the much-needed buoyancy to the Indian markets which have been witnessing an exodus of foreign investors.

In the news from the , Glenmark Pharma share price was in focus today as the drug company's subsidiary entered into a licensing agreement with Yuhan corporation for commercializing Ryaltris in South Korea.

Ryaltris, developed by Glenmark, is a novel, investigational, fixed-dose combination nasal spray of an anti-histamine and a steroid, indicated for treatment of symptoms associated with seasonal allergic rhinitis (SAR) in patients over 12 years of age.

To know more about the company, you can read Glenmark pharma Q2FY19 result analysis and Glenmark pharma annual report on our website.

Moving on to the news from the banking sector, Bandhan bank share price witnessed buying interest today as the private sector lender reported a 10.3% rise in its net profit at Rs 3.3 billion. The company had reported profit after tax (PAT) of Rs 3 billion in the corresponding quarter of the previous year.

Total income of the lender also increased to Rs 18.8 billion during the October-December quarter as against Rs 13.4 billion.

The company was in focus recently due to amalgamation with Gruh Finance.

On Monday, Bandhan bank said that Gruh finance will merge with it in an all-share deal valued at approximately Rs 818 billion based on the closing prices of shares of the two players.

Moreover, the merger will see HDFC Limited owning close to 15% in Bandhan Bank via its holding in Gruh Finance.

As per Tanushree Banerjee, Co-head of Research at Equitymaster, mergers and acquisitions are typically evaluated based on the synergies of the businesses and valuations offered.

Here's what she wrote in one of the recent editions of The 5 Minute WrapUp...

• Turns out Bandhan Bank's acquisition of Gruh Finance is a winner on all counts. Not that the bank has struck a bargain in the share swap ratio. Rather Gruh Finance has been richly valued. But Gruh Finance could help Bandhan become more than a bigger bank.
  
  Although HDFC (parent of Gruh Finance) is not directly involved in the deal, it is evident that both HDFC and Bandhan Bank want a bigger share of the rural pie. The exponential growth that rural banking has witnessed over past few years offers huge scope. Especially, for entities with proven credit appraisal history.

It would be interesting to see how this pans out. Meanwhile, we will keep you updated on all the developments from this space.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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