Sensex Ends 226 Points Higher; Capital Goods and Banking Stocks Witness Buying

Fri, 24 Jan Closing | Monish Vora, TM Team

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Indian share markets ended their trading session on a positive note today.

At the closing bell, the BSE Sensex stood higher by 226 points (up 0.6%) and the NSE Nifty closed higher by 67 points (up 0.6%).

The BSE Mid Cap index ended up by 0.8% and the BSE Small Cap index ended the day up by 0.5%.

On the sectoral front, gains were seen in the banking sector and capital goods sector.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng stood up by 0.15% and the Nikkei was trading up by 0.13%, while the Shanghai Composite was trading down by 2.75%.

European markets were trading on a positive note. The FTSE 100 was up by 1.73%. The DAX was trading up by 1.37%, while the CAC 40 was trading up by 1.38%.

The rupee was trading at 71.33 to the US$ at the time of writing.

Speaking of the Indian economy and Indian share markets, Ankit wrote to you about a recent upcoming IPO. It's a company profiting from two megatrends - digitisation and financialisation - in the Indian economy.

Have a look at the chart below. A quick comparison of assets under management (AUM) of mutual funds in India versus abroad will give you a clear idea of the huge megatrend.

Mutual Funds: Megatrend of the decade?

India's mutual fund AUM as a percentage of GDP is 11%. This is far lower than the world average of 55%.

Here's what Tanushree Banerjee wrote about it in a recent edition of The 5 Minute WrapUp...

• I strongly believe, the next decade could be the decade of financialisation in India.
  
  Traditionally, Indian households have preferred to invest in physical assets like real estate but things are changing.
  
  Indians now are more open to investing in financial assets like mutual funds. Better awareness, financial education, increasing urbanisation are all driving this change.
  
  Mutual fund AUM grew 24% annually in the last 5 years. I expect India's GDP to grow at 6-7% over the next decade.

Just combine these growth rates and you can see the massive growth opportunity.

Moving on to news from the macroeconomic space, as per a leading financial daily, India is likely to fund roughly US$ 28 billion of its expenditure outlay in its budget for fiscal 2020-21 via off-budget borrowings as it seeks to revive a sagging economy while keeping its fiscal deficit in check.

This comes as Prime Minister Narendra Modi's government is under pressure to increase spending on rural welfare schemes and infrastructure to boost growth that has fallen for six straight quarters.

Off-budget borrowings are a means by which the government keeps its fiscal deficit in check by making quasi-government entities borrow on its behalf, to partly fund its expenditure plan for the year.

The news state that this would mark a roughly 13.8% increase in so-called off-budget borrowings from an estimated 1.75 trillion rupees (US$24.6 billion) in the ongoing fiscal year.

Finance Minister Nirmala Sitharaman, who will deliver the budget speech on 1st February, is widely expected to announce stimulus measures for small businesses and non-banking finance companies as a cut in corporate tax rates and rate cuts by the central bank have failed to revive growth.

It would be interesting to see how these numbers and estimates show up in the budget announcement. Meanwhile, we will keep you updated on all the developments from this space. Stay tuned.

The upcoming budget would play a critical role in shaping the investment trend.

In the below video, Tanushree Banerjee tells how you should react to the biggest economic event of the year - the Union Budget which is going to be announced in a few days.

Watch now to know more...

Apurva Seth, editor of Breakout Profits (requires subscription), has also written about the budget in today's edition of Profit Hunter. You can read the same here: Will the Budget Disappoint the Markets?

In news from the cement sector, UltraTech Cement share price was in focus today as the company posted 48.64% year-on-year (YoY) rise in standalone profit at Rs 6.4 billion for December quarter.

Revenue came in almost flat at Rs 99.8 billion against Rs 99.4 billion reported in the same quarter last year.

On a consolidated basis, the company posted 88.98% YoY rise in consolidated profit at Rs 7.1 billion. Revenue stood almost flat at Rs 103.5 billion against Rs 104.4 billion in the corresponding quarter last year.

During the quarter, the company's wholly-owned subsidiary UltraTech Cement Middle East Investments divested its entire shareholding in Emirates Cement Bangladesh and Emirates Power Company to Heidelberg Cement Bangladesh for US$ 30.2 million and included the gain on divestment of Rs 89.6 million in other income.

The company believes that signs of revival were visible in some key regions during the latter part of Q3FY20.

The company in a regulatory filing said that this, together with the government's firm commitment to revive the economy and the thrust on infrastructure spending augur well for the growth of cement demand.

It added that UltraTech is best positioned to take advantage of the revival in cement demand, despite the anomalies that may get created in demand patterns in some parts of the country due to extraneous reasons.

The company believes that demand is expected to grow in line with the GDP rate. Any pick-up in urban housing demand, liquidity improvement, fund allocation from central and state government should be watched going ahead.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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