Sensex Ends 113 Points Higher; Energy and Banking Stocks Witness Buying

Mon, 4 Feb Closing

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Indian share markets witnessed buying interest during closing hours and ended the day marginally higher. Gains were largely seen in the energy sector and banking sector, while power stocks and telecom stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 113 points (up 0.3%) and the NSE Nifty closed higher by 19 points (up 0.2%). The BSE Mid Cap index closed down by 0.8%, while the BSE Small Cap index ended the day down by 1.2%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 0.2% and the Nikkei was trading up by 0.5%.

European markets were trading on a mixed note. The FTSE 100 was up by 0.2%. The DAX was trading flat, while the CAC 40 was down by 0.3%.

The rupee was trading at 71.70 to the US$ at the time of writing.

Taking cues from the budget announcements last week, foreign portfolio investors (FPIs) bought Rs 13.2 billion worth of domestic stocks on Friday, data available with NSE suggested.

On the other hand, domestic institutional investors (DIIs) were net sellers to the tune of Rs 50 million.

Speaking of FII data, note that 2018 was a turbulent year for the Indian stock markets. Foreign investors dumped Indian equities worth Rs 33,014 crore and debt instruments worth Rs 47,795 crore. In fact, they have continued to be net sellers in Indian stocks even in 2019. So far in January 2019, they have sold equities worth Rs 2,675 crore.

Had it not been for the solid participation from domestic investors, the Indian markets would have witnessed a much steeper fall.

The chart below puts things in perspective.

The Rapid Growth of the Indian Mutual Fund Industry

Ankit Shah shares an interesting observation in the rapid growth of MF Industry.

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

• Ten years ago, the total assets under management (AUM of the Indian mutual fund industry were Rs 4.13 trillion (1 trillion equals 1 lakh crore) as on 31 December 2008.
  
  Over the subsequent five years, the industry grew at a compound annual growth rate (CAGR) of 15% to take the total AUM to Rs 8.2 trillion as on 31 December 2013.
  
  Thereafter, the Indian mutual fund industry took off like never before, compounding at 23% CAGR, and taking the total AUM as on 31 December 2018 to Rs 22.86 trillion.
  
  In just 10 years, the AUM of the Indian MF Industry has multiplied 5.5 times, compounding at 19% CAGR.
  
  The total number of mutual fund folios as on 31 December 2018 stood at 8.03 crore (80.3 million).

Also, speaking of the budget announcement on Friday, to help you gain more insight into interim budget proposals, we have research analyst, Sarvajeet Bodas talk about everything you need to know about the interim budget in our latest episode of Indian Stock Market Podcast. As per him, devil lies in the detail.

Catch him talk about all the must-knows of budget, including which stocks and sectors could benefit post the announcement.

Moving on to the news from the finance sector, DHFL share price was in focus today. This came as with DHFL group companies' debt mess coming under lens, global brokerage Credit Suisse warned that it could trigger a second wave of risk aversion in India's debt mutual fund industry.

A report from the global brokerage stated that DHFL is among the largest borrowers from mutual funds and the aggregate exposure of debt mutual funds to the home financier's securities is Rs 85 billion.

This amounts to about 0.7% of debt mutual funds' assets under management (AUM) as of December 2018.

Furthermore, the exposure for some fund houses is larger, at 2-10% of total debt AUM, with some schemes having up to 30% of their AUM invested in Dewan securities.

The development comes as the stock of the company has been witnessing sharp selling pressure after last week Cobrapost said that DHFL diverted funds to shell companies to buy assets, and that firms linked to DHFL's controlling shareholders - the Wadhawan group made political donations beyond mandated levels.

Note that DHFL is also facing questions about its financial health after the IL&FS default pushed up the cost of funds for the mortgage lender and made borrowing difficult.

Rating company Care ratings today downgraded ratings on the company's debt worth over Rs 1.2 lakh crore issued by DHFL.

As per an article in The Economic Times, the company revised the rating grade of AAA to AA+ for nonconvertible debentures and long-term bank loans. Commercial papers, short-term debt securities rated as A1+ have been put under credit watch.

The company has decided to divest its stake in Aadhar Housing Finance to Blackstone.

Private equity major Blackstone agreed to buy nearly 80% of affordable homes-focused Aadhar Housing Finance from the financially stretched Wadhawan group.

The group's holding company Wadhawan Global Capital (WGC) will be selling its 70% stake in the company, while DHFL will also be exiting its investment, which is reported to be around 9%.

How this all pans out and what effect it might have on the debt mutual funds remains to be seen. Stay tuned to get all the updates from this space.

Market participants were also tracking IDBI bank share price, GSK Pharma share price, Future Retail share price and Novartis India share price as these companies announced their December quarter results today.

You can also read our recently released Q3FY19 results of other companies here: Reliance Industries, Federal Bank, Infosys, TCS, Trident, HDFC bank, Maruti Suzuki, DHFL, Gruh Finance.

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

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

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