Sensex Opens Over 200 Points Down; Realty and Auto Stocks Under Pressure

Thu, 27 Feb 09:30 am

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Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.2% while the Hang Seng is down 0.9%. The Nikkei 225 is trading down by 1.8%. Meanwhile, the S&P 500 fell for a fifth straight day on Wednesday and while its decline was slower than the last few days, the session was volatile as investors reacted to headlines about coronavirus and sought to gauge its economic fallout.

Back home, India share markets opened lower. The BSE Sensex is trading down by 204 points while the NSE Nifty is trading down by 57 points. The BSE Mid Cap index and BSE Small Cap index opened down by 0.5% and 0.3% respectively.

All sectoral indices have opened the day on a negative note with realty stocks, automobiles stocks and IT stocks witnessing maximum selling pressure.

The rupee is currently trading at 71.58 against the US$.

The Indian rupee settled for the day higher by 20 paise at 71.65 against the US dollar on Wednesday in line with other Asian currencies, helped by lower crude oil prices.

At the interbank foreign exchange market, the local currency opened at 71.76 to the US dollar.

During the day, the local unit saw a high of 71.59 and a low of 71.79. The domestic unit finally settled at 71.65, up 20 paise from its previous close.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

Moving on to the news from the economy. As per the ratings agency Crisil, increased demand for retail loans, strong growth in lending by private banks and pick-up in economic activity may improve credit growth in the next financial year (FY21).

The RBI's move to exempt banks from cash reserve ratio (CRR) requirement for incremental credit to certain sectors for up to five years, will also support lending.

According to report, the prolonged slowdown in bank lending may be bottoming out this fiscal, with gross credit offtake set to rise 8-9% on-year in FY21, a good 200-300 basis points (bps) over the likely growth of around 6% this fiscal.

So far this year, loan growth has slowed to around 7-7.5%. During this fiscal, some growth momentum is expected in the fourth quarter, after subdued three quarters due to traditional fiscal year ending growth.

It mentioned that retail credit should continue to grow at a healthy rate of around 16%, next year, supported by sustained demand for unsecured loans, muted business growth for non-banks as well as steady levels of pool purchases.

Structural shifts such as favourable demographics, rising propensity to leverage for personal consumption, increase in availability of financing, and reasonable risk-adjusted returns for lenders, will continue to support retail lending.

One theme we believe will play out over the next decade is the credit growth in India.

Retail and corporate credit are expected to grow by multi-fold over the next few years.

It remains to be seen how these projections pan out. We will keep you updated on all the developments from this space.

Speaking of credit growth, let's take a look at India's domestic credit data...

Increasing Domestic Credit to Private Sector Key for Economic Growth

Domestic credit to the private sector in India is amongst the lowest in the world.

Here's what Tanushree Banerjee, co-head of research at Equitymaster, wrote about it in one of the editions of The 5 Minute WrapUp...

• A huge chunk of the domestic borrowing is by the government. That leaves very little scope to lend to the private sector.
  
  Low credit to the private sector means low capital available for expansion. A major hurdle for one of the major growth engines of the economy.
  
  With the government set to borrow overseas, a lot of capital is expected to free up at home.
  
  This also coincides with the recent efforts by the Insolvency and Bankruptcy Code (IBC) to resolve bad loans. This will free up further capital for lending.

As per her, a proactive step in this regard will be a huge boost to the economy going forward.

This is one of the megatrends that will help what Tanushree calls the Rebirth of India.

She has identified the 7 best stocks that will profit from the Rebirth of India. You can read about these top 7 stocks here.

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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