Sensex Tanks 886 Points; IT, Energy and Finance Stocks Witness Selling

Thu, 14 May Closing

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Indian share markets witnessed heavy selling pressure today even after Finance Minister Nirmala Sitharaman on Wednesday announced a set of stimulus measures to support micro small and medium enterprises (MSMEs), non-banking financial companies (NBFCs), and power distribution companies.

Optimism over the economic package was offset by the selloff in global markets.

Asian equities slipped today following another selloff on Wall Street as US Federal Reserve chief Jerome Powell warned of a "highly uncertain" outlook for the economy, adding that lawmakers might have to provide even more stimulus on top of the US$ 3 trillion already declared.

Further, World Health Organization's warning saying that the virus "may never go away" dampened investor sentiments.

FM Nirmala Sitharaman will address the media today in the second phase of announcements on government's Rs 20 trillion package.

Sectoral indices ended on a mixed note, with stocks in the IT sector, energy sector and finance sector witnessing selling pressure, while healthcare stocks and FMCG stocks ended in green.

At the closing bell, the BSE Sensex stood lower by 886 points (down 2.8%) and the NSE Nifty closed down by 241 points (down 2.6%).

The BSE Mid Cap index and the BSE Small Cap index ended the day down by 0.4% and 0.6%, respectively.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down 1.4% and the Shanghai Composite stood lower by 1%. The Nikkei was down 1.7%.

The rupee was trading at 75.56 against the US$.

Note that the coronavirus impact has shaken markets worldwide. Businesses are seeing unprecedented shifts in a virus struck, locked down economy.

As per Richa Agarwal, editor of our premium smallcap service Hidden Treasure, there are robust smallcap businesses that are not just resilient but likely to emerge stronger from this crisis.

Richa has shared her views on these smallcaps, in the video below. Tune in now...

Moving on, market participants were tracking Biocon share price, Escorts share price, and Indiabulls Real Estate share price as these companies announced their March quarter results (Q4FY20) today.

In news from the commodities space, domestic gold prices traded higher on the Multi Commodity Exchange (MCX) today as worries over second phase of virus infections dampened risk appetite amid mixed fundamentals.

Weaker economic data and persisting US-China tensions also supported the yellow metal's prices.

Gold June futures rose as much as 0.5% to Rs 46,220 per 10 grams, extending their 0.8% gains of the previous session.

Tracking gold, silver futures on MCX rose 0.5% to Rs 43,207 per kg.

In global markets, gold prices eased today after US Federal Reserve Chairman Jerome Powell downplayed the possibility of negative interest rates.

Powell said that the US economy faces unprecedented downside risks that could do lasting damage to households and businesses if fiscal and monetary policymakers don't rise to the challenge.

US stocks fell sharply for the second day on Wednesday, after his comment. The Dow Jones Industrial Average slipped 2.2% and the S&P 500 fell 1.8%.

Spot gold eased 0.2% to US$ 1,712.58 per ounce, having jumped 0.8% in the previous session.

Jerome Powell on Wednesday warned of a "significantly worse" US recession than any downturn since World War II and said that the US central bank will take more actions if needed.

The Fed chair in his speech outlined the worrying scenario posed by mass bankruptcies and unemployment.

Meanwhile, the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.8% to 1,092.14 tonnes on Wednesday.

Speaking of gold, how lucrative has gold been as a long-term investment in India?

The chart below shows the annual returns on gold over the last 15 years...

Gold Has Been a Shining Long-Term Investment

As you can see, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.

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

• "In fact, gold has delivered double-digit gains in 10 of the last 15 years.
  
  During the entire 15-year period, gold has shot up 555% (compounded annual return of 12.1%).
  
  During the same period, the Sensex surged 511% (compounded annual return of 12.0%). If you include dividends, the Sensex returns would be higher than gold by a couple of percentage points.
  
  One must note that the Sensex returns are not representative of the broader market returns. Moreover, gold was a no-brainer. You didn't have to study financial statements, business models and forecast future earnings growth to get a double-digit return on your investment."

Meanwhile, Apurva Sheth, lead chartist at Equitymaster, talks about a reliable investing signal, which is indicating that gold prices will go higher.

Tune in to his video here...

Moving on to news from the FMCG sector, shares of Godrej Consumer Products gained over 6% today, even as the company's consolidated net profit for the quarter ended March 2020 declined 75.4% year-on-year (YoY) to Rs 2.3 billion.

The company had logged a profit of Rs 9.4 billion in the year-ago period.

The company's revenue declined 12.2% to Rs 21.5 billion against Rs 24.3 billion reported in the corresponding quarter of the previous fiscal.

Total income for the quarter under review came in at Rs 22,029.6 million, down 11.2% against Rs 24,817.2 million in the year-ago period.

For the full year, the company's net profit declined 36.1% to Rs 15 billion as against Rs 23.4 billion during the previous year ended March 2019.

Sales declined 3.9% to Rs 98.3 billion as against Rs 102.2 billion in the previous year.

The company noted that its sales have been affected adversely due to Covid-19 lockdown in India as well as overseas locations.

Godrej Consumer Products share price ended the day up by 5.4%.

To know more, you can read Godrej Consumer's Q4FY20 result analysis on our website.

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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