5 Reasons Why Sensex Zoomed 613 Points Today

Tue, 18 May Closing

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Indian share markets extended gains as the session progressed and ended on a strong note.

Benchmark indices continued their positive momentum for the second consecutive day today as India reported less than 3 lakh daily Covid-19 cases.

At the closing bell, the BSE Sensex stood higher by 613 points (up 1.2%).

Meanwhile, the NSE Nifty closed higher by 185 points (up 1.2%).

Mahindra & Mahindra and Bajaj Auto were among the top gainers today.

Bharti Airtel and ITC, on the other hand, were among the top losers today.

The SGX Nifty was trading at 15,150, up by 204 points, at the time of writing.

The BSE Mid Cap index and the BSE Small Cap index ended up by 2% and 1.3%, respectively.

Sectoral indices ended on a positive note with stocks in the auto sector, consumer durables sector and power sector witnessing most of the buying interest.

Telecom stocks, on the other hand, witnessed selling pressure.

Shares of Adani Transmission and Hindustan Zinc hit their respective 52-week highs today.

US stock futures are trading on a positive note today with the Dow Futures trading up by 56 points.

The rupee is trading at 73.04 against the US$.

Gold prices for the latest contract on MCX are trading down by 0.3% at Rs 48,344 per 10 grams.

Here are Top 5 Factors Why Indian Share Markets Rallied Today

Decline in Covid-19 Cases: India reported 2.6 lakh fresh cases in the last 24 hours, the lowest in 28 days, the health ministry's May 18 data showed.

The national recovery rate has improved to 84.8%. In Maharashtra, the worst-hit state reported the number of fresh cases at 26,616 remained below 30,000.

The market is discounting progressive lifting of widespread lockdowns starting in early June.

Better Earnings: The current market rally was also supported by the better earning from India Inc. Pharma major Cipla, FMCG giant Colgate-Palmolive and private lender Federal Bank posted healthy numbers for the quarter ended March 2021.

Macro Data: Recent macroeconomic data was better than expected. Consumer Price Index (CPI)-based retail inflation came in at a three-month low of 4.3% in April versus 5.5% in March and 7.2% in April 2020.

Additionally, index of industrial production grew 22.4% in March supported by a low base.

Firm Global Cues: Asian stock markets ended on a strong note today, shrugging off worries about an increase in regional coronavirus infections and a subdued session on Wall Street, while inflation jitters helped push gold prices to three-month highs.

The Hang Seng and the Shanghai Composite ended the day up by 1.4% and 0.3%, respectively.

Japan's Nikkei rose as much as 2.1% on solid earnings reports and bargain hunting.

Sectoral Performance: Gains were also seen as auto, consumer durables, and power sectors witnessed huge buying interest today. The auto sector ended the day up by 3.4% today, while the consumer durables sector and power sector ended their day higher by 2.7% and 2.3%, respectively.

We will keep you updated on how these factors develop in the coming days and what effect they have on Indian stock markets. Stay tuned.

Speaking of stock markets, in his latest video for Fast Profits Daily, Vijay Bhambwani talks about why he is bullish on PSU stocks.

Back in October 2020, Vijay had recorded a video on PSU stocks, saying they present very good trading opportunities and also investment opportunities.

Vijay is still bullish on these stocks and in the video below, he explains why you should be too.

In news from the pharma sector, Gland Pharma was among the top buzzing stocks today.

Gland Pharma shares surged as high as 10% to hit a fresh 52-week high of Rs 3,136.5 apiece in intra-day trade today after the company posted robust March quarter (Q4FY21) numbers.

The pharma company's share price made a market debut in November 2020 and were listed at Rs 1,701 per share, as against the initial public offering (IPO) price of Rs 1,500 apiece.

Gland Pharma, a generic injectable focused pharmaceutical company, on Monday reported a 34% rise in its consolidated net profit to Rs 2.6 billion for the fourth quarter ended March 2021, on account of robust sales.

The company had posted a net profit of Rs 1.9 billion for the corresponding period of the previous fiscal year.

For the full fiscal year 2021, the company posted a net profit of Rs 10 billion as against Rs 7.7 billion in the previous year.

Consolidated revenue from operations of the company stood at Rs 8.9 billion for the quarter under consideration. It was Rs 6.4 billion in the year-ago period.

For the financial year ended March 2021, the company's consolidated revenue from operations was Rs 34.6 billion. It was Rs 26.3 billion in the preceding fiscal year.

The company's consolidated earnings before interest, tax, depreciation, and amortisation (EBITDA) in the quarter rose 31% year on year (YoY) to Rs 3.7 billion, compared to Rs 2.9 billion recorded in the last year.

For the full fiscal year 2021, EBITDA stood at Rs 14.4 billion, up 31%, compared to Rs 10.9 billion reported in the previous financial year.

The company maintained a healthy EBITDA margin of 40% and profit after tax (PAT) margin of 28% during the quarter.

Gland Pharma has also reported earnings per share (EPS) of Rs 63 for the 12 months period ended 31 March 2021, compared to Rs 49.9 in FY20.

The drug firm also registered a stable growth in markets of USA, Europe, Canada and Australia during the quarter and for the full year ended 31 March 2021 on back of new launches and volume growth in existing portfolio supported by the increased capacity.

In domestic markets, the company has ramped up remdesivir supply and maintained sufficient supply of enoxaparin to support the requirement of Covid-19 patients.

Gland Pharma share price ended the day up by 9.5% on the BSE.

Moving on to news from the engineering sector...

Shares of Praj Industries moved higher by 12% to hit a new high of Rs 371.8 after the company announced that Circular Biobased Delta has approved Praj's bio-bitumen samples processed from purified lignin, as a part of their flagship CHAPLIN program.

The Netherlands-based Circular Biobased Delta is one of Europe's premier consortia to promote bio-economy.

Lignin is one of the co-products resulting from the second-generation ethanol plants, paper-making and also from compressed bio-gas plants.

Bitumen is a black viscous mixture of hydrocarbons produced by fractionation of crude oil and has wide applications in road construction and roofing as a binder.

Praj Industries has now developed a proprietary process (under patenting) to convert the crude lignin into bio-bitumen which has the potential to replace this fossil-based bitumen and offer eco-friendly green bitumen.

The binding and viscoelastic property of bio-bitumen makes it useful for applications in asphalt.

Circular Biobased Delta (CBBD) facilitates cooperation between knowledge centres, public authorities and industry to grow usage of biomass as a raw material in the chemical, construction and packaging industries.

Under its flagship program CHAPLIN, it aims at stimulating the development and commercialisation of bio-bitumen as a binder for use in asphalt so as to improve the greening approach in road construction while reducing CO2 intensity.

Note that the stock price of Praj Industries surpassed its previous high of Rs 351 per share touched on 11 May 2021.

In the past six months, the stock has zoomed 360% as compared a to 14% gain in the S&P BSE Sensex.

Praj Industries share price ended the day up by 11.9% on the BSE.

Speaking of the current stock market scenario, note that smallcap stocks have been on a roll recently.

The BSE smallcap index had crashed to a multi-year low of 8.6k back in March 2020. Who would have thought that in less than a year, the index will come roaring back and go up a massive 133%?

Despite the Covid-related headwinds, Indian stock markets registered their best financial year performance in a decade in FY21. While the Sensex and Nifty surged 68% and 71% respectively, gains in mid-and small-caps have been sharper with both the indices rallying 91% and 115%, respectively.

While caution is indeed warranted, Richa Agrawal, Research Analyst at Equitymaster, thinks there is still a lot more steam left to this smallcap rally.

Despite rallying more than 130% since the March 2020 lows, Richa believes smallcap stocks are set for a massive up move in 2021 and beyond.

Here's what she wrote in a recent edition of Profit Hunter...

• The P/E for smallcap index doesn't make sense. There are thousands of listed small companies. Some have negative earnings. The base is not a valid data to work with.
  
  That said, the closest proxy to relative valuations is the Smallcap to Sensex ratio,
  
  Historically, this ratio has averaged 0.43x. In the previous mega runs of the smallcap index, this ratio has gone as high as 0.75x.
  
  In January 2018, when smallcaps peaked, the ratio was at 0.58x.
  
  Guess where this ratio is now after a 100% run up in the smallcap index?
  
  0.38.
  
  It's lower than the median over 2 decades.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

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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