5 Reasons Why Sensex Zoomed 976 Points Today

Fri, 21 May Closing

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Indian share markets witnessed positive trading activity throughout the day today and ended on a strong note.

Benchmark indices rebounded after two-days fall and ended 2% higher, lifted mainly by financials, after a report said the government was working on a new stimulus package.

At the closing bell, the BSE Sensex stood higher by 976 points (up 2%).

Meanwhile, the NSE Nifty closed higher by 269 points (up 1.8%).

State Bank of India and HDFC Bank were among the top gainers today.

IOC and Power Grid Corp, on the other hand, were among the top losers today.

The SGX Nifty was trading at 15,226, up by 288 points, at the time of writing.

The BSE Mid Cap index and the BSE Small Cap index ended up by 0.8% and 0.7%, respectively.

Sectoral indices ended on a positive note with stocks in the banking sector, finance sector and telecom sector witnessing most of the buying interest.

Shares of Adani Transmission and Natco Pharma hit their respective 52-week highs today.

US stock futures are trading on a positive note today with the Dow Futures trading up by 96 points.

The rupee is trading at 72.83 against the US$.

Gold prices for the latest contract on MCX are trading down by 0.3% at Rs 48,406 per 10 grams.

Here are Top 5 Factors Why Indian Share Markets Rallied Today

Easing Covid-19 Concerns: The steady decline in new daily coronavirus infections in the country over the past week, after hitting a peak of over 4 lakh earlier this month, has given investors' confidence that the worst of the severe second wave of the pandemic may be over.

The reducing rate of reproduction of the virus as well as national positivity rate is giving hope that the restrictions imposed by state governments may start easing next month.

India reported 2.6 lakh new coronavirus cases today to take the total count 26 million. The new infection count remained below the 3 lakh mark for the fifth consecutive day.

The country reported 4,209 new deaths in the last 24 hours to take total fatalities to 2.9 lakh.

Favourable Global Cues: Indian share markets took cues from the bounce in Wall Street on Thursday, which was led by a recovery in technology stocks.

Technology and most growth-oriented stocks have come under pressure recently on concerns over higher inflation may force the US central bank to raise interest rates soon, which makes such stocks expensive for investors.

European and Asian stock markets fluctuated between gains and losses as sentiment continues to be driven by inflation fears and optimism over the economic recovery.

The Hang Seng ended on a flat note today, while the Shanghai Composite ended the day down by 0.6%.

Japan's Nikkei ended up by 0.8% in today's session.

Vaccine Availability: Market participants are also becoming increasingly confident that the current acute shortage in vaccines in the country will rectify itself in the coming months as various vaccine manufacturers ramp up supplies.

Further, the entry of new vaccines in the market is also expected to ease the supply crunch, which has seen some states halt the drive for 18-44-year-olds just a month after starting the program.

Better Quarterly Earnings: The current market rally was also supported by the better earnings reported by State Bank of India, Hindustan Petroleum (HPCL), JK Lakshmi Cement and Torrent Power.

Sectoral Performance: Gains were also seen as banking, finance and telecom sectors witnessed huge buying interest today. The banking sector ended the day up by 3.7% today, while the finance sector and telecom sector ended their day higher by 3% and 1.7%, 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 explains why he maintains a cautious stand on the stock market, with the help of four charts.

Tune in to the video below to find out more:

RBI Slaps Penalty on City Union Bank and 3 Other Lenders

In news from the banking sector, City Union Bank was among the top buzzing stocks today.

The Reserve Bank of India (RBI) has imposed monetary penalty on City Union Bank, Tamilnad Mercantile Bank and two other lenders for contravention of certain directions issued by the central bank.

A penalty of Rs 10 million has been imposed on City Union Bank Limited for contravention of non-compliance with certain provisions contained in the RBI (lending to micro, small & medium enterprises (MSME) sector) directions, 2017 and the circulars on educational loan scheme and credit flow to agriculture - agricultural loans - waiver of margin/security requirements.

In another statement, the RBI said it has imposed penalty of Rs 10 million on Tamilnad Mercantile Bank for non-compliance with certain provisions of directions issued by it on cyber security framework in banks.

The RBI also imposed a penalty of Rs 0.9 million on Nutan Nagarik Sahakari Bank, Ahmedabad for non-compliance with directions interest rate on deposits, know your customer (KYC) and circular on frauds monitoring and reporting mechanism.

In each case, the RBI said the penalties were imposed based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by them with customers.

City Union Bank share price ended the day up by 1.7% on the BSE.

Moving on to news from the power sector...

Shares of Torrent Power surged over 6% in intra-day trade today after the company reported a strong set of numbers for the quarter ended March 2021.

Torrent Power has posted a consolidated profit after tax (PAT) of Rs 4 billion for the quarter ended 31 March 2021.

The company had incurred a net loss of Rs 2.7 billion in Q4 of previous fiscal year 2019-20.

In March 2020 quarter, the company took an exceptional write off to the extent of Rs 10 bn on account of its impairment assessment of the 1,200 megawatt (MW) DGEN mega power project located at Dahej in Gujarat. This resulted in net loss in March-20 quarter.

However, due to the Covid-19 pandemic and stress in the power sector, the company's consolidated income rose marginally by 3% to Rs 31.2 billion for the quarter, from Rs 30.2 billion in Q4 of last year.

On an annual basis, Torrent Power registered a near 10% growth in its consolidated PAT for the full fiscal year 2020-21 at Rs 13 billion, as against Rs 11.8 bn in previous fiscal year 2019-20.

The impact of the pandemic was visible in the nearly 11% dip in its consolidated total income for FY21 at Rs 123.1 billion, down from Rs 138.2 billion in FY20.

The company's consolidated earnings before interest, tax, depreciation, and amortisation (EBITDA) in the quarter rose 10% year on year (YoY) to Rs 9.5 billion, compared to Rs 8.6 billion recorded in the last year.

For the full fiscal year 2021, EBITDA stood at Rs 36.1 billion, down 3%, compared to Rs 37.3 billion reported in the previous financial year.

Meanwhile, Torrent Power had a net debt reduction of Rs 10.9 billion during the year, with borrowings at Rs 78.1 billion as on 31 March 2021. Its debt equity ratio is 0.7 and net debt to EBITDA ratio is 1.9.

Torrent Power has reported earnings per share (EPS) of Rs 26.9 for the 12 months period ended 31 March 2021, compared to Rs 24.4 in FY20.

The board at its meeting held on 20 May 2021, has also approved total dividend of Rs 11 per equity share including interim dividend of Rs 5.5 per share.

Torrent Power share price ended the day up by 4.6% on the BSE.

Speaking of the power sector, it's interesting to note the power exchanged in India is about 4.5% of the overall power production, as can be seen in the chart below.

As per Tanushree Banerjee, Co-Head of Research at Equitymaster, India's power sector is currently in transition. It's driven by increasing reliance on short-term contracts and electricity spot markets.

This transition to the short-term market is happening due to quickly evolving industry dynamics.

Tanushree believes the Indian power sector will see a surge in spot power volumes due to certain factors.

In August 2020, Tanushree recommended a high-quality stock from this space. Subscribers can read the report here (requires subscription).

And if you are not a StockSelect subscriber, here's where you can sign up.

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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