Sensex Ends Flat; Energy and Metal Stocks Witness Selling

Thu, 25 Jul Closing

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After opening the day marginally higher, Indian share markets traded on a volatile note throughout the day and ended their trading session on a flat note.

Sectoral indices ended on a mixed note with stocks in the healthcare sector, IT sector and banking sector witnessing buying interest, while energy stocks witnessed huge selling pressure.

At the closing bell, the BSE Sensex stood lower by 17 points and the NSE Nifty closed lower by 19 points. The BSE Mid Cap index ended the day up by 0.5%, while the BSE Small Cap index ended down by 0.1%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up 0.2% and the Shanghai Composite stood higher by 0.5%. The Nikkei 225 was up 0.2%.

The rupee is trading at 68.98 against the US$.

Speaking of share markets in general, there's been a heavy sell-off in the Indian stock markets following the Union Budget 2019. Since the Budget announcement, investor wealth worth Rs 8.8 lakh crore has been wiped out.

The biggest sellers in the ongoing correction are foreign investors.

Why are foreign investors dumping Indian stocks?

Ankit Shah answers this question in one of the latest editions of The 5 Minute WrapUp. Here's an excerpt of what he wrote...

• One of the main reasons is the higher tax burden on the super-rich in the form of additional surcharge.
  
  All individuals and association of persons (AOPs) come under the purvey of this additional surcharge.
  
  Why does this bother foreign investors?
  
  Here's the thing - several foreign portfolio investors (FPIs) are structured as AOPs, limited liability partnerships and trusts.
  
  As such, if they earn over Rs 2 crore a year, they will be subjected to the higher tax surcharge.

Due to the above development, FPIs have been on a selling spree in the latest month. Have a look at the chart below that shows the net monthly flows of foreign investors in the Indian stock markets:

Foreign Investors Turn Net Sellers After Five Months of Buying

In the month of July, foreign investors have sold off equities worth Rs 71 billion.

It's certainly not a small amount. But one must also see the sell-off in the larger context - foreign investors have been net buyers of Indian equities in 2019.

Since the start of the year, their net investment in Indian equities is worth Rs 719 billion. They have been net buyers in five out of seven months.

So, the ongoing sell-off should not be seen as foreign investors exiting India for good. They will come back when the valuations get more attractive to compensate for the higher tax burden.

So, look out for the stocks that will rise fast when the tide of the market turns up.

Moving on, market participants were tracking Tata Motors share price and Mphasis share price as these companies announced their June quarter (Q1FY20) results today.

You can read our recently released Q1FY20 results: Zee Entertainment, SKF India, Torrent Pharma, Monsanto India.

In the news from the finance space, Bajaj Finance share price was in focus today as the company reported 43% year-on-year (YoY) rise in its June quarter consolidated net profit. This was the highest ever profit recorded by the company.

Net interest income during the quarter grew 43% YoY to Rs 36.9 billion.

The consolidated asset under management surged 41% YoY to Rs 1.29 lakh crore.

Total operating expenses to net interest income during the quarter was lower at 34.98% against 37.02% in the same period last year. New loans booked during the quarter increased 29% YoY.

The NBFC also increased its customer franchise 31% as of June 2019.

Even asset quality saw improvement during the quarter. Gross non-performing assets as a percentage of gross advances increased 6bps quarter-on-quarter (QoQ) to 1.6% and net NPA by 1 basis point to 0.64% during the quarter.

Provision coverage ratio improved to 61% in Q1FY20, from 60% in previous quarter.

In the news from the commodity space, crude oil witnessed buying interest today. Gains were seen as signs of slowing global growth in the financial markets added to demand concerns for the commodity.

Crude oil has been trading on a volatile note this month. The commodity saw losses last week after official data showed US stockpiles of products like gasoline rose sharply earlier this month.

Meanwhile, volatility was also seen on the back of ongoing geopolitical tensions in the Middle East.

Iran said that a small oil products tanker missing in the Strait of Hormuz was in its territorial waters. This stoked fraught relations with Iran's neighbors and the West over threats to shipping in the key oil chokepoint.

How this all pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Speaking of crude oil, in the video below, Vijay Bhambwani explains how trading in crude oil is an evergreen strategy. As per him, trading in crude oil offers excellent opportunities in nearly all market conditions due to its unique standing within the world's economic and political systems.

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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