Sensex Ends 162 Points Higher; Banking and Telecom Stocks Witness Buying

Wed, 4 Sep Closing

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After opening the day on a flat note, Indian share markets witnessed buying interest during closing hours and ended higher.

Gains were seen in the metal sector, banking sector and telecom sector, while automobile stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 162 points (up 0.4%) and the NSE Nifty closed higher by 47 points (up 0.4%). The BSE Mid Cap index ended the day up 0.1% and the BSE Small Cap index ended the day up by 0.3%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 4% and the Shanghai Composite stood higher by 0.9%. The Nikkei 225 was up 0.1%.

The rupee was trading at 72.05 against the US$.

Speaking of the economy and Indian stock markets, Richa Agarwal reveals her investing strategy amid all gloom and doom.

She also talks about the stock she is looking at in such times. She is very cautious in her approach and looks for the stocks that survive in all the market cycles.

Tune in to find out...

Maruti Suzuki share price was in focus today. The company said it has decided to shut down operations for two days at its Haryana plants.

In a statement, the company said it will observe "no production day" on September 7 and 9 at Gurugram and Manesar plants.

Stock of the company witnessed selling pressure and ended over 4% lower today on back of the above news.

In the news from the macroeconomic space, India's services sector activity growth eased in August as new business inflows rose at a slower pace. Following this, job creation and output expansion moderated.

The IHS Markit India Services Business Activity Index declined from 53.8 in July to 52.4 in August, pointing to a slower rate of increase in output.

The IHS Markit India Composite purchasing manager's index (PMI) Output Index, that maps both the manufacturing and services industry, fell from 53.9 in July to 52.6 in August.

Notwithstanding the decline, the composite PMI Output Index was in expansion territory for the 18th month in a row.

Growth of aggregate new orders moderated from July and was modest.

Private sector jobs rose further in August, but the pace of expansion was slower.

In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

Despite the decline, service providers remained confident of a rise in business activity in the coming 12 months, with optimism strengthening to a one-year high.

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

In the news from the commodity space, India's gold imports in August plunged 73% year-on-year (YoY).

This was the lowest level in three years as a rally in local prices to a record high and a hike in import duty curtailed retail purchases of the precious metal.

As per the news, India imported 30 tonnes of gold in August, down from 111.47 tonnes a year ago.

In value terms, the country's imports in the month fell 62% to US$ 1.37 billion.

Note that Lower imports by the world's second biggest consumer could cap gains in global prices that are trading near their highest level in over six years.

Speaking of gold, globally, gold prices are up around 20% so far this year amid inflows into gold-backed assets. US-China trade war, volatility in risk assets like equities, and central banks signaling a looser monetary policy have boosted the safe-haven appeal of gold.

As per a Bloomberg report, inflows into gold-backed exchange traded funds (ETFs) topped 100 tons in August, the highest since February 2013. Holdings rose 101.9 tons, bringing total known assets to 2,453.4 tons, the third straight monthly increase after the addition of a combined 154.1 tons in June and July.

For domestic markets, jewelers hope that upcoming festive season will improve gold demand, which has been hurt due to high prices.

As many central banks diversify their portfolio, they are adding gold as global growth slows and trade and geopolitical tensions rise.

Also, speaking of gold, co-head of research, Tanushree Banerjee shares some interesting information on the Sensex to Gold (per 10 grams) ratio going back 15 years.

Have a look at the chart below:

Sensex versus Gold in Fairly Valued Zone

Here's what she wrote about it in one of the editions of The 5 Minute WrapUp...

• While the ratio has been quite volatile, the average ratio turns out to be 1.
  
  In other words, whenever the Sensex has risen at a much faster pace than gold prices, its fall has also been equally precipitous. The reason behind this volatility is not hard to find.
  
  Stock markets are more amenable to manipulation than gold prices are.
  
  Thus, if the Sensex to gold price ratio is way more than one, it could be a signal the Sensex is overvalued.
  
  Alternatively, if it is way below one, it could mean that Sensex is undervalued.
  
  The ratio stands at around 1.09 currently, indicating that the Sensex is trading pretty close to its fair value!

Thus, even though the market correction seems overdone in mid and smallcaps, the bluechips, particularly those in the Sensex, aren't undervalued yet.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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