Sensex Ends 132 Points Higher; IT and Healthcare Stocks Witness Buying

Mon, 15 Oct Closing

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After trading on a volatile note throughout the day, share markets in India witnessed buying interest during the closing hours and ended the day in green. Sectoral indices were trading on a mixed note, with stocks in the IT sector and healthcare sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 132 points (up 0.4%) and the NSE Nifty closed up by 40 points (up 0.4%). The BSE Mid Cap index ended the day up 0.6%, while the BSE Small Cap index ended the day up by 1.4%.

The rupee was trading at Rs 73.98 against the US$ in the afternoon session.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.4% and the Shanghai Composite was down by 1.5%. The Nikkei 225 was down by 1.9%. Meanwhile, European markets were trading on a mixed note. The FTSE 100 was up by 0.1%. The DAX was up by 0.4%, while the CAC 40 was down by 0.1%.

Stocks from the sugar sector were witnessing buying interest today after a media report indicated that the government is planning to provide funding to set up an ethanol plant.

As per the news, to boost ethanol production, the government is planning to provide financial help to sugar companies. It was also quoted that government is being asked to approve interest credit of Rs 15 billion to mills.

Till now, the government has approved loan of Rs 44 billion to mills.

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

In the news from commodity markets, crude oil was witnessing buying interest today. Gains were seen as market participants took fresh bets following positive cues from Asian markets. Crude oil rose over 1.5% today to Rs 5,333 per barrel.

Speaking of crude oil, almost every time a rise or fall in the stock markets is invariably linked to crude oil prices.

Logically, it seems right too. Rise in crude oil increases input costs for dependent firms. It also means rising inflation. Rising inflation means rising interest rates.

It also puts pressure on the government to cut excise duty, thereby impacting its revenues. We have already seen that happening. After all, there is an election year coming up.

But has it really affected the stock markets?

Here's what Girish Shetty wrote about it on one of the recent editions of The 5 Minute WrapUp...

• In the short-term: Yes.
  
  But in the long run, as we can see, Sensex returns have been independent of crude oil prices or even positively co-related!
  
  Crude oil prices doubled from US$ 41 in December 2008 to US$84 in April 2010. In the same time, Sensex also doubled from 8,800 levels to 17,600 levels.
  
  So, please don't fret unnecessarily about crude oil.
  
  Check if your business has a moat that helps it pass on input price increases to its customers. In the long run, they will survive and also gain market share from those that can't pass on prices. Short term pessimism due to rising crude oil prices provides a buying opportunity in these stocks.

As per him, focusing on quality stocks rather than crude oil will matter more in the long run.

In the news from the finance space, as per a leading financial daily, the National Company Law Appellate Tribunal (NCLAT) stayed all proceedings against Infrastructure Leasing & Financial Services (IL&FS) and other group companies till its further order.

The appellate tribunal order came over an urgent petition moved by the Ministry of Corporate Affairs after the Mumbai bench of NCLT had turned down its plea for 90 days moratorium over the loans taken by the IL&FS and its subsidiaries.

The government had sought moratorium seeking relief after 49 creditors, including bondholders, demanded payment under threat of legal proceedings.

Note that the complete collapse of IL&FS group will mean a huge default of Rs 910 billion. This is a big mess.

However, the government has taken over and new board is now in place. This is a bit of silver lining to this problem.

But guess what - there are way more cockroaches then initially thought.

As per IL&FS's annual report, there were group companies in the range of 176-251. However, the new board has clarified that there are more than 340 group entities. That means more pain than anyone initially thought.

As the chart below shows, it is really the IL&FS group companies that are in a painful situation.

Even If IL&FS Group Brought This Correction, this is Right Time to Buy & Sit Tight!

In fact, the new board believes the actual liabilities could be understated and has appointed the Serious Investigation Office (SFIO) for forensic audit. This will also help to identify if there was any fraud involved.

There are concerns that the defaults by IL&FS could cause a contagion in the Indian financial sector.

It would be interesting to see how this pans out. Meanwhile, we will keep you updated on all the developments form this space.

From the banking space, IndusInd Bank share price was in focus today as the bank reported a 4.6% year-on-year (YoY) increase in profit at Rs 9.2 billion for the quarter ended September 2018.

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

By the way, in our latest edition of the stock market podcast, we have our Research Analyst, Radhika Pandit present a contrary view on PSU sector. She talks about good PSU stocks that you must look at. Listen in... visit SoundCloud, iTunes or Stitcher.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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