Sensex Ends 79 Points Lower; IT and Metal Stocks Witness Selling

Fri, 9 Nov Closing | Monish Vora, TM Team

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Share markets in India continued to trade in the red during closing hours and ended their trading session marginally lower. Sectoral indices ended on a mixed note with stocks in the IT sector and metal sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 79 points (down 0.2%) and the NSE Nifty closed down by 13 points (down 0.1%). The BSE Mid Cap index ended the day up 0.7%, while the BSE Small Cap index ended the day up 0.6%.

The rupee was trading at 72.59 against the US$.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 2.4% and the Shanghai Composite was down by 1.4%. The Nikkei 225 was down 1.1%.

In the news from the banking sector Punjab National Bank share price was in focus today after the government of India increased stake in the bank by 5.83%.

PNB on Thursday informed that the government bought additional 0.6 billion shares in the bank.

With this, the government's stake in the bank has increased to 71.92% from 66.09%.

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Speaking of PNB, a blue chip stock, Sarvajeet offers an interesting observation about investing in blue chips.

Here's what he wrote in today's edition of The 5 Minute WrapUp...

• Talking about finding quality in large-cap stocks...
  
  If history is to be believed, companies classified as large caps have also failed the test of 'quality'.
  
  Surprisingly, the current mood in the market is to dump the entire mid and small cap space and buy large caps in the name of quality.
  
  Many fund managers believe, in uncertain times like this, one should stick to quality large cap stocks.
  
  Well, to an extent, I agree with them.
  
  But for me... irrespective of market sentiment or market cap, sticking to quality stocks is the only mantra.
  
  I mean look at the recent examples like Vakrangee, Punjab National Bank, PC Jeweller. If someone would have mistaken market cap for quality, he would have paid a hefty price.

The chart below demonstrates this point very well:

In January 2018, PC Jeweller's market cap was in north of Rs 200 billion.

So, if your metric for safety and quality was market capitalisation then this company may have qualified.

However, once the Vakrangee episode broke out and there were serious questions on PC Jewellers corporate governance practices, the frenzy was over.

It is a small cap now, with a market cap of around Rs 50 billion.

It's situation like these where Tanushree's safety first approach to investing comes handy. She strongly believes all large caps are not necessarily blue chips.

She judges 'Safety & Quality' by looking at metrics like long term ROEs, robust operating cash flows, lean balance sheets, managements credibility, and transparency in the books of accounts etc.

You can sign up for Tanushree's StockSelect recommendation service here.

Moving on to the news from the IPO space, Surat-headquartered Ami Organics, which had received market regulators approval for an initial public offering (IPO) in October, is getting ready to launch its IPO in the first half of next month.

The company, according to the draft red herring prospectus (DRHP), will sell 35 lakh shares through the initial stake sale.

Proceeds of the IPO will be used to repay borrowings, fund long-term working capital requirements and for general corporate purposes.

With so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

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

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