Sensex Ends 117 Points Higher; SBI Rallies 11%

Fri, 5 Feb Closing

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Indian share markets witnessed volatile trading activity throughout the day today and ended marginally higher.

Stellar December quarter results by State Bank of India (SBI) and a status-quo stance in policy rates by the Reserve Bank of India (RBI) improved investor sentiment even as mild profit-booking amid heightened volatility trimmed gains at higher levels.

At the closing bell, the BSE Sensex stood higher by 117 points (up 0.2%).

Meanwhile, the NSE Nifty closed higher by 29 points (up 0.2%).

In intraday trade, the BSE Sensex hit 51,000, gaining over 400 points, while the NSE Nifty crossed the crucial 15,000-mark.

SBI, Kotak Mahindra Bank and Dr Reddy's Lab were among the top gainers today. Bharti Airtel and Axis Bank were among the top losers today.

The SGX Nifty was trading at 14,945, up by 50 points, at the time of writing.

The BSE Mid Cap index ended down by 0.9%. The BSE Small Cap index ended down by 0.3%.

Sectoral indices ended on a mixed note. Gains were largely seen in the banking sector, healthcare sector and realty sector.

Telecom stocks and oil & gas stocks, on the other hand, witnessed selling pressure.

Asian share markets ended on a positive note as progress in vaccine distribution and US stimulus hopes prompted bets on further normalisation in the global economy.

The Nikkei surged 1.5% while the Shanghai Composite stood lower by 0.2%. The Hang Seng ended up by 0.6%.

European stock markets rose today, tracking an upbeat sentiment from Wall Street on hopes of a faster global economic recovery.

US stock futures are trading higher today indicating a positive opening for Wall Street indices. Nasdaq Futures are trading up by 44 points (up 0.3%), while Dow Futures are trading up by 125 points (up 0.4%).

The rupee is trading at 72.89 against the US$.

Gold prices for the latest contract on MCX are trading up by 1% at Rs 47,157 per 10 grams.

Speaking of the current stock market scenario, with the recent rally seen in stock markets, note that the smallcap index has gained more than 110% since the lows in March 2020.

While caution is indeed warranted, Richa Agrawal, Research Analyst at Equitymaster, thinks there is still a lot more steam left to this smallcap rally.

Despite rallying more than 110% since the March 2020 lows, Richa believes small-cap stocks are set for a massive up move in 2021 and beyond.

Here's what she wrote in a recent edition of Profit Hunter...

• The P/E for smallcap index doesn't make sense. There are thousands of listed small companies. Some have negative earnings. The base is not a valid data to work with.
  
  That said, the closest proxy to relative valuations is the Smallcap to Sensex ratio,
  
  Historically, this ratio has averaged 0.43x. In the previous mega runs of the smallcap index, this ratio has gone as high as 0.75x.
  
  In January 2018, when smallcaps peaked, the ratio was at 0.58x.
  
  Guess where this ratio is now after a 100% run up in the smallcap index?
  
  0.38.
  
  It's lower than the median over 2 decades.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

Richa was on YouTube with a video on the revival in smallcaps. Should you buy, hold or sell your smallcaps?

Find out in this video.

In news from the financial markets, the Reserve Bank of India (RBI) kept its policy repo rate unchanged at 4% and reverse repo rate at 3.35%, and promised an accommodative stance as long as necessary to revive growth and come out of the Covid-19 induced stress.

The central bank said it will restore the cash-reserve ratio (CRR) to its normal levels in two phases, 3.5% (from 3% now) effective March 27, and then at 4% from May. This would mean banks will again have to set aside money with the central bank.

Rate sensitive stocks in the realty sector, banking sector and automobile sector ended higher today as the six-member monetary policy committee (MPC) of the RBI maintained status quo stance on the policy rates in its last bi-monthly meeting of the current financial year.

This is the fourth time in a row that the MPC has decided to keep the policy rate unchanged. The RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.

The RBI governor said the gross domestic product (GDP) will rise 10.5% in 2021-22. He said that inflation should be at 5.2% for the current quarter, and 5.2-5% for the first half of the next fiscal and that this would be within the limit of RBI's policy mandate of keeping the consumer price index (CPI) inflation within 2-6%.

This was the first meeting of the panel after the Budget 2021-22 earlier this week projected a nominal GDP growth rate of 14.5% and fiscal deficit of 6.8% for the financial year beginning April 1, 2021.

In a major reform that will have a huge ramification in the coming days for India's bond market, retail investors can now open gilt accounts with the RBI and trade in government bonds. The retail investors can take positions both in primary and secondary markets, RBI governor Shaktikanta Das said in his speech.

Reports state that this is a game changer as far as retail participation in the bond market is concerned. Major efforts in the past failed to persuade retail investors to take positions in the government debt papers. They could do it via banks, and mutual funds, or through various indices.

However, if the gilt accounts are opened with the RBI and positions are taken directly in the market, retail investors will flock to the route, something that bond market experts have been suggesting for a long time.

We will keep you updated on the latest developments from this space. Stay tuned.

Speaking of stock markets, in his latest video for Fast Profits Daily, Vijay Bhambwani lists the sectors he is most bullish on after the budget.

Tune in to find out more:

Moving on to stock specific news...

ITC was among the top buzzing stocks today.

Shares of the company extended their rally to the fifth straight day, gaining as much as 4% to hit a fresh 52-week high of Rs 239 on the BSE in intra-day trade.

In the past five trading sessions, shares of ITC have surged 18% as there was no material announcement in the Budget that would significantly impact any of the consumer stocks.

ITC today informed stock exchanges that the board of directors of the company will consider a declaration of interim dividend for the financial year 2020-21 in the forthcoming meeting.

The company is scheduled to announce its October-December quarter (Q3FY21) results on Thursday, February 11, 2021.

ITC share price ended the day up by 1.7%.

Apart from ITC, market participants were also tracking public sector banks (PSBs) today.

Shares of PSBs witnessed buying interest today with the Nifty PSU Bank index surging 8%, hitting a fresh 52-week high after sector giant State Bank of India (SBI) reported a solid set of numbers for the quarter ended December 2020.

Besides, the government's proposal to privatize two PSU banks in the financial year 2021-22 also fueled rally in these stocks.

Shares of Bank of India, Central Bank and Indian Bank gained in the range of 3-5%.

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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