Sensex Ends 323 Points Lower; Realty and Banking Stocks Witness Selling

Thu, 17 Sep Closing

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Indian share markets witnessed selling pressure throughout the day today and ended lower.

Benchmark indices slipped today following losses in global markets after the US Federal Reserve's policy-making committee indicated the overnight rate could stay close to zero for years to reach its 2% inflation target.

At the closing bell, the BSE Sensex stood lower by 323 points. Meanwhile, the NSE Nifty ended down by 88 points.

Hindalco was the top loser in NSE. Meanwhile, the top gainers in NSE today include Dr Reddy's Laboratories and Zee Entertainment.

SGX Nifty was trading at 11,526, down by 90 points, at the time of writing.

The BSE Mid Cap index ended down by 0.2%. The BSE Small Cap index ended down by 0.5%.

On the sectoral front, realty stocks and banking stocks were among the hardest hit.

Asian stock markets ended on a negative note. As of the most recent closing prices, the Hang Seng ended down by 1.7% and the Shanghai Composite stood lower by 0.4%. The Nikkei ended down by 0.7%.

US stock futures are trading lower today, indicating a negative start for Wall Street indices.

Nasdaq Futures are trading down by 131 points (down 1.2%), while S&P Futures are trading down by 36 points (down 1%).

The rupee is trading at 73.66 against the US$.

Gold prices are trading down by 0.9% at Rs 51,370 per 10 grams. Over the last three weeks, gold is trading in a narrow range since hitting record highs of Rs 56,200 last month.

Even with the recent volatility in prices, gold and silver remain among the best performing commodities this year to combat the fallout from the coronavirus pandemic.

So, is it time to book profits in gold and silver?

In our latest episode of Investor Hour Podcast, Jim Rogers joins Rahul Goel to talk about gold and more...

In the podcast, he tells that he was buying gold and silver and would buy even more. He believes you can get rich with investments in gold and silver.

In this freewheeling chat, he also talks about China, his view on the US dollar, the opportunities in agriculture, the bubble in tech stocks, bonds, bitcoin...and more.

Listen in to the podcast here.

You can also watch the podcast video here:

In news from the mutual funds space, the markets regulator is planning another set of reforms for mutual funds where it might revamp the mutual fund (MF) risk-o-meter.

As per an article in a leading financial daily, the market regulator will expand the MF risk-o-meter to include a "Very High" risk category.

The five existing categories of MFs are low, moderately low, moderate, moderately high and high.

The article added that risk in equity funds will be assesses on the basis of three parameters - market capitalisation, volatility, and impact cost.

Equity funds will be reclassified into the high and high risk categories. All credit risk funds will be moved to the new very high risk category.

The report added that credit risk funds will be judged on the basis of quality, duration, and liquidity of bonds.

Asset management companies (AMCs) will be required an annual timeline of how the risk has evolved in each fund. Any change in a scheme's underlying assets should reflect in the scheme's risk classification.

Note that the proposal comes shortly after the regulator on September 13 modified norms on asset allocation by multi-cap funds.

The circular mandates multi-cap equity schemes to allocate 25% each to largecaps, midcaps, and smallcaps. The remaining 25% is up to the fund manager.

The regulator also issued a clarification on Sunday, suggesting that based on the preference of unit holders, mutual funds could consider rebalancing.

They also have an option to facilitate a switch for unitholders to other schemes. They could also merge the multicap fund with a largecap fund or convert it to large cum midcap fund.

Assuming every fund rebalances, Friday's circular is expected to trigger a move of around Rs 280 billion from largecaps to smallcaps.

Richa Agarwal, lead smallcap analyst at Equitymaster, believes this move would be net positive for select smallcap stocks. As per Richa, there could be a speculative rally across smallcaps.

Here's what she wrote about it in a recent edition of the Profit Hunter:

• It would be myopic and imprudent to bet on any smallcap in the hope of a regulation driven rally.
  
  That said, you must invest in smallcaps selectively with long-term horizon in mind.
  
  Here's why...

• You see, despite the rally in smallcaps since March, there is still a huge valuation gap between smallcaps and Sensex.
  
  The ratio of smallcaps to Sensex stands at 0.37 now, as compared to long-term average of 0.44 times.
  
  This means certain smallcaps will witness a significant rebound, irrespective of regulations.

Richa believes this could be a once in a decade opportunity to get rich from select smallcaps.

Moving on to stock specific news...

Dhanuka Agritech was among the top buzzing stocks today.

Dhanuka Agritech share price rallied as much as 10% today, a day after the company approved the buyback of up to 10,00,000 equity shares at a final price of Rs 1,000 per share for an aggregate amount not exceeding Rs 1 billion.

The agrochemical company has fixed September 28, 2020 as the record date for the purpose of determining the entitlement and the names of equity shareholders who are eligible to participate in the buyback.

In other news, HSIL share price rallied over 10% after the company said it will consider share buyback next week.

Stock of the company hit its 52-week high, surpassing its previous high of Rs 71.35 hit on September 16, 2020.

"Meeting of the Board of Directors of the Company will be held on Monday, September 21, 2020 to consider the proposal of buyback of the fully paid-up equity shares of the Company," the company said in an exchange filing.

Speaking of buybacks, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

• The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

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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