Sensex Ends 134 Points Lower; Finance and Banking Stocks Witness Selling

Fri, 18 Sep Closing

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Indian share markets witnessed selling pressure during closing hours today and ended marginally lower.

Benchmark indices witnessed a sudden decline in the last hour of trading, amid selling seen in banking and finance stocks.

At the closing bell, the BSE Sensex stood lower by 134 points. Meanwhile, the NSE Nifty ended down by 11 points.

HDFC Bank was the top loser in NSE. Meanwhile, the top gainers in NSE today include Dr Reddy's Laboratories and Cipla.

SGX Nifty was trading at 11,516, down by 7 points, at the time of writing.

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

On the sectoral front, finance stocks and banking stocks witnessed selling pressure. Pharma stocks, on the other hand witnessed buying interest.

Asian stock markets ended on a positive note. As of the most recent closing prices, the Hang Seng ended up by 0.4% and the Shanghai Composite stood higher by 2.1%. The Nikkei ended up by 0.2%.

US stock futures are trading mixed today. Nasdaq Futures are trading up by 61 points (up 0.6%), while Dow Futures are trading down by 151 points (down 0.5%).

The rupee is trading at 73.45 against the US$.

Gold prices are trading up by 0.3% at Rs 51,605 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.

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In news from the mutual funds space, the markets regulator has tweaked norms for assigning net asset value (NAV) while purchasing units of mutual fund (MF) schemes.

"It has been decided that with respect to purchase of units of MF schemes (except liquid and overnight schemes), closing NAV of the day shall be applicable, on which the funds are available for utilisation irrespective of the size and time of receipt of such application," the regulator said.

Until now, investors who gave a cheque for below Rs 2,00,000 got the same day's NAV, while those putting more got the NAV of the day when the cheque was realised.

The regulator has also asked mutual fund houses to put in place a policy specifying role of several teams engaged in fund management and back office with regard to execution of order and allocation of trade among various schemes.

The regulator has asked asset management companies (AMCs) to put in place a written down policy such as specific activities, role and responsibilities of various teams engaged in fund management, compliance, risk management and back-office, among others, with regard to order placement, execution of order, trade allocation among various schemes and other related matters.

In other news, industry body Association of Mutual Funds in India (AMFI) has said that aligning multi-cap schemes to comply with the new definition could lead to the creation of a bubble in small- and mid-caps.

In a statement to markets regulator, AMFI said that the compulsion to deploy about Rs 260 billion in smallcap stocks and close to Rs 105 billion in midcap stocks in a span of a few months will most likely create a bubble in those two segments. Majority of small-caps and a large number of mid-caps are highly illiquid.

AMFI added that the circular compels MFs to buy stocks in the broader universe at expensive valuations. AMFI also gave a few recommendations such as renaming the existing multi-cap fund category to "flexi-cap", to allow dynamic allocation to all three stock categories.

On September 11, the capital markets regulator issued a circular directing multi-cap schemes to deploy at least 25% each in large-, mid-, and small-caps. At present, such schemes manage Rs 1.47 trillion in assets.

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...

Dr Reddy's Lab was among the top buzzing stocks today.

Dr Reddy's Lab share price surged over 12% to hit a fresh record high of Rs 5,497 on the BSE, after the company entered into a settlement agreement with Celgene Corp.

In the past three days, the stock has gained as much as 15% after the firm said it has been roped-in by Russia-based Russian Direct Investment Fund (RDIF) to distribute 100 million Covid-19 vaccine doses in India.

Apart from Dr Reddy's, shares of other pharma companies also witnessed huge buying interest today, with the S&P BSE Healthcare index surging 4% to hit its record high on the back of positive news flow.

Laurus Labs and Apollo Hospitals surged to record highs while Strides Pharma Science, Lupin and Neuland Labs scaled their 52-week highs.

Laurus Labs will turn ex-date for 1:5 stock split on September 29, 2020. The company's board of directors has fixed September 30, 2020, as the record date for the sub-division of equity shares of the company from the existing face value of Rs 10 each to Rs 2 each.

The company announced its stock split plan in April, to make the stock more affordable for the small retail investors and increase liquidity.

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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