Sensex Ends 260 Points Lower; Finance and Banking Stocks Witness Huge Selling
Closing

Indian share markets witnessed negative trading activity today and ended their trading session lower.

The Reserve Bank of India's (RBI) move to cut repo rate by 40 basis points (bps) failed to cheer markets.

Selling pressure was seen as RBI Governor Shaktikanta Das said the GDP growth in FY21 is expected to be in negative territory.

Sectoral indices ended on a mixed note with stocks in the finance sector and banking sector witnessing selling pressure, while IT stocks and healthcare stocks ended in green.

At the closing bell, the BSE Sensex stood lower by 260 points and the NSE Nifty closed down by 67 points.

The SGX Nifty was trading at 9,041, down by 34 points, at the time of writing.

The BSE Mid Cap index and the BSE Small Cap index ended their day down by 0.8% and 0.2%, respectively.

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Asian stock markets finished on a negative note. Japanese shares fell today as risk sentiment was hit after China's plans to impose a new security legislation on Hong Kong fueled worries over Sino-US tensions.

The Nikkei erased early gains and dropped 0.8%. Meanwhile, the Hang Seng tumbled the most in almost five years on back of the above news.

The Hang Seng dipped 5.6%, or 1,349.89 points today, its biggest decline since July 2015.

Gold prices are currently trading up by 1.2% at Rs 46,944.

The rupee is trading at 75.95 against the US$.

Note that the coronavirus impact has shaken markets worldwide. After all, 2020 has already seen one of the worst market crashes in history.

Will the 2020 Market Crash Be Worse than 2009?

Naturally, there is an atmosphere of fear all round.

Is it time to sell stocks now? Will the correction get worse?

History has shown that after years like the one we had just now, the next 3 years are good for the markets. In fact, these corrections are the rare times when you find businesses with solid fundamentals at reasonable valuations.

If you can find good businesses that can survive the current crisis, you will do well in the long run.

Meanwhile, in the video below, Rahul Shah, talks about how you can be 'Aatma Nirbhar' or self-reliant in your stock selection. He talks about some simple methods and principles so that you are able to buy stocks on your own and not be dependent on anyone.

Tune in to find out more...

Moving on, market participants were tracking Bosch share priceUPL share price, and JSW Steel share price as these companies announced their March quarter results (Q4FY20) today.

You can read our recently released Q4FY20 results of other companies here: Ultratech CementBajaj AutoL&T InfotechNescoSanofi IndiaApollo TyresAjanta PharmaGrindwell NortonJubilant Foodworks.

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In news from the IT sector, shares of NIIT Technologies surged 9% intraday today after the company announced that its Rs 3,374-million buyback offer will commence from May 29.

The company, in a regulatory filing, said that the regulator had provided an extension for dispatching the letter of offer within 15 days from the closure of the lockdown as mandated by the government.

The buyback offer will open on May 29 and close on June 11.

Last year in December, the company had said its board has approved a proposal to buy back up to 1.95 million fully paid-up equity shares of a face value of Rs 10 each at a price of up to Rs 1,725.

Earlier this month, the company's board also approved the change of name of the company from 'NIIT Technologies' to 'Coforge', subject to shareholders' approval and other necessary approvals, if any.

Note that last month, the markets regulator had eased the 12-month cooling-off period that companies have to observe between buybacks and equity fundraising.

A company is restricted from raising further capital for one year from the expiry of the buyback period.

The market regulator had said "to enable quicker access to capital, it has been decided to temporarily relax the period of restriction provided in regulation 24(i)(f) of the buyback regulations. Accordingly, the words "one year" shall be read as "six months" in the said regulation."

Many companies have launched share buybacks amid a sharp fall in their stock prices. Some of these companies include Motilal Oswal Financial ServicesDelta CorpDalmia Bharat, Emami and Kalpataru Power.

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.

Moving on to news from the finance sector, SBI Cards and Payment Services share price witnessed huge selling pressure today.

Stock of the company slipped 9% to Rs 495 on the BSE after the Reserve Bank of India (RBI) announced an extension of the moratorium on loan EMIs by three months.

The non-banking finance company's stock was trading at its lowest level since listing on March 16, 2020.

In a surprise move, the RBI today decided to cut the repo rate by 40 basis points from 4.4% to 4%. The reverse repo rate has been reduced to 3.35%.

It also extended the moratorium on loan repayments by three more months. In March, the central bank had allowed a three-month moratorium on payment of all term loans due between March 1, 2020, and May 31, 2020.

For the working capital facilities, the interest payment has been deferred by another three months, in-line with extension of moratorium on term loans.

SBI Cards is the second largest credit card issuer in India.

Earlier this month, the company had reported a 71% year-on-year (YoY) decline in pre-tax profit at Rs 1.1 billion Q4FY20, due to additional bad loan provisioning of Rs 4.9 billion factoring in Covid-related disruption.

Apart from SBI Cards, shares of other financials including banks, housing finance companies and non-banking finance companies (NBFCs) witnessed selling pressure today, on back of the above news.

Shares of AU Small Finance Bank, Bajaj Finance, Axis Bank, Bandhan Bank, HDFC and ICICI Bank fell in the range of 4-8%.

Meanwhile, shares of Union Bank of India, Power Finance Corporation and Mahindra & Mahindra Financial Services hit their respective 52-week lows in intraday trade today.

What effects RBI's measures have on Indian stocks markets and the Indian economy remains to be seen. Meanwhile we will keep you updated on the latest developments from this space.

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


Sensex Trades 300 Points Lower; Axis Bank & Bajaj Finance Top Losers
12:30 pm

Share markets in India are presently trading on a volatile note. Benchmark indices edged lower today even after the Reserve Bank of India (RBI) slashed repo rate by 40 bps to 4%.

Selling pressure is seen as RBI Governor Shaktikanta Das said the GDP growth in FY21 is expected to be in negative territory.

Barring IT stocks, all sectoral indices are trading on a negative note with stocks in the finance sector, metal sector and banking sector witnessing most of the selling pressure.

The BSE Sensex is trading down by 301 points (down 1%), while the NSE Nifty is trading down by 85 points (down 1%).

The BSE Mid Cap index is trading down by 0.6% and the BSE Small Cap index is trading down by 0.2%.

Gold prices are trading up by 0.8% at Rs 46,761 per 10 grams.

The rupee is trading at 75.77 against the US$.

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Market participants are tracking Bosch share price, UPL share price, and JSW Steel share price as these companies are scheduled to announce their March quarter results (Q4FY20) later today.

You can read our recently released Q4FY20 results of other companies here: Ultratech CementBajaj AutoL&T InfotechNescoSanofi IndiaApollo TyresAjanta PharmaGrindwell NortonJubilant Foodworks.

In news from the banking sector, shares of Bandhan Bank slipped over 6% today after the private lender said its services have been impacted in some areas of West Bengal and Odisha due to cyclone Amphan and the cyclone is likely to impact business worth Rs 2.6 billion.

In a regulatory filing, the bank said, "as per the initial assessment, in our areas of operations, 49 banking units (micro banking outlet) in five districts were impacted of which 45 are operational today."

The bank further said, it could continue operations in all but five branches in the affected districts. Where the outlets could not continue services, it was due to issues in accessibility.

As per estimate, the business of around 65,000 of its micro banking borrowers, amounting to an exposure of approximately Rs 2.6 billion could be impacted due to the cyclone.

Bandhan Bank share price is presently trading down by 5.5%.

Moving on to news from the macroeconomic space, in a new set of measures to trim the impact of coronavirus on the economy, the Reserve Bank of India (RBI) today decided to cut the repo rate by 40 basis points (bps) from 4.4% to 4%.

The reverse repo rate has been reduced to 3.35%.

RBI Governor Shaktikanta Das said that RBI's Monetary Policy Committee (MPC) met again from May 20-22. MPC voted to 5:1 majority to reduce the policy repo rate by 40 basis points.

The RBI also extended the moratorium on payment of loans by another three months till August to provide much-needed relief to borrowers.

Earlier in March, the apex bank had allowed a three-month moratorium on payment of all term loans due between March 1, 2020, and May 31, 2020.

As a result of this moratorium, individuals' EMI repayments of loans taken were not deducted from their bank accounts. The EMI payments will restart only once the moratorium time period expires on August 31.

Here are some key takeaways from RBI's press conference:

RBI governor Shaktikanta Das said that the private consumption, which comprises 60% of the GDP, has taken the biggest hit. Both the demand compression and supply disruption has taken a toll on the economy.

On economic growth in the current fiscal, the RBI projected negative growth with a pickup in growth impulses in second half.

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The special refinancing facility of Rs 150 billion to SIDBI at repo rate for 90 days for lending & refinance operations has been further rolled over for another 90 days at the end of initial 90 days period.

The RBI said it will extend Rs 150 billion line of credit to EXIM Banker.

The RBI increased export credit period to 15 months from 1 year.

The governor said inflation outlook is highly uncertain due to the outbreak of the COVID-19 pandemic and expressed concern over elevated prices of pulses. He also said there is a need to review import duties to moderate prices.

He said that headline inflation may remain firm in the first half of the year and may ease in second half. He added that inflation may fall below 4% in the third or fourth quarter of the current fiscal.

Note that in March, the RBI governor had announced several measures to ease liquidity pressure in the banking system and to boost the economy from the coronavirus shock, including a sharp 75 basis points rate cut in March.

With the RBI cutting interest rates, the focus of market participants has now shifted to whether the RBI's decision will translate into better economic activity in the near term.

Note that RBI rate cuts have always had a big gap with bank lending rates. This is evident in the chart below:

Yet Another RBI Rate Cut May Not Result in Lower Lending Rates

Here's what Tanushree Banerjee wrote about it in one of the editions of The 5 Minute WrapUp...

  • It will be a while before lower lending rates stoke the economy.

    Therefore, hoping for an immediate revival in the economy is futile. The RBI has no magic wand to do this.

    Rather look for stocks that can outperform irrespective of the RBI policy.

    I believe the cement sector may be a good place to start.

    One of my recent recommendations from the sector is a typical Rebirth of India stock.

    And I won't be surprised if it repeats its 2002-2006 performance.

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


Indian Indices Trade on a Volatile Note; RBI Cuts Repo Rate by 40 bps
10:30 am

Share markets in India have extended early losses and are presently trading on a volatile note.

Benchmark indices edged lower today even after the Reserve Bank of India (RBI) slashed repo rate by 40 basis points (bps) to 4% and maintained the stance 'accommodative'.

Consequently, reverse repo rate now stands at 3.35% from 3.75% earlier.

Selling pressure is also seen as RBI Governor Shaktikanta Das said the GDP growth in FY21 is expected to be in negative territory.

The RBI also announced a three-month moratorium for all term loan repayments between March 1 and May 31.

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In March, the RBI governor had announced several measures to ease liquidity pressure in the banking system and to boost the economy from the coronavirus shock, including a sharp 75 basis points rate cut in March.

The BSE Sensex is trading down by 394 points, down 1.1%, while the NSE Nifty is trading down by 112 points.

Shares of HDFC and ICICI Bank fell over 4%, while Axis Bank, Bajaj Finance, and Tata Steel are trading down by 3%.

Barring IT stocks, all sectoral indices are trading in red with stocks in the banking sector, metal sector, and finance sector witnessing most of the selling pressure.

More details to follow in the upcoming commentary.


Sensex Opens Lower; Metal and Automobiles Stocks Under Pressure
09:30 am

Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.9% while the Hang Seng is down 3.4%. The Nikkei 225 is trading down by 0.4%. Wall Street ended lower on Thursday, a day after hitting two-month highs, on a fresh wave of China-US tensions that raised doubts about the trade deal reached early this year between the world's two largest economies.

Back home, India share markets opened lower. The BSE Sensex is trading down by 124 points while the NSE Nifty is trading down by 45 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.1% and 0.3% respectively.

Sectoral indices are trading mixed with energy stocks and realty stocks witnessing buying interest. Automobiles stocks and metal stocks are trading in the red.

Moving on, gold prices are currently trading down 1.6% at Rs 46,388.

The rupee is currently trading at 75.60 against the US$.

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In the news from the oil & gas space. Oil prices were on the rise today, heading for a fourth straight week of gains, amid more evidence that fuel demand is recovering as countries ease business and social restrictions that were imposed to counter the coronavirus pandemic.

Brent crude was up 0.4%, at US$36.20 a barrel, after gaining nearly 1% on Thursday.

West Texas Intermediate crude was up 0.2%, at US$33.97 a barrel, having gained more than 1% in the last session.

Note that last month, crude oil futures crashed and briefly went to negative prices, implying that investors would need to pay buyers to take delivery of crude oil amid dwindling storage space.

What effects crude oil prices have on Indian stocks markets and the Indian economy remains to be seen. Meanwhile we will keep you updated on the latest developments from this space.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Dr Reddy's Labs has received Establishment Inspection Report (EIR) from USFDA for its formulations manufacturing plant-3 at Bachupally, Hyderabad, indicating closure of the audit.

The EIR implies closure of the audit and the unit had received a form 483 with one observation in February.

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Meanwhile, the company reported a more than 71% increase in consolidated net profit for the quarter ended March on the back of improved showing in the key global generics business, a turnaround in Europe market and new launches in North America.

Total revenue from operations was more than 10% higher.

New launches, scale up of existing products and a favorable forex rate, which was partially offset by price erosion, helped the growth in the North America generic market.

Volumes were higher partially due to COVID-19 related stocking up. During the quarter, the company had launched five new products.

Dr. Reddy's share price opened down by 0.2%.

Here's an interesting data on Dr. Reddy's Lab, investing just Rs 100,000 in Dr. Reddy's Labs in 1992, it would have given a whopping Rs 4.89 crores in 2014!

Profit Opportunities in the Rebirth of India

Co-head of Research, Tanushree Banerjee believes, the opportunities in the Rebirth of India are not only more profitable than the ones in 1991 but the gains could come faster too.

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


SGX Nifty Trades Lower, US-China Tensions, JK Lakshmi Cement Q4 Results, and Top Cues in Focus Today
Pre-Open

Indian share markets ended marginally higher yesterday.

Benchmark indices erased most of gains in the last hour of trading, but still ended on a positive note for the third straight day.

Sectoral indices ended on a mixed note with stocks in the automobile sector and metal sector witnessing buying interest, while power stocks and banking stocks witnessed selling pressure.

At the closing bell yesterday, the BSE Sensex stood higher by 114 points and the NSE Nifty closed up by 40 points.

The BSE Mid Cap index and the BSE Small Cap index ended up by 0.8% and 0.7%, respectively.

SGX Nifty is currently trading down by 51 points, or 0.56% lower at 9,030 levels. Indian share markets are headed for a flat to negative start today following the negative trend on SGX Nifty.

Asian stock markets witnessed selling pressure yesterday as deteriorating Sino-American ties cast a cloud over the recent rally in risk assets.

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President Donald Trump stoked tensions by tweeting criticism of Xi Jinping's leadership, two days before the biggest Chinese political gathering of the year.

Speaking of stock markets and the coronavirus crisis, Richa Agarwal, editor of our premium smallcap service Hidden Treasure, talks about robust smallcap businesses that are not just resilient but likely to emerge stronger from the coronavirus crisis.

Tune in now...

Richa also recently spoke about her top 3 stocks at the Pathbreaking Profits Summit.

Thousands attended the summit. In case you missed it, you can still watch the video of the summit here or if you prefer, you can read the transcript here.

Moving on, market participants will be tracking Bajaj Finserv share priceHawkins Cookers share price, and Colgate Palmolive share price as these companies announced their March quarter results (Q4FY20) yesterday.

You can read our recently released Q4FY20 results of other companies here: Ultratech CementBajaj AutoL&T InfotechNescoApollo Tyres, Ajanta Pharma, Jubilant Foodworks.

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Domestic Gold Prices Ease

Domestic gold prices edged lower yesterday for the first time in three days. On (Multi Commodity Exchange MCX), June gold futures fell 0.6% to Rs 46,845 per 10 grams.

Tracking gold, silver futures slumped 1.6% to Rs 48,255 per kg.

Last week, gold prices had hit a new high of Rs 47,980 tracking rally in global rates amid increasing US-China tensions and expectations of further stimulus from central banks.

In global markets, gold prices eased yesterday but losses were capped amid US-China tensions. Spot gold slid 0.6% to US$ 1,738.97 per ounce. US gold futures slipped 0.6% to US$ 1,740.80.

The US Senate passed a bill that could bar some Chinese companies from listing on American exchanges.

Earlier this week, on Monday, gold rallied to its highest since October 2012, driven by economic damage concerns, US-China tensions, and massive monetary and fiscal stimulus.

Speaking of gold, how lucrative has gold been as a long-term investment in India?

The chart below shows the annual returns on gold over the last 15 years...

Gold Has Been a Shining Long-Term Investment

As you can see, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.

Here's what we wrote about this in one of the editions of The 5 Minute WrapUp...

  • "In fact, gold has delivered double-digit gains in 10 of the last 15 years.

    During the entire 15-year period, gold has shot up 555% (compounded annual return of 12.1%).

    During the same period, the Sensex surged 511% (compounded annual return of 12.0%). If you include dividends, the Sensex returns would be higher than gold by a couple of percentage points.

    One must note that the Sensex returns are not representative of the broader market returns. Moreover, gold was a no-brainer. You didn't have to study financial statements, business models and forecast future earnings growth to get a double-digit return on your investment."

Also speaking of gold, note that the interest in gold has gone up ever since stock markets crashed in March. Gold prices in the international markets are getting close to its all-time high.

But bitcoin has been on an up move too. It's price in dollars has almost doubled in the last two months.

In his latest video, Apurva Sheth, lead chartist at Equitymaster, compares gold and bitcoin. He explains, which is the better asset in this difficult economic situation.

Tune in to his video here...

JK Lakshmi Cement March Quarter Results

JK Lakshmi Cement reported a more-than-double profit before tax (PBT) at Rs 1.3 billion for March quarter, on the back of strong operational performance.

The company had a PBT of Rs 574 million in the same quarter last fiscal.

The company's sales at Rs 10.6 billion were lower as compared to Rs 11.7 billion in the corresponding quarter of previous year because of the lockdown in the last 10 days of the month.

The company's EBITDA (earnings before interest, tax, depreciation and amortisation) during the quarter rose 51.6% to Rs 2,245 million against Rs 1,481 million in the year-ago quarter.

EBITDA margin improved to 21.1% from 12.6% in Q4FY19.

The management said the company's efforts in improving product mix, market optimisation, enhancing the premium products sales, reduction in logistic costs and improvement in plant efficiency parameters enabled the company to post better returns.

To know more, you can read the company's latest result analysis on our website.

M&M in Talks to Sell 29% Stake in Specialty Steel JV

From the automobiles sector, Mahindra & Mahindra is in talks to sell 29% stake in its speciality steel joint venture (JV) back to its two existing partners, Japan's Sanyo Special Steel Co and Mitsui Corp.

Reportedly, the company is looking to exit from non-core businesses. M&M will sell its stake in Mahindra Sanyo Special Steel (MSSSPL) in one shot or in multiple tranches and is aiming to raise Rs 2.5-3 billion.

M&M had 51% in the JV and Sanyo 29%, while the remaining 20% was held by Mitsui.

However, in 2018, Sanyo bought around 22% in Mahindra Sanyo, increasing its holding to 51%.

Consequently, MSSSPL ceased to be a subsidiary of M&M. Note that, MSSSPL had revenues of around Rs 1.2 billion in FY19.

How this arrangement pans out remains to be seen. We will keep you updated on the developments from this space.

Exit Option for Franklin Templeton Mutual Fund Investors

Moving on to news from the mutual funds space, the Indian stock market regulator mandated listing of units of schemes being wound up, giving investors of schemes in Franklin Templeton Mutual Fund an alternative route to access liquidity if they don't wish to wait for receipts from portfolio investments.

In a circular, the regulator said that "pursuant to listing, trading on the stock exchange mechanism will not be mandatory for investors. Rather, if they so desire, they may avail of an optional channel of exit provided to them."

Reports state that the above move could help in creating a market, where investors get some access to liquidity even in stressed debt portfolios.

Last month on April 23, Franklin Templeton Mutual Fund announced the winding up of six of its yield-oriented debt schemes, in light of heightened redemption pressure and lack of liquidity in debt markets, following the Covid-19 outbreak.

According to estimates, around 3,00,000 investors are impacted by Franklin Templeton's move to wrap up six of its yield-oriented debt schemes.

This week, the fund house appointed the debt capital markets team of Kotak Mahindra Bank as an independent advisor to expedite the process of monetizing assets in the portfolios, while trying to preserve the value of investments.

Speaking of the Franklin Templeton fiasco and mutual funds, Ajit Dayal, founder of Quantum group, talks about the corruption in the Indian mutual fund industry, in one of his latest articles. You can read the same here: Black swans, Black crows and Fund lies

Vijay Bhambwani has also recorded a video on the analysis of the situation and his recommendation for debt fund investors. You can check the same here: What the Franklin Templeton Fiasco Means for Traders

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