Sensex Crashes 788 Points on US-Iran Conflict; Metal and Banking Stocks Fall

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Indian share markets fell sharply today, tracking a global selloff amid US-Iran tensions. The BSE Sensex fell over 800 points, breaching the 41,000 mark, while Nifty fell below 12,000.

All sectoral indices ended on a negative note, with stocks in the metal sector, banking sector and finance sector, leading the losses.

At the closing bell, the BSE Sensex stood lower by 788 points (down 1.9%) and the NSE Nifty closed down by 234 points (down 1.9%).

The BSE Mid Cap index and the BSE Small Cap index ended the day down by 2.3% and 2%, respectively.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1% and the Nikkei stood lower by 1.9%.

The rupee is trading at 72.03 against the US$.

The rupee slid past 72 against the US$ as oil prices spiked. Oil prices gained more than 2%, with Brent rising above US$ 70 a barrel, after US President Donald Trump issued a threat to impose sanctions on Iraq amid escalating tensions with Iran in the Middle East.

In news from the banking sector, shares of Karur Vyasa Bank fell over 5% today after the lender said its Managing Director & CEO P R Seshadri has submitted his resignation citing personal reasons.

The bank in a regulatory filing said, "board of Directors of the Bank in their meeting held Monday has accepted the resignation of P R Seshadri."

The filing added that Seshadri will be relieved from the services of the bank at the close of working hours on 31st March 2020 as per his request.

In other news, shares of Punjab National Bank, Bank of Baroda, State Bank of India (SBI) and Canara Bank witnessed selling pressure today as heightened tensions between the United States and Iran pushed bond yields higher in India.

Private banks including RBL Bank, Federal Bank, Yes Bank and ICICI Bank also fell in the range of 2-3%.

US President Donald Trump on Sunday vowed "major retaliation" if Iran tried to avenge the death of its key military commander Qasem Soleimani, who was killed by the US military on Friday.

In response, Tehran decided to "abandon the limits, imposed on it, under the 2015 nuclear deal".

Apart from higher yields, selling pressure was seen amid reports that the government may not propose fresh capital infusion under Union Budget 2020, and will rather encourage them to expedite recovery of bad loans and raise funds from the market.

According to the report, banks may be asked to divest or sell their non-core business as part of fund-raising exercise during 2020-21.

Banks may be asked to depend on the "robust pipeline of recovery from the resolution of both NCLT and non-NCLT cases" during this calendar year and also maintain headroom for raising capital from the market.

Finance Minister Nirmala Sitharaman is expected to present the second budget of the Modi 2.0 government on February 1.

SBI has already initiated the process of diluting its stake in its subsidiaries SBI Cards and Payment Services and UTI Mutual Fund.

Note that the government has already front loaded Rs 688.6 billion, out of Rs 700 billion earmarked for capital infusion for the current fiscal, to take care of the mega-merger plan announced in August 2019.

How the above developments pan out in the coming days remains to be seen. Stay tuned.

Moving on, in latest developments from the IPO space, the National Stock Exchange (NSE) on Monday said it has approached markets regulator for its initial public offering and hopes to launch the public issue by September this year subject to approvals.

The entire IPO would be offer-for-sale (OFS), wherein existing shareholders will sell NSE's shares.

The country's largest lender SBI, earlier this month, announced that it is looking to sell 5 million shares representing 1.01% stake in the NSE as part of its capital raising exercise.

Currently, SBI holds 5.2% stake in the exchange.

Earlier in December 2016, NSE had filed draft papers for its much-awaited IPO.

However, NSE's listing plans hit a roadblock following a probe by markets regulator against the exchange and some of its top officials. It was alleged that the exchange misused its co-location facility and gave preferential access to certain trading members.

In April 2019, the regulator had barred NSE from accessing the capital markets for a period of six months. It had also asked NSE to "disgorge" more than Rs 6.3 billion along with 12% interest per annum in connection with the co-location case.

NSE aims to raise about Rs 100 billion from the IPO, which would result in existing promoters selling 22-24% of their stakes.

LIC of India, SBI Group, IDBI, Norwest Venture Partners and GS Strategic Investments Ltd (Mauritius) are among the shareholders that may sell a portion of their stake through the public offering.

How this IPO sails through remains to be seen.

Speaking of IPOs, note that the year 2019 didn't see much activity in the IPO market. Since the start of the year, there were just 16 IPOs on the BSE main board.

Even the ones that hit the primary markets were mostly small to mid-sized IPOs. And no mega IPOs.

Very few companies come out with IPOs during bearish market conditions. So, when the IPO market is sluggish, you must take that as an indicator of market sentiment and liquidity conditions.

It is interesting to note that despite the tepid market conditions, most of the companies gave positive listing day gains.

In fact, if you had invested in each one of them and held them till now, your gains would have been even better.

The chart below shows the top five performing IPOs of 2019:

Top 5 Winning IPOs of 2019

So, unlike bull markets wherein selling shareholders do their best to squeeze the highest price, bear markets often offer fantastic opportunities to spot great companies and get onboard early on.

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

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