Sensex Corrects Over 750 Points, Nifty Below 17,700; IT and Banking Stocks Under Pressure

Thu, 6 Jan 10:30 am

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Asian share markets are lower today after two days of rallies, as investors took cues from the Federal Reserve meeting, which pointed to a faster-than-expected rise in US interest rates due to concerns about persistent inflation.

The Nikkei tanked 2.6% while the Shanghai Composite declined 0.2%. The Hang Seng fell 0.4%.

In US stock markets, Wall street indices ended down sharply on Wednesday after US Federal Reserve meeting minutes signaled the central bank may have to raise interest rates sooner than expected.

The Nasdaq posted its biggest one-day percentage drop since February. The tech heavy index quickly extended losses after the release of the minutes, which investors viewed as more hawkish than they had feared.

The Dow Jones Industrial Average fell 1.1% while the Nasdaq plunged a whopping 3.3%.

Back home, Indian share markets opened deep in the red today.

Taking cues from SGX Nifty and weak global sentiment, benchmark indices opened sharply lower today and extended losses.

The BSE Sensex is trading down by 764 points. Meanwhile, the NSE Nifty is trading lower by 215 points.

Maruti Suzuki is among the top gainers today. HDFC Bank and Tech Mahindra, on the other hand, are among the top losers today.

The BSE Mid Cap index is down 0.7%. The BSE Small Cap index is trading lower by 0.5%.

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

Radico Khaitan and Sunteck Realty hit their 52-week high today.

Shares of a dozen firms that debuted recently are in focus today as the mandatory one-month lock-in period for anchor investment expires from tomorrow. Five of these 12 companies including RateGain, Shriram Properties, Data Patterns, Supriya Lifesciences and CMS Info Systems had allocated more than 10% of outstanding shares to anchor investors.

The rupee is trading at 74.46 against the US$.

Gold prices are trading down by 0.5% at Rs 47,767 per 10 grams.

Gold fell today as a surge in US Treasury yields following hawkish meeting minutes released by the Federal Reserve offset the precious metal's safe-haven demand.

Crude oil prices lost ground, easing from their highest levels in more than a month as OPEC+ producers stuck to a plan to boost production and US fuel stockpiles surged amid declining demand.

Speaking of stock markets, in his latest video for Fast Profits Daily, Brijesh Bhatia shares his view on midcaps and smallcaps in 2022.

In a video last year, Brijesh had said midcaps and smallcaps would outperform the Nifty and that's exactly what happened. The broader market created a lot of wealth for traders and investors in 2021.

Will this trend continue in 2022? Brijesh answers this question in the video below.

In news from the banking sector, HDFC Bank is among the top buzzing stocks today.

HDFC Bank has sold Rs 21.9 bn of distressed retail loans to asset reconstruction companies (ARCs) in the last three quarters with the aim to clean its book.

As per reports, the retail pool consisted mainly of personal and vehicle loans.

The private lender has been selling retail loan portfolios in the last fortnight of every quarter. In the quarters ended June and December, Phoenix ARC acquired two pools, while Edelweiss ARC acquired one pool in the quarter ended September.

In the December quarter, HDFC Bank had invited bids for a credit card portfolio of Rs 500 m from ARCs. However, the auction failed to attract bidders because the reserve price of 23% was perceived as very high, though there were buyers at 10-13%.

In the June quarter, HDFC Bank sold a Rs 14.8 bn retail pool for a consideration of Rs 7.8 bn, and in December it sold Rs 2.6 bn for Rs 1.4 bn. Both trades were done with Phoenix ARC and at 53-54 paise on a rupee.

Meanwhile, the bank sold a Rs 4.5 bn retail portfolio for Rs 1.8 bn to Edelweiss ARC at 39 paise on a rupee.

The retail loan portfolio sold to ARCs had accounts that are classified as non-performing loans - overdue for over 90 days - and those accounts that are classified as special mention accounts-2 - where the overdue is between 61 days and 90 days.

Reportedly, HDFC Bank may have sold retail NPAs to prevent a spike in non-performing numbers. The bank's net non-performing loans for the quarter ended September 2021 stood at Rs 47.6 bn, which is 0.4% of its net loan book.

HDFC Bank share price is presently trading down by 2%.

Note that, HDFC Bank is one that has always adapted to changing times.

HDFC Bank wanted to transform itself from a leader in the physical banking to a leader in online banking. Since then, HDFC Bank has constantly focused on going digital.

In 2004, only 10% of customer transactions were initiated through internet and mobile. The number has gone up to 92% in 2019.

It is a great example of a company which has taken advantage of its scale and embraced disruption rather than fear it.

These are traits that one should look for in picking stocks. They not only withstand the disruption but also gain from it in the long-run.

Moving on to news from the automobile sector, Hero Electric, the market leader in the electric two-wheeler segment, has approached the Delhi High Court seeking arbitration proceedings against Hero MotoCorp over the use of the 'Hero' trademark.

The Naveen Munjal-led Hero Electric has claimed exclusive rights under the family pact to stop Hero MotoCorp from using the Hero brand name.

In its plea, the company has sought an injunction against Hero MotoCorp over the use of 'Hero' brand name for its upcoming electric vehicle (EV) slated for launch in March.

While Hero Electric is led by Naveen Munjal, Hero MotoCorp is headed by his uncle Pawan Munjal. The two companies are market leaders in their respective segments.

Although Hero Electric has been in the EV business for 15 years, it has taken it seriously now to protect the brand image with Hero MotoCorp debuting in the heating EV market.

Several media reports hint that Hero MotoCorp has already registered the brand name "Vida" for use on electric scooters and bikes.

Sources also said that the family pact of 2010 neither places any restrictions on Hero MotoCorp from selling EVs nor does it prevent it from using its trademarks.

Hero MotoCorp, which also owns a 35% stake in EV startup Ather Energy, plans to launch its first electric product in March. Besides, it has tied up with Taiwan-based Gogoro Inc to bring the latter's battery swapping platform to India.

Hero MotoCorp share price is presently trading down by 0.9%.

To know more, check out Hero MotoCorp's 2020-21 annual report analysis.

And 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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