Sensex, Nifty End at Record High; Tata Motors Rallies 8%

Tue, 12 Jan Closing

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Extending gains to the 12th straight day, Indian share markets recovered early losses and scaled fresh record highs today, led by automobile and financial stocks.

Buying interest was also seen in index heavyweights Reliance Industries and HDFC Bank.

At the closing bell, the BSE Sensex stood higher by 248 points (up 0.5%).

The NSE Nifty closed higher by 79 points (up 0.54%).

Bharti Airtel and SBI were among the top gainers today.

The SGX Nifty was trading at 14,604, up by 114 points, at the time of writing.

The BSE Mid Cap index ended up by 0.4%, and the BSE Small Cap index ended up by 0.3%.

On the sectoral front, gains were largely seen in the energy sector, automobile sector and realty sector.

Healthcare and FMCG stocks, on the other hand, witnessed selling pressure.

Shares of MRF, Eicher Motors and Bajaj Electricals hit their 52-week highs today.

Asian stock markets closed on a positive note. As of the most recent closing prices, the Hang Seng ended up by 1.3% and the Shanghai Composite stood higher by 2.2%.

US stock futures are trading higher today indicating a positive opening for Wall Street indices. Nasdaq Futures are trading up by 47 points (up 0.4%), while Dow Futures are trading up by 72 points (up 0.2%).

European share markets are trading on a mixed note as investors paused to assess how much worse the Covid-19 pandemic could get while waiting for a new earnings season on Wall Street to inject fresh direction.

Crude oil prices rose today on expectations of a drawdown in crude oil inventories in the United States for a fifth straight week, but investor worries over climbing coronavirus cases globally capped price gains.

The rupee is trading at 73.20 against the US$.

Speaking of stock markets, note that since the lows in March 2020, the smallcap index has gained more than 100%.

While caution is indeed warranted, Richa Agrawal, Research Analyst at Equitymaster, thinks there is still a lot more steam left to this smallcap rally.

Despite rallying more than 100% since the March 2020 lows, Richa believes small-cap stocks are set for a massive up move in 2021 and beyond.

Here's what she wrote in a recent edition of Profit Hunter...

• The P/E for smallcap index doesn't make sense. There are thousands of listed small companies. Some have negative earnings. The base is not a valid data to work with.
  
  That said, the closest proxy to relative valuations is the Smallcap to Sensex ratio,
  
  Historically, this ratio has averaged 0.43x. In the previous mega runs of the smallcap index, this ratio has gone as high as 0.75x.
  
  In January 2018, when smallcaps peaked, the ratio was at 0.58x.
  
  Guess where this ratio is now after a 100% run up in the smallcap index?
  
  0.38.
  
  It's lower than the median over 2 decades.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

In news from the commodities space, domestic gold and silver prices continued their volatile ride of this year amid mixed global cues.

On MCX, February gold futures edged 0.4% higher to Rs 49,548 per 10 gram while silver futures advanced 1.1% to Rs 66,223 per kg.

In the previous session, gold prices had risen 0.7% after a massive fall on Friday.

A rebound in the US dollar from three-year lows along with a surge in 10-year US yields has been weighing on non-interest-bearing gold since the start of this year even though expectations build up for further massive US stimulus.

Gold prices had surged 25% in 2020 on the back of massive stimulus, and rising safe-haven demand. In August last year, gold had hit a record high of Rs 56,200.

Speaking of the precious yellow metal, in his latest video for Fast Profits Daily, Vijay Bhambwani talks about why gold and silver prices crashed last week on Friday.

What does this event mean for the long-term trend in prices? Should traders change their bullish stance?

Vijay answers these questions in the below video. Tune in to find out more:

In news from the realty sector, Sunteck Realty was among the top buzzing stocks today.

The Mumbai-based realty developer has seen robust sequential growth of 75% in new bookings for Q3FY21 on improving demand. On a year-on-year (YoY) basis, pre-sales grew 7%, the company informed exchanges.

Momentum in company's sales was aided by its ready-to-move-in, nearing-ready inventory as well as newly launched projects. Further, collections also grew at 79% quarter-on-quarter to Rs 2.5 billion for Q3FY21 and by 52% YoY.

A combination of favourable factors such as the reduced stamp duty and low interest rates is expediting the home-purchase decision, the company said in a press statement.

Note that Sunteck Realty is among the beneficiaries of recently announced reduction in levies by the Maharashtra government.

As per reports, most Mumbai-based developers are likely to report decent earnings performance in the December quarter on the back of recent government measures.

Latest data shows that housing sales in Maharashtra have zoomed in recent months with Mumbai witnessing a record registration of around 19,600 units in December 2020 and more than 36,000 units in the last quarter of calendar year 2020.

Sunteck Realty share price ended the day up by 2.2%.

Mahindra Lifespace share price was also in focus today after the company signed a Memorandum of Understanding (MoU) with State Bank of India (SBI) to enable an improved and more seamless experience for homebuyers across India.

As part of the agreement, which includes various co-promotional activities and outreach initiatives, customers and employees of SBI and Mahindra Lifespaces will be able to avail the benefits of faster home loan processing and approvals, and special discounts and schemes.

Moving on to news from the banking sector, the Reserve Bank of India's (RBI's) Financial Stability Report (FSR) of December 2020 has stated that banks' gross non-performing assets (GNPAs) may rise sharply to 13.5% by September 2021, and escalate to 14.8%, nearly double the 7.5% in the same period of 2019-20, under the severe stress scenario.

The FSR, released on Monday, gave a caveat: "Considering the uncertainty regarding the unfolding economic outlook, and the extent to which regulatory dispensation under restructuring is utilised, the projected ratios are susceptible to change in a nonlinear fashion".

In his foreword, RBI Governor Shaktikanta Das noted: "Stretched valuations of financial assets pose risks to financial stability. Banks and financial intermediaries need to be cognisant of these risks and spillovers in an interconnected financial system."

State-run banks are seen being the worst-affected among bank groups with their GNPA ratio expected to increase to 16.2% by September 2021 under the baseline scenario from 9.7% in September 2020.

The FSR mentioned that "stress test results indicate that four banks may fail to meet the minimum capital level by September 2021 under the baseline scenario, without factoring in any capital infusion by stakeholders.

As for non-banking financial companies (NBFCs), credit given by NBFCs grew by a mere 4.4% as compared with 22% in 2018-19.

Gross NPAs of NBFCs increased to 6.3% on March 2020 from 5.3% on March 2019. Asset quality is expected to deteriorate due to disruption in business operations caused by the pandemic, especially in the industrial sector, one of the major recipients of NBFC credit.

We will keep you updated on the latest developments from this space. Stay tuned.

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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