Top 6 Factors Behind the Stock Market Rally, L&T Finance Holdings Rights Issue, and Buzzing Stocks Today

Wed, 20 Jan Pre-Open

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Indian share markets rallied nearly 2% yesterday, boosted by realty and finance stocks.

Benchmark indices registered sharp gains yesterday after a massive selloff in the past two days as the incoming US administration pushed for a big stimulus.

At the closing bell yesterday, the BSE Sensex stood higher by 834 points (up 1.7%). In intraday trade, the Sensex zoomed 936 points to 49,500 levels.

The NSE Nifty closed higher by 240 points (up 1.7%).

Bajaj Finserv and Bajaj Finance were among the top gainers.

The BSE Mid Cap index ended up by 2.3%. The BSE Small Cap index ended higher by 1.7%.

On the sectoral front, gains were largely seen in the finance sector, realty sector and metal sector.

Gold prices for the latest contract on MCX were trading up by 0.2% at Rs 48,990 per 10 grams at the time of closing stock market hours yesterday.

Top 6 Factors Why Sensex Surged Over 1.5% Yesterday

Firm Global Cues: Asian stock markets rose yesterday after data showed China's economy was one of the few to grow in the year 2020. China's economy grew 2.3% in 2020 while the United States, Europe and Japan struggled in the wake of the coronavirus pandemic.

Europe Backs Money Printing: Eurozone finance ministers pledged continued fiscal support for their economies and discussed the design of post-pandemic recovery plans as the European Commission warned the Covid-19 crisis was making the bloc's economic imbalances worse.

Sustained Capital Inflows: As per data available with NSDL, foreign portfolio investors (FPIs) have pumped in over Rs 130 billion in the Indian share markets in January so far. FPIs invested a net Rs 174.4 billion into equities but pulled out Rs 25.9 billion from the debt segment between January 1-18.

December Quarter Earnings: Indian companies have reported decent December quarter earnings so far and the same has fuelled optimism in the stock markets.

Budget 2021: Finance Minister Nirmala Sitharaman has said that the Budget will see a massive public sector investment and expenditure push, including on infrastructure projects and the healthcare sector.

Rising Crude Oil Prices: Crude oil prices climbed yesterday as optimism that government stimulus will buoy global economic growth and oil demand trumped concerns that renewed Covid-19 pandemic lockdowns globally could cool fuel consumption.

We will keep you updated on how these factors develop in the coming days and what effect they have on Indian stock markets. Stay tuned!

Speaking of the current stock market scenario, in her latest video, Co-head of Research at Equitymaster, Tanushree Banerjee lays down the steps that could help you reset your portfolio for a profitable 2021.

This is first time in 25 years that a benchmark index in India, the BSE Sensex, is trading at a P/E multiple of 40x. The last time the Sensex breached this multiple in October 1994.

Most investors are worried about parking money in safe stocks or safe asset classes. But are they making the right choices?

Tune in to the video to find out more:

Top Stocks in Focus Today

Mindtree will be among the top buzzing stocks today.

Mindtree reported a 65.7% rise in consolidated net profit to Rs 3.3 billion for the December 2020 quarter. The company had posted a net profit of Rs 1.97 billion in the corresponding period last year.

On a sequential basis, the company clocked 28.7% growth, backed by growth across verticals and robust margin expansion with a strong order book.

The Bengaluru-based company saw its revenue grow 3% to Rs 20.2 billion in the quarter under review from Rs 19.7 billion in the year-ago period.

At the end of the December 2020 quarter, the company's active client base stood at 276, and eight new clients were added during the quarter, the company said in a filing.

To know more, you can read Equitymaster's Mindtree's Q3FY21 result analysis.

Adani Green Energy share price will also be in focus today as the company on January 18 said that French energy giant Total SA will acquire 20% minority interest in the company from Adani Group. The deal, valued at around US$ 2 billion, will also provide Total a seat on the board of directors of AGEL.

The transaction follows Total investing US$ 510 million in April 2020 for the acquisition of 50% stake in AGEL's 2,353 megawatt (MW) operational solar project in the country.

The acquisition is part of Total's target of building a portfolio of 35,000 MW of renewable energy capacity globally by 2025.

Market participants will track realty sector stocks today. Shares of real estate companies witnessed buying interest yesterday with the Nifty Realty index surging nearly 5% after Indiabulls Real Estate said it is seeing high demand for completed products, and continues to expect robust collections for the rest of the financial year.

In an investor presentation, the Mumbai-based real estate developer said the affordability of real estate is at a multi-year high with declining interest rates.

Among individual stocks, DLF hit a 52-week high of Rs 299.45 yesterday after rallying 7% in intra-day trade. Shares of Godrej Properties, Prestige Estate Projects, Sobha, Oberoi Realty and Brigade Enterprises ended up in the range of 4-8% yesterday.

L&T Finance Holdings Rights Issue: Offer Opens on 1st February

In news from the finance sector, L&T Finance Holdings said its board has approved raising of up to Rs 30 billion through a rights issue.

The offer will open on 1 February and close on 15 February.

A rights issue is a fundraising tool to mobilize capital from existing shareholders of a company. Shares are generally offered at a discount to prevailing market price in a rights issue.

The lender has fixed a price of Rs 65 per equity share for the offer and an entitlement ratio at 17:74 (17 equity shares for every 74 shares held by the eligible equity shareholders of the company), as on the record date.

Note that banks and non-banking financial companies (NBFCs) have been raising funds to build capital buffers.

Mahindra & Mahindra Finance and Shriram Transport Finance have raised Rs 30.9 billion and Rs 15 billion through their respective rights issues.

Last week, L&T Finance Holdings reported a 51% decline in consolidated net profit at Rs 2.9 billion for the third quarter ended December 31, 2020, against Rs 5.9 billion in the corresponding period last year.

The company posted highest quarterly disbursements since Q1FY20, up by 51% QoQ.

Recently, a working committee set up by the Reserve Bank of India (RBI) released new proposals to review the ownership and corporate structure of private sector banks. The committee also suggested the conversion of large NBFCs into banks.

As per reports, the proposals are favourable to large NBFCs promoted by corporate houses like L&T Finance along with the likes of Bajaj Finance, Mahindra Finance, Aditya Birla Capital and others who may now look forward to converting to a universal bank.

How the above developments pan out 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.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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