Sensex Rallies 600 Points in Opening Trade; M&M Jumps 8%

Mon, 8 Feb 09:30 am

   Pre-Open   

   Momentum Moves   

   SGX Nifty   

   12:30 pm   

   Closing   

Asian stock markets are trading on a positive note today as investors monitored comments from Janet Yellen pushing a US stimulus bill as well as an improvement in coronavirus trends.

Treasury Secretary Yellen said on Sunday talk shows that the US can return to full employment in 2022 if it enacts a robust enough relief package.

The Hang Seng is trading up by 1.1% while the Shanghai Composite is up 1.2%. The Nikkei is trading higher by 2.1%.

In US stock markets, Wall Street indices extended their rally on Friday boosted by optimism over earnings, stimulus talks and progress on vaccine rollouts.

Both, the Dow Jones Industrial Average and S&P 500 rose for a fifth straight session in their longest streak of gains since August, while the S&P 500 and Nasdaq posted record closing highs for a second day in a row.

The Dow Jones Industrial Average rose 92 points, up 0.3%, while the Nasdaq Composite gained 0.6%. For the week, the Nasdaq surged 6% and the Dow added 3.9%.

Back home, Indian share markets have opened on a strong note, following the trend on SGX Nifty and tracking gains in Asian peers.

A total of 140 companies are slated to report their December quarter results today including Aditya Birla Fashion and Balkrishna Industries.

The BSE Sensex is trading up by 576 points. Meanwhile, the NSE Nifty is trading higher by 164 points.

M&M is among the top gainers today. NTPC, on the other hand, is among the top losers today.

The BSE Mid Cap index has opened up by 1.2%. The BSE Small Cap index is trading higher by 1%.

All sectoral indices are trading on a positive note with stocks in the banking sector, finance sector and auto sector witnessing most of the buying interest.

The rupee is trading at 72.81 against the US$.

Gold prices are trading down by 0.1% at Rs 47,195 per 10 grams.

Speaking of stock markets, note that the Budget announcements cheered Dalal Street last week as the NSE Nifty hit all-time high of 15,014 on Friday.

Does the market have enough steam left to extend last week's gains fueled by the budget announcements?

Last week in Momentum Moves, Brijesh Bhatia spoke about what traders can expect on budget day.

In this week's video, Brijesh talks about how the charts say that the Nifty rally will likely pause this week. As per Brijesh, we might see Nifty reversing from the resistance zone of 15,070-15,450.

Tune in to the video to find out more:

In news from the mutual funds space, continuing the selling spree for the eighth consecutive month, mutual funds pulled out Rs 129.8 billion from equities in January as surge in markets provided an opportunity to book profits.

Overall, mutual funds withdrew a net of over Rs 564 billion in 2020, data available with the markets regulator showed.

Despite withdrawals from mutual funds in the past few months, stock markets have continued to rise as flows from FPIs have been robust.

Foreign portfolio investors (FPIs) have put in Rs 194.7 billion in the Indian equity markets in January after investing Rs 1.7 lakh crore in 2020.

According to the data, MFs pulled out Rs 129.8 billion from equities in January. This has taken the outflow to over Rs 948 billion since June.

On the other hand, mutual funds put in Rs 118.3 billion in debt markets in the month under review.

Individually, MFs withdrew Rs 264.3 billion in December, Rs 307.6 billion in November, Rs 144.9 billion in October, Rs 41.3 billion in September, Rs 92.1 billion in August, Rs 92 billion in July and Rs 6.1 billion in June.

However, they invested over Rs 402 billion in the first five months of the year (January-May). Of this, Rs 302.9 billion was invested in March.

Speaking of mutual funds, note that last year in September, the market regulator tweaked its October 2017 circular, mandating multi-cap funds to invest at least 25% each in smallcaps, midcaps and largecap stocks, leaving the remaining 25% to their discretion.

All mutual funds were required to comply with the latest provisions by the first week of February 2021.

Assuming every fund rebalances, the circular is expected to trigger a move of around Rs 280 billion from largecaps to smallcaps.

Richa Agarwal, lead smallcap analyst at Equitymaster, believes this move would be net positive for select smallcap stocks. As per Richa, there could be a speculative rally across smallcaps.

Here's what she wrote about it in one of the editions of the Profit Hunter:

• It would be myopic and imprudent to bet on any smallcap in the hope of a regulation driven rally.
  
  That said, you must invest in smallcaps selectively with long-term horizon in mind.
  
  Here's why...

• You see, despite the rally in smallcaps since March, there is still a huge valuation gap between smallcaps and Sensex.
  
  The ratio of smallcaps to Sensex stands at 0.37 now, as compared to long-term average of 0.44 times.
  
  This means certain smallcaps will witness a significant rebound, irrespective of regulations.

Richa believes this could be a once in a decade opportunity to get rich from select smallcaps.

In news from the IPO space, Brookfield India Real Estate Trust's Rs 38 billion REIT issue closed with an overall 8 times subscription.

In the retail investors' category, the issue was oversubscribed by nearly 12 times and was oversubscribed by 5 times in the institutional investors' segment.

Prior to the public issue, the REIT had received commitments worth over Rs 17.1 billion from 39 anchor investors including global institutional investors, insurance companies, mutual funds and long-only funds.

REITs act an attractive dividend play as at least 90% of the net distributable cash flows shall be declared and paid once every quarter of a financial year by their manager.

So far, domestic markets have seen Embassy Office Parks REIT in 2019 and Mindspace Business Parks REIT in 2020, both trading at a premium over their issue price.

How this REIT performs on listing day remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

Moving on to stock specific news...

Bharat Heavy Electricals (BHEL) is among the top buzzing stocks today.

As per a leading financial daily, India may consider BHEL, Mecon and Andrew Yule and Co. among candidates for the next round of disinvestment pick.

SBI Capital Markets, the adviser to the proposed stake sale in BHEL, recently submitted its report to the department of investment and public asset management (Dipam) on the plan. This will help the government's thinking on whether to proceed with the stake sale in India's largest power equipment maker and the amount of stake that would be sold.

SBI Capital is also advising Dipam on the proposed stake sales in Mecon and Andrew Yule. The department of heavy industry is the nodal ministry for both BHEL and Andrew Yule, while Mecon falls under the steel ministry.

The government hopes to garner Rs 1.75 lakh crore from disinvestment receipts next fiscal.

Note that the government has been missing its disinvestment targets, and of the Rs 2.1 lakh crore disinvestment goal for this fiscal, it has been able to raise just Rs 152.2 billion as on January.

BHEL share price has opened the day down by 7.4%.

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

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