Sensex Ends 178 Points Higher; Metal and Realty Stocks Witness Buying

Fri, 5 Apr Closing

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Indian share markets continued to witness buying interest and ended their trading session on a positive note. Gains were largely seen in the metal sector and realty sector, while stocks from the power sector witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 178 points (up 0.5%) and the NSE Nifty closed higher by 68 points (up 0.6%). The BSE Mid Cap index closed up by 0.6%, while the BSE Small Cap index ended the day up by 0.7%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng stood down by 0.2% and the Nikkei was trading up by 0.4%.

European markets were also trading on a positive note. The FTSE 100 was up by 0.2%. The DAX was trading marginally lower, while the CAC 40 was up by 0.2%.

The rupee was trading at 69.25 to the US$ at the time of writing.

Indian share markets managed to recover losses seen yesterday after the RBI rate cut and ended today's session on a positive note.

The central bank cut its benchmark interest rate by 25 basis points yesterday.

RBI's monetary policy committee (MPC), led by Governor Shaktikanta Das, announced a 25 basis points cut in the short-term lending rate, also known as repo or repurchase rate, in its first bi-monthly rate review of financial year 2019-20.

The repo rate now stands at 6%.

This was the second back-to-back rate cut by the six-member MPC ever since Das was appointed governor and four out of six MPC members voted in favor of rate cut. The move also makes India the only country in Asia to have cut interest rates twice in three months.

Despite the central bank's continued open market operations (OMOs) and the dollar-rupee swap, systemic liquidity as of March-end was in deficit at Rs 400 billion. The tightness in liquidity was visible in high credit-deposit ratios and elevated corporate bond spreads.

Speaking of the RBI rate cut, if we speak of companies growing with high leverage, the RBI's recent rate cuts have come as a big breather to such entities.

But data from the BSE 500 index shows that businesses that have debt over 1x equity contribute just 20.7% of total sales. Businesses that have debt between 0.5 and 1x contribute 15.4% of total sales.

BSE 500 Companies with Debt over 0.5x Contribute Just 35% of Revenues

Therefore, the rate cut, which is believed to be a stimulant for the economy, will really benefit the companies that contribute just a third of the total revenues.

In the news from the banking sector, Lakshmi Vilas Bank share price was in focus today. The stock of the lender witnessed buying interest on reports that the boards of Lakshmi Vilas Bank and Indiabulls Housing Finance are set to meet this week to consider a merger proposal.

YES Bank share price was also in focus today. The stock of the lender witnessed buying interest after reports yesterday suggested that it was planning to raise funds through a share sale.

As per the news, the bank is aiming to raise about Rs 30 billion from the share sale. Deutsche Bank is said to be among the advisors to YES Bank on the share sale.

How these events pan out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

In the news from the commodity space, crude oil witnessed volatility today and traded on a mixed note today. Losses were seen during the start of the day as market participants were concerned about progress in US-China talks to end a trade war.

However, the commodity reversed losses and steadied below US$ 70 per barrel.

Note that the US-China trade deal, the OPEC cuts, and the US sanctions on Iran and Venezuela are continuing to dominate crude oil headlines.

Crude oil prices were near 2019 highs last month, supported by supply cuts led by producer club OPEC. Reportedly, US sanctions against oil producers Iran and Venezuela are boosting prices.

Last month, the OPEC scrapped its planned meeting in April, effectively extending supply cuts that have been in place since January until at least June, when the next meeting is scheduled.

The OPEC and non-affiliated allies like Russia - known as the OPEC+ alliance - have been withholding around 1.2 million barrels per day (bpd) in crude supply from the start of the year to tighten markets and prop up prices.

US crude oil output has soared by more than 2 million barrels per day (bpd) since early 2018, to around 12 million bpd, making America the world's biggest producer ahead of Russia and Saudi Arabia.

On the demand-side, there is concern that an economic slowdown as well as improving energy efficiency and the emergence of alternative transport fuels will erode oil consumption.

Moving on to the news from the IPO space, the initial public offer of Polycab India hit the markets today.

Polycab India is engaged in the business of manufacturing and selling wires and cables and fast moving electrical goods (FMEG) under the "POLYCAB" brand.

According to CRISIL Research, Polycab India is the largest manufacturer in the wires and cables industry in India, in terms of revenue from the wires and cables segment and provides one of the most extensive range of wires and cables in India.

During the financial year 2017-18 (FY18), the company had a market share of approximately 18% of the organized wires and cables industry, and approximately 12% of the total wires and cables industry in India, estimated at Rs 525 billion based on manufacturers realization.

Polycab India manufactures and sells a diverse range of wires and cables such as power cables, control cables, instrumentation cables, solar cables, building wires, flexible cables, flexible/single multi core cables, communication cables and others including welding cables, submersible flat and round cables, rubber cables, overhead conductors, railway signaling cables, specialty cables and green wires.

To get a detailed view of the IPO, you can read Ankit Shah's latest note in the Equitymaster Insider: Polycab India IPO: All You Need to Know

Speaking of IPOs, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

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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