Sensex Ends 223 Points Higher; Power and Banking Stocks Witness Buying

Thu, 16 Apr Closing

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Indian share markets traded on a volatile note throughout the day and ended higher.

Benchmark indices opened on a negative note today, tracking global markets as rising coronavirus cases and grim growth projections dampened investor sentiment. However, losses were recovered thereafter as indices rose over 1.5%

Gains were largely seen in the power sector, banking sector and capital goods sector, while IT stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 223 points (up 0.7%) and the NSE Nifty closed higher by 68 points (up 0.8%).

The BSE MidCap index ended the day up by 1.4%, while the BSE SmallCap index ended up by 1.7%.

Asian stock markets ended on a mixed note. As of the most recent closing prices, the Hang Seng was down 0.6% and the Nikkei was down 1.3%. The Shanghai Composite was up 0.3%.

Before we move on to other news, we would like to share that Equitymaster's birthday is around the corner. We will be starting our 25th year as an organisation, next week on 22nd April.

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Moving on, the rupee is trading at 76.87 against the US$.

As the Coronavirus pandemic continues to haunt the global financial markets, the rupee has been hit badly.

In a recent article titled The Sharp Fall in Indian Rupee: 6 Points to Know, we dive deeper and look at the factors behind rupee's depreciation.

Market participants were tracking Wipro share price as the IT major on Wednesday reported a 6% drop in quarterly profits to Rs 23.4 billion, while revenues increased 3.6% to Rs 157.1 billion over the year-ago period.

To know more about the company, you can read Wipro's Q4FY20 result analysis on our website.

Apart from Wipro, market participants were also tracking TCS share price as the company announced its March quarter results (Q4FY20) today.

In news from the finance sector, according to rating agency ICRA, microfinance companies are running a risk of having cash shortfall of Rs 26 billion in the first quarter ending June 2020 (Q1FY21).

While their repayments and operational expense obligations are pegged at Rs 80 billion in the first quarter, the liquidity buffers on balance sheet are around Rs 54 billion.

As the collections from borrowers could remain muted for some time post the lockdown is eased, the industry stares at a cumulative cash shortfall.

Most of the microfinance institutions (MFIs) have extended a moratorium to their borrowers till May 31, 2020.

As per ICRA, the credit costs for MFIs is expected to at least double from the present levels of 1-1.5% to 2.5-3% for most players, which is likely to impact their profitability by 3-5% in FY21.

Rating agency CRISIL has also raised concerns regarding the same. As per CRISIL, MFIs may face double whammy as the extension in lockdown period will severely affect their asset quality and will also put pressure on their liquidity profile.

The rating agency further said that MFIs have made collection in the month of March and the efficiency was at a healthy level of 98-99%.

Moreover, they drew bank loans for on-lending in the last week of March but due to the lockdown, they could not disburse the money so in the near term, they have enough liquidity to meet their debt obligation and expenses. But in the medium term, there will be an impact on earning profiles of these lenders.

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

Speaking of the finance sector, it is interesting to note that India's microfinance sector has grown at an annual rate of 27% over the last four years.

Microfinance - The Next Big Opportunity?

Here's what Tanushree Banerjee wrote about this in one of the editions of The 5 Minute WrapUp...

• The average ticket size of a microfinance borrower in India is around Rs 38,000 which is much lower than the global average (Rs 65,000).
  
  The sector itself has grown at an average annual rate of 27% for the last 4 years.
  
  Still states like Uttar Pradesh, Bihar, and Madhya Pradesh with a large rural population are highly under-penetrated even today.

A private bank that is part of Tanushree's 7 stocks to buy list has already taken a big step in lending to this segment of the population.

It will be a big beneficiary when the microfinance boom plays out in India.

Moving on to news from the commodity space, gold prices in India moved to new highs today, breaching the Rs 47,000 mark per 10 gram for the first time.

On Multi Commodity Exchange (MCX), June gold futures rose as much as Rs 47,095 per 10 gram.

Tracking gold, silver rates also moved higher by 0.2% to Rs 44,120 per kg.

A weaker rupee, which fell to a record low of 76.87 against the US dollar today, also lifted domestic gold prices.

In global markets, gold prices moved higher as downbeat US economic data heightened fears of a deeper global recession due to coronavirus.

Speaking of gold, in his latest video, Vijay Bhambwani explains why the bull market in gold may get bumpy going ahead.

You can check the same here: A Timely Warning About Gold

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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