RBI Booster for Indian Indices: Sensex Ends 986 Points Higher; Banking and Auto Stocks Witness Huge Buying

Fri, 17 Apr Closing

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Indian share markets continued to trade in the green during closing hours and ended their day on a strong note.

Benchmark indices Sensex and the Nifty ended on a positive note for the second consecutive day after the RBI announced some key measures to inject the much-needed liquidity.

At the closing bell, the BSE Sensex stood higher by 986 points (up 3.2%) and the NSE Nifty closed higher by 298 points (up 3.3%).

The BSE Mid Cap index ended up by 2.1%, while the BSE Small Cap index ended the day up by 2.4%.

On the sectoral front, gains were largely seen in the finance sector, banking sector, and auto sector.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 1.56% and the Shanghai Composite was up by 0.66%. The Nikkei 225 was up 3.15%.

European markets were also trading on a positive note. The FTSE 100 was up by 3.14%. The DAX was trading up by 3.72%, while the CAC 40 stood up 3.64%.

The rupee was trading at 76.47 against the US$.

Note that, the recent correction has made the valuations of many stocks further attractive. The icing on the cake is the dividend yields these stocks provide.

Richa Agarwal, editor of Hidden Treasure, has written a detailed piece on these 8 stocks.

She believes, a healthy dose of dividends from the most consistent businesses can be your best bet. You can read everything about high dividend stocks here.

Now, 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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In news from the macroeconomic space, Reserve Bank of India (RBI) Governor Shaktikanta Das announced additional measures today, including reducing reverse repo rate, to support the economy hit by COVID-19.

The RBI slashed the reverse repo rate by 25 basis points to 3.75% even as it kept the repo rate unchanged at 4.4%.

RBI Governor Shaktikanta Das announced several steps to improve liquidity for non-banking finance companies. You can read about all the announcements here.

In the news from the commodity sector, halting their rally this week, gold prices were witnessing selling pressure today.

The fall in price was seen amid a rebound in global equity markets.

On MCX, June gold futures fell over Rs 1,000 per 10 grams to Rs 46,200.

Tracking gold, May silver futures also plunged 1.7% to Rs 43,492 per kg.

Note that gold prices in India moved to new highs yesterday, breaching the Rs 47,000 mark per 10 gram for the first time.

Earlier this week, prices had surged over 2% to Rs 46,255 per 10 gram, hitting a new high of Rs 46,385.

In global markets, gold witnessed buying this week as downbeat US economic data heightened fears of a deeper global recession due to coronavirus.

Speaking of gold, how lucrative has gold been as a long-term investment in India?

The chart below shows the annual returns on gold over the last 15 years...

Gold Has Been a Shining Long-Term Investment

HYPERLINK "https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=11/18/2019&story=1&title=11182019-Gold-Has-Been-a-Shining-Long-Term-Investment&utm_source=TM&utm_medium=website&utm_campaign=MCOM&utm_content=market-commentary" https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=11/18/2019&story=1&title=11182019-Gold-Has-Been-a-Shining-Long-Term-Investment&utm_source=TM&utm_medium=website&utm_campaign=MCOM&utm_content=market-commentary <>

As you can see, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.

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

• In fact, gold has delivered double-digit gains in 10 of the last 15 years.
  
  During the entire 15-year period, gold has shot up 555% (compounded annual return of 12.1%).
  
  During the same period, the Sensex surged 511% (compounded annual return of 12.0%). If you include dividends, the Sensex returns would be higher than gold by a couple of percentage points.
  
  One must note that the Sensex returns are not representative of the broader market returns. Moreover, gold was a no-brainer. You didn't have to study financial statements, business models and forecast future earnings growth to get a double-digit return on your investment.

Meanwhile, 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

In other news, the rupee witnessed some welcome breather and witnessed buying interest today.

The domestic currency rebounded by 48 paise against the US dollar buoyed by RBI measures to prop up the economy reeling under the coronavirus impact.

Gains were also seen on the back of positive cues coming through a rebound in domestic equities.

Market participants said that the measures announced by RBI Governor Shaktikanta Das would provide the much needed liquidity and ease the financial stress caused by the pandemic.

The central bank reduced the reverse repo rate - the rate at which banks park their fund with the central bank - by 25 basis points to 3.75%, a move which will encourage banks to lend to the productive sectors of the economy.

Note that the Indian rupee had touched a fresh record low of 76.87 against the US dollar yesterday.

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

On a year-to-date (YTD) basis, the rupee has depreciated sharply against the US dollar. While it started the calendar year 2020 at 71.28 against the US dollar, it is currently hovering around 77-levels.

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

We reached out to Vijay Bhambwani, editor of Weekly Cash Alerts, who is closely tracking the Indian rupee in the current scenario. Here's what he has to say...

• The onset of Corona virus has not been kind to the INR.
  
  The Rupee futures (USDINR ) opened in March at 72.36 and have closed at 76.61 on April 09 2020. That is a decline of 5.87% in 6 short weeks.
  
  The implications of the same will be widespread. India is a net importing Country. Everything that we import will now be more expensive. Approximately two thirds of all our imports are fossil fuels. Fuels are what we call multiplier effect commodities. If fuel prices rise at the petrol pumps, everything from fruits, vegetables, grains to dairy and poultry products get expensive.
  
  That impact will be felt at a later date. I expect the trickle down effect to start appearing in prices after the April-June quarter is over.
  
  I have already factored in this aspect in my statistical data model and plan to identify such events to generate profitable trading opportunities for my WCA plan subscribers.

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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