Sensex Ends Higher, Rupee and Brent Crude Oil Hit Record Low, Insurance Sector Amid Covid-19, and Top Cues in Focus Today

Thu, 23 Apr Pre-Open

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Indian share markets ended on a strong note yesterday.

Buying interest was seen as investors anticipated another stimulus from PM Modi's cabinet meet scheduled yesterday.

Prime Minister Narendra Modi held a cabinet meet to take stock of the ongoing situation in the wake of coronavirus outbreak. Market participants were hoping for announcement of another economic relief package.

At the closing bell yesterday, the BSE Sensex stood higher by 743 points (up 2.4%) and the NSE Nifty closed higher by 206 points (up 2.3%).

The BSE Mid Cap index ended up by 0.8%, while the BSE Small Cap index ended up by 0.7%.

On the sectoral front, gains were largely seen in the energy sector, automobile sector and FMCG sector.

Top Stocks in Focus Today

From the paints sector, shares of Asian Paints will be in focus today. The stock of the company witnessed buying interest yesterday on the back of historic drop in crude oil prices.

Reports state that Asian Paints will benefit from the sudden slump in crude oil prices as crude oil derivatives form 30-35% of its raw material costs.

Reports also state that Asian Paints is well placed to gain market share once discretionary demand recovers.

From the pharma sector, Aurobindo Pharma share price will also be in focus today as the US health regulator reverted its inspection classification of the company's Unit IV back to voluntary action indicated (VAI), thus relieving the company of any further regulatory action for this manufacturing facility.

Market participants will be tracking Reliance Industries share price as the company announced its March quarter results (Q4FY20) yesterday.

You can also read our recently released Q4FY20 results of some companies here: Wipro, TCS, Infosys, HDFC Bank, Tata Elxsi.

Rupee Hits Fresh Record Low

The domestic currency touched a fresh all-time low of 76.92 against the US dollar in the early trade yesterday.

This was seen as forex market continued to grapple with economic uncertainties due to the fast-spreading coronavirus pandemic amid sustained outflow by foreign institutional investors.

However, the rupee recovered from record low levels to settle higher by 15 paise at 76.68 against the US dollar following gains in domestic stock markets.

The US dollar rose to a two-week high against a basket of currencies yesterday, as investors fled riskier assets for the world's most liquid currency.

Note that the rupee had plunged to a record low against the dollar last week, hovering near the 77-mark. The weakness in the rupee was largely due to strengthening of the US Dollar against the basket of currencies as investors fled to safe haven greenback amid weakening risk appetite in the markets.

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 trading at 76.83 against the US dollar.

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.

We also 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.

Vijay has also talked about the Indian currency in a special edition podcast from Investor Hour. He shares what's around the corner for Indian rupee and how should position oneself for potential gains.

You can listen the entire episode here...

Developments in Insurance Sector Amid Covid-19

In news from the insurance sector, online insurance aggregator Policybazaar.com said the demand for health insurance policies has surged by 30% post the spread of coronavirus pandemic.

Shares of insurance companies have bounced back sharply recently. Shares of ICICI Lombard General Insurance Company and New India Assurance Company have seen about 37-50% surge in their share prices in the past one month.

Reports state that expectations of strong demand for health insurance products amid coronavirus outbreak and higher profitability aided by lower claims is driving up investor sentiment.

However, subdued demand for automobiles is a key concern for general insurers. The automobile sector accounts for over 35-40% of total general insurance premium.

There are also doubts on renewal of existing policies. While the government and the insurance regulator IRDAI have extended the renewal time for premiums amid coronavirus, customers may demand more time.

How the above trend pans out in coming days remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

Note that the insurance sector is one sector which is a clear outperformer in this volatile market.

With the huge future potential of the sector, the outperformance is not surprising. India's life insurance penetration i.e. insurance premiums as a percentage of GDP, is very low compared to the global average.

Life Insurance Sector - Megatrend in the Making

The industry is expected to grow at a CAGR of 11-13% over the next five years. India's large youth population and growing awareness about insurance is bound to accelerate growth.

As per Tanushree, this is one of the megatrends that will help what she calls the Rebirth of India.

She has identified the 7 best stocks that will profit from the Rebirth of India. You can read about these top 7 stocks here.

Brent Crude Oil Prices Hit their Lowest

Crude oil prices fell to less than US$ 16 a barrel yesterday, hitting its lowest since 1999. Brent crude, which fell 24% in the previous session, touched US$ 15.98 a barrel yesterday, its lowest since June 1999.

A glut has been building since OPEC+, led by Saudi Arabia and Russia, failed to renew output cuts last month.

OPEC+ agreed new curbs this month, but government lockdowns to contain the pandemic have cut fuel demand more steeply.

Speaking of crude oil, in his latest video, Vijay Bhambwani shares his thoughts on the recent crude oil crash.

He talks about whether we should be celebrating lower crude prices, or should we be worried?

You can check the same here: Crude Oil Prices Have Crashed. What Does it Mean for India?

Note that Monday and Tuesday have been two of the most turbulent days in the history of oil trading, as investors confronted the reality that worldwide supply will overwhelm demand for months or years and current production cuts to offset that glut are nowhere near sufficient.

Tuesday set a new milestone as more than 2 million contracts for US crude for delivery in June changed hands, the busiest day in history.

US crude oil futures collapsed below US$ 0 earlier this week on Monday for the first time in history, amid a coronavirus-induced supply glut.

The futures ended the day at a stunning minus US$ 37.63 a barrel as desperate traders paid to get rid of oil.

Vijay has also recorded a video on this which you may access here.

And 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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