Sensex Ends Marginally Lower; IT and Consumer Durables Stocks Witness Selling

Thu, 2 May Closing

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Indian share markets traded on a mixed note during the day and ended their session marginally lower.

Sectoral indices ended on a mixed note with stocks in the IT sector and consumer durables sector witnessing selling pressure while telecom stocks witnessed buying interest.

At the closing bell, the BSE Sensex stood lower by 50 points (down 0.1%) and the NSE Nifty closed down by 23 points (down 0.2%). The BSE Mid Cap index ended lower by 0.6% and the BSE Small Cap index ended the day down by 0.2%.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was up by 0.8% and the Shanghai Composite was up by 0.5%. The Nikkei 225 was down 0.2%.

The rupee was trading at 69.39 against the US$.

Speaking of Indian stock markets, note that the Sensex, BSE Midcap index and BSE Smallcap index have had differing degrees of volatility over past fifteen years.

But the returns from the three different indices are mostly in line since 2004. Rs 100 invested in any of these indices in 2004 would have yielded about Rs 700 by March 2019.

In fact, as we can see in the chart below, the gap in the compounded annual return of the Sensex and Smallcap index is less than 1%.

Difference in 15 year CAGR of Sensex and BSE Smallcap Index is Less than 1%

This shows that while small caps are a good place to look for big returns, blue chips can also offer you big returns over long time frames.

In fact, as per Tanushree, the best contrarian bets on such safe stocks could even offer you handsome three and digit returns.

In the news from the banking space, Bandhan Bank share price was in focus today as the lender reported a 67.8% year-on-year (YoY) increase in its March quarter net profit.

The rise here was seen on the back of higher net interest and non-interest income. Net profit for the quarter stood at Rs 6.5 billion.

Net interest income (NII), or the core income a bank earns by giving loans, was up 45.60% to Rs 12.5 billion as against Rs 8.6 billion last year.

Non-interest income was at Rs 3.8 billion, up 91.1% YoY.

Provisions and contingencies for the bank surged 41.3% YoY to Rs 1.9 billion during the quarter.

As a percentage of total loans, gross non-performing assets (NPAs) stood at 2.04% as compared to 2.4% in the previous quarter and 1.25% in the same quarter a year ago.

Net NPAs were at 0.58% in the March quarter compared to 0.7% in the previous quarter and 0.58% in the same quarter last year.

Deposits rose 27.6% YoY to Rs 432.3 billion while advances increased 38.4% YoY to Rs 447.7 billion.

The management of the bank said that the year 2018-19 has been a challenging year for the banking industry and that Bandhan Bank closed the financial year on a positive note with visibility of growth and improvement in asset quality and liability profile.

In the news from the airlines sector, Jet Airways share price was in focus today. Shares of the company witnessed selling pressure and plunged over 20% in today's trade as bidders for the debt-ridden airline showed no interest following up on their expressions of interest.

As per the news, three of the four qualified bidders - Etihad Airways, Indigo Partners, and TPG Capital - have not signed nondisclosure agreements, a must for conducting due diligence, even as just ten days are left for final submission of bids.

Last week, high-risk investors were putting up tactical bets on revival prospects of the airline.

As per an article in The Economic Times, investors for the debt laden carrier - Etihad Airways, TPG Capital and Indigo Partners are having second thoughts on whether to bid for it, as questions about the bidding procedure remain unanswered.

Here's an excerpt from the article...

• The stock has got into a zone where risk-reward has become favourable for high-risk investors. These high-risk investors had earlier burnt their fingers with similar bets on companies like JP Associates and Reliance Communications.

In other news, lenders to Jet Airways have approached the government to secure its international landing slots. The lenders are said to have moved the Ministry of Civil Aviation to guard the international slots and the airline's overseas flying rights.

Domestic slots have been distributed among its rivals including IndiGo and SpiceJet by the Directorate General of Civil Aviation (DGCA) for three months. Jet Airways had 280 slots at the Mumbai airport and 180 in Delhi. The airline can have these slots back if a new buyer comes on board.

Note that, Jet Airways used to be a frontrunner once.

So, what went wrong?

Well, one of the many reasons was the challenge from the entry of budget carriers. This led to dropping of fares by Jet Airways. Some tickets were sold even below the breakeven cost.

Then, provincial taxes of as much as 30% on jet fuel were added to its expenses. Further, the rise in oil prices was a death blow to their earnings.

On a consolidated level, the company has bled in nine of the last eleven fiscals. In other words, it has kept its bottom-line in the black in only two out of the last eleven years.

The airline needs Rs 85 billion to restart operations. So far, it isn't clear whether Jet Airways will find a buyer to fly again, or if lenders will take it to a bankruptcy court.

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

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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