Sensex Sinks 1,700 Points; Bajaj Finance and ICICI Bank Crash 9%

Mon, 4 May 12:30 pm

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Stock markets in India crashed further in the afternoon session, tracking weak global cues after the latest flare up in US-China tensions. US President Donald Trump suggested he could lump new tariffs on China.

Trump and US Secretary of State Mike Pompeo blamed China for creating the new coronavirus in a Chinese laboratory.

Selling pressure was also seen as yet another extension of the nationwide lockdown dampened investor sentiment.

Apart from the extension of the lockdown, weak company results led to today's sell-off. Many bluechip stocks including Reliance Industries, Hindustan Unilever, and Tech Mahindra reported weak March quarterly results.

The BSE Sensex is trading down by 1,732 points (down 5.1%) at 31,900 levels. Bajaj Finance (down 9.1%) and ICICI Bank (down 9%) are the top contributors to the Sensex's fall today.

Meanwhile, the NSE Nifty is trading down by 496 points (down 5%).

The BSE Mid Cap index and the BSE Small Cap index are trading down by 4% and 3.1%, respectively.

Among sectoral indices, metal stocks, banking stocks and automobile stocks are witnessing most of the selling pressure.

Gold prices are currently trading up by 0.1% at Rs 45,578.

The rupee is currently trading at 75.77 against the US$.

In news from the FMCG sector, shares of Hindustan Unilever fell 6% today after the company reported its lowest revenue in nine quarters as the coronavirus pandemic and nationwide lockdown dented demand and disrupted supplies.

The country's largest consumer goods company reported a 7% decline in volumes for Q4FY20.

The company's profit before tax fell 10.6% to Rs 19.9 billion, while net profit declined 1.2% year-on-year (YoY) to Rs 15.2 billion.

HUL's revenue was down 9.4% to Rs 90.1 billion.

"The spread of COVID-19 impacted the business from mid-March, which culminated into scaling down of operations post the national lockdown. Domestic consumer growth declined by 9% with a decline of 7% in underlying volume growth," HUL said in its BSE filing.

The company's board proposed a final dividend of Rs 14 per share, subject to shareholders' approval. The company said that the total dividend for financial year 2019-20 amounted to Rs 25 per share.

The company said it is currently operating at about 70% of normative levels and is hopeful to improve this in the coming days.

HUL share price is presently trading down by 3.2%.

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

Moving on to news from the banking sector, the Reserve Bank of India (RBI) on Saturday, cancelled the licence of CKP Co-operative Bank citing the bank's weak financial position and said that the bank was not in a position to pay its present and future depositors due to its financial instability.

The RBI also said there was no concrete revival plan or proposal for merger with another bank and that credible commitment towards revival from the management was not visible. The bank failed to meet the regulatory requirement of maintaining a minimum capital adequacy ratio of 9% and reserves.

However, the RBI assured depositors that more than 99% of them will get full payment of the deposits back from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

RBI's chief general manager, Yogesh Dayal tweeted, "CKP Co-op Bank, Mumbai, has been under the all-inclusive directions of the RBI since 2014. As there was no scope for revival of the bank, its licence has been cancelled. Out of 132,170 depositors of the bank, about 99.2% will get full payment of their deposits from their DICGC."

Banking stocks are under pressure today on the back of above news. Shares of State Bank of India (SBI), ICICI Bank, IndusInd Bank and HDFC Bank plunged over 8% today.

Apart from the RBI's directive, selling pressure was also seen amid fears of rising non-performing assets (NPA) due to the nationwide lockdown that has brought the economic activity to a grinding halt.

According to a Reuters report, the government expects bad debts to double owing to the coronavirus crisis.

According to the report, a fresh surge in bad debt could hit credit growth and delay India's recovery from the coronavirus pandemic.

How the above developments pan out remains to be seen. Stay tuned for more updates from this space.

Speaking of the banking sector, the low access to credit for micro small and medium enterprises (MSMEs) tells us there is a huge opportunity for lenders.

This is evident from the chart below:

India's Huge Lending Opportunity

Of the 60 million MSMEs in India, only 11% had access to credit from organised lenders. Most of them are self-financed or get credit from unorganised sources.

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

• Self-financing limits the growth of these MSMEs. On the other hand, high interest rates from unorganised sources makes it difficult for them to earn profits.
  
  The Modi government is looking at various ways to correct this problem. Mudra loans, online loans facilities are being made available to MSMEs.
  
  Slowly but surely, lenders are sensing the huge opportunity that lies ahead for this sector.
  
  Banks and other financial firms with prudent lending practices and strong distribution networks will benefit from this megatrend.

Tanushree is counting on 7 top stocks from the Indian stock market that will benefit from this megatrend.

As per her, now is the right time to buy these stocks to profit from the Rebirth of India. You can read about them 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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