Sensex Ends Marginally Lower; Metal and IT Stocks Witness Selling

Fri, 10 May Closing

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India share markets witnessed selling pressure during closing hours and ended their volatile trading session marginally lower.

At the closing bell, the BSE Sensex stood lower by 96 points (down 0.3%) and the NSE Nifty closed down by 23 points (down 0.2%). Both, the BSE Mid Cap index and the BSE Small Cap index ended the day down by 0.2%.

Sectoral indices ended in the red with stocks in the metal sector and IT sector witnessing most of the selling pressure.

The rupee was trading at 69.85 against the US$.

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 3.1%. The Nikkei 225 was down 0.3%.

European markets were trading on a positive note. The FTSE 100 was trading up by 0.5%, while the DAX was trading up by 1.3% and the CAC 40 was up by 0.9%.

In the news from global financial markets, as per a leading financial daily, top US and Chinese trade negotiators concluded the first of two days of talks yesterday.

The talks were to rescue a trade deal that is close to collapse as US prepares to go ahead with its plans to hike tariffs on billions of dollars of goods imported from China.

Note that during a 10-month US-China trade war, US tariffs have been imposed on US$250 billion worth of Chinese goods, and retaliatory Chinese tariffs slapped on US$110 billion worth of American products.

Stock markets in China fell as much as 6% on Monday after US President Donald Trump threatened to raise tariffs on all Chinese imports to 25%.

The US president made the above threat in a pair of tweets on Sunday - just a few days ahead of a round of trade negotiations scheduled to begin on Wednesday.

He tweeted that levies imposed on Chinese goods over the past year as part of the trade war with Beijing were partially responsible for great economic results in the US and had little impact on product cost.

He further added that the current 10% tariffs on US$ 200 billion worth of Chinese goods would rise to 25% on Friday, and that US$ 325 billion of additional Chinese goods that were currently untaxed would shortly be subject to tariffs of 25%.

The above development follows trade war between the world's top two economies after Trump administration last year published a list of about 1,300 Chinese exports worth US$ 50 billion that could be hit by US tariffs because of Beijing's alleged theft of intellectual property and technology. China hit back with a levy 25% tariffs on imports of 106 US products.

The tit-for-tat tariffs are part of a wider clash looming over trade between the world's two biggest economies.

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

In the news from the steel sector, Tata Steel share price witnessed heavy selling today on reports that the company's joint venture (JV) with Thyssenkrupp may fail as the deal is yet to be approved by European regulators who have expressed concerns about its impact on competition.

Shares of the company plunged more than 8% today, recording their sharpest intraday fall since November 15, 2016.

The two companies had struck a deal last year to combine their European steel units to create Europe's second-largest steelmaker after ArcelorMittal.

While announcing the March quarter results last month, Tata Steel had said the company and Thyssenkrupp AG recently submitted a comprehensive package of proposed remedies after the European Commission issued its 'Statement of Objection' for the proposed European steel JV.

In other news, JSW Steel share price was also in focus today. The company reported crude steel production at 13.93 lakh tonnes (LT) for April 2019, registering a rise of 2% over corresponding month of previous year.

The production of rolled products increased to 3.36 LT in April 2019 as compared to 3.24 LT in April 2018, representing a surge of 4%. The production of rolled products stood at 9.53 LT in April 2019.

JSW Steel share price ended the day up by 0.4%.

Speaking of interesting development in the steel sector, did you know In the last 6 years, India has been the world's fastest growing steel producer, among the top 10.

Over the last 6-year period, India's steel production grew at a CAGR of 6%. Countries such as Germany and Japan registered negative growth. Growth has been flat in USA, South Korea, Russia, and Brazil.China, the world leading steel producer, which saw double-digit growth over 2001-2010, grew marginally by 4% CAGR in the last six years.

No wonder India has surged past Japan and USA to become the second largest steel producer in the world.

This data validates Tanushree's optimism about India's future.

In the news from banking sector, SBI share price was in focus today as the public lender posted a profit of Rs 8.4 billion for March quarter against a loss of Rs 77.2 billion in the corresponding quarter last year.

Asset quality of the bank improved with percentage of gross non-performing assets (NPAs) easing to 7.73% from 8.71% on a sequential basis.

Net NPA improved to 3.01% sequentially from 3.95%.

In absolute terms, gross NPAs declined to Rs 1.73 lakh crore from Rs 1.88 lakh crore on a sequential basis. The figure stood at Rs 2.23 lakh crore in the corresponding quarter last year.

Fresh slippages came in at Rs 75 billion against Rs 45 billion in December quarter. Net interest income jumped 14.91% to Rs 229.5 billion during the quarter against Rs 199.7 billion in the year ago period.

Provisions and contingencies stood at Rs 165 billion against Rs 280.9 billiom in the year ago period. Provision coverage ratio as on March 31 stood at 78.73%.

The bank has made a provision of Rs 39.8 billion for the year ended March 31, 2019 towards arrears of wages due for revision w.e.f November 1, 2017.

The stock of the bank ended 2.9% higher on BSE in today's session.

Speaking of the banking sector, whenever SBI announces its quarterly result, its management always says, 'the worst is behind us', 'the worst is over'.

The management has repeated this statement after almost every quarterly result. In fact, SBI Chairman, Rajnish Kumar had to mention this last year.

• People don't believe when you say that the worst is over. We have to prove now that the worst is over. So wait for next two-three quarters.

As Warren Buffett famously said, 'There's never just one cockroach in the kitchen, when you start looking around'.

This dictum is apt when it comes to banking.

Eventually, this leads to the bank underperforming the market and its peer banks.

And if there is any private sector bank that has severely underperformed in the last two years, it has to be Lakshmi Vilas Bank (LVB).

Look at the chart below.

Lakshmi Vilas Bank Down 60% from Its 2017 High

Here's what Sarvajeet Bodas wrote about this in the recent edition of The 5 Minute WrapUp...

• LVB declined by more than 50% in the last 2 years compared to the overall BSE Bankex showing gains of about 30%.
  
  Here's another interesting data.
  
  If you look at the shareholding pattern of LVB during this 2-year time frame, retail investors (Individual share capital up to Rs. 2 Lacs) have increased by 15%. The number of shares owned by them increased by 24%.

This is a typical example of retail investors catching a falling knife!

Apart from SBI, market participants were also tracking Eicher Motors share price and L&T share price as these companies were to announce their Q4FY19 results today.

You can also read our recently released Q4FY19 Results: Vedanta, Ceat, ICICI Bank, Apollo Tyres, JK paper.

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

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