Sensex Opens Over 450 Points Down; Banking Stocks Under Pressure

Tue, 12 May 09:30 am

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Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.1% while the Hang Seng is down 1.4%. The Nikkei 225 is trading down by 0.2%. Meanwhile, the S&P 500 closed slightly higher on Monday as investors looked beyond new spikes in coronavirus infections to focus on expectations that an economy crippled by mandated shutdowns will soon be re-opened for business.

Trends on SGX Nifty indicated a negative opening for the index in India with a 68 points loss.

India share markets opened lower. The BSE Sensex is trading down by 430 points while the NSE Nifty is trading down by 116 points. The BSE Mid Cap index and BSE Small Cap index opened down by 0.5% and 0.2% respectively.

All sectoral indices are trading in red with banking stocks, realty stocks and capital goods stocks witnessing maximum selling pressure.

Moving on, the rupee is currently trading at 75.91 against the US$.

Gold prices are currently trading down 0.1% at Rs 45,781.

Domestic gold futures eased on Monday to slip below the Rs 45,700 per 10 grams mark briefly, however losses were limited amid mild gains in global rates.

MCX gold futures fell by as much as Rs 222 per 10 grams or 0.5% to Rs 45,661 per 10 grams, compared to their previous close of Rs 45,812 per 10 grams.

Gold futures registered an all-time high of Rs 47,327 per 10 grams in late March, as the coronavirus (COVID-19) pandemic boosted the yellow metal's appeal as a safe haven.

In the international market, gold prices held above the key US$1,700 per ounce support level, as a new wave of coronavirus infections in some countries raised expectations of further stimulus measures and lower interest rates.

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

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, Apurva Sheth, lead chartist at Equitymaster, talks about a reliable investing signal in his latest video, which is indicating that gold prices will go higher.

Tune in to his video here...

Moving on to the news from automobiles sector. As per an article in a leading financial daily, India's automakers have warned that total automobile sales could fall as much as 45% in the current fiscal year in a worst-case scenario as economic growth slumps due to the COVID-19 pandemic.

They are also seeking government help through the crisis.

The Society of Indian Automobile Manufacturers (SIAM) stated that if India's economy contracts by 2% in the year starting April 1, sales of cars, trucks and motorbikes could decline by as much as 45% from a year before.

SIAM presented two more scenarios to the government, one where the economy grows by 2-3%, which would lead to a 20% decline in auto sales, and a second where growth stagnates from last year, resulting in a 35% decline in sales.

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

Automobile stocks opened mixed with Tata Motors DVR and Bajaj Auto witnessing maximum selling pressure.

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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