Sensex Opens Over 500 Points Down; IT and Automobiles Stocks Under Pressure

Thu, 14 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 0.7% while the Hang Seng is down 1.3%. The Nikkei 225 is trading down by 0.6%. Wall Street's three major indices closed lower for the second day in a row after Federal Reserve Chairman Jerome Powell warned on Wednesday of extended economic weakness due to the coronavirus pandemic and called for Congress to agree on additional fiscal support.

Trends on SGX Nifty indicated a negative opening for the index in India with a 145 points loss.

India share markets fell in the opening session. The BSE Sensex is trading down by 547 points while the NSE Nifty is trading down by 152 points. The BSE Mid Cap index and BSE Small Cap index opened down by 0.6% and 0.4% respectively.

Except realty stocks, all sectoral indices are trading in red with IT stocks, automobiles stocks and banking stocks witnessing maximum selling pressure.

Moving on, gold prices are currently trading up 0.8% at Rs 45,981.

The rupee is currently trading at 75.43 against the US$.

The rupee appreciated by 5 paise to 75.46 against the US dollar on Wednesday as fiscal stimulus by the government bolstered investor sentiment.

Prime Minister Narendra Modi's Rs 20 trillion economic stimulus package enthused investors.

However, risk sentiments are negative and investor sentiments remain fragile over coronavirus concerns.

At the interbank foreign exchange, the rupee opened on a strong note at 75.31 but lost most of its gains in day trade.

The local currency settled at 75.46 against the US dollar, registering a rise of 5 paise over its previous close. During the trading session rupee witnessed an intra-day high of 75.30 and a low of 75.50.

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.

Moving on to the news from the financial sector. Finance Minister Nirmala Sitharaman on May 13 announced a Rs 300-billion special liquidity scheme for non-banking finance companies (NBFCs), housing finance companies (HFCs) and micro-finance institutions (MFIs).

She also announced an extension of the partial credit guarantee scheme worth Rs 450 billion under which the first 20% loss in debt papers will be borne by the government.

AA and below rated and unrated papers will be eligible for this investment.

FM Sitharaman detailed the Rs 20 trillion economic stimulus package under the Atmanirbhar Bharat Abhiyan.

The first tranche of the announcement has 15 relief measures, of which six pertain to the micro, small and medium enterprises (MSMEs), two related to Employees' Provident Fund, two on non-banking finance companies (NBFCs), housing finance companies (HFCs) and micro-finance institutions (MFIs), one on discoms, one for contractors, one for real estate and 3 tax measures.

We will keep you updated on the reform measures announced in coming days for various sectors. Stay tuned.

Note that in March, Finance Minister Nirmala Sitharaman had announced a package of Rs 1.7 trillion.

Unlike the previous stimulus packages, this one is no longer a tiny fraction of India's GDP.

At about 10.2%, it is among the biggest stimulus packages announced over the past few months by governments all around the world. This is evident in the chart below:

India's Rs 2 Trillion Stimulus Package One Among the Largest in the World

We will keep you updated on the latest developments from this space. Stay tuned.

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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