Sensex Crashes 1,069 Points; Banking, Finance and Automobile Stocks Bleed

Mon, 18 May Closing

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Indian share markets witnessed negative trading activity throughout the day today and ended deep in the red.

Benchmark indices extended losses as the session progressed as investors were unimpressed by the stimulus measures announced over the weekend, which failed to provide any near-term relief.

Selling pressure was also seen as the government extended nationwide lockdown till May 31, although with some relaxations to pave the way for increased movement of people and facilitate more economic activity.

Further, rising tensions between the US and China and poor economic data from world economies dampened sentiment.

Data in Japan confirmed it slipped into recession in the first quarter, putting it on course for its worst post-war slump.

Barring IT stocks, all sectoral indices ended on a negative note with stocks in the finance sector, banking sector and automobile sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 1,069 points (down 3.4%) and the NSE Nifty closed down by 314 points (down 3.4%).

The SGX Nifty witnessed huge selling pressure and was trading at 8,824, down by 301 points, at the time of writing.

The BSE Mid Cap index and the BSE Small Cap index ended their day down by 3.8% and 2.9%, respectively.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.6% and the Nikkei stood higher by 0.5%.

European stock markets rose today alongside US equity futures as investors found reason for encouragement in signs businesses are reopening across major economies.

The rupee is trading at 75.98 against the US$.

Gold Prices are currently trading up by 0.9% at Rs 47,830.

Market participants were tracking Bharti Airtel share price, Torrent Power share price, and  HYPERLINK "https://www.equitymaster.com/share-price/DRLP/LALPATHLAB-539524/DR-LAL-PATHLABS-LTD-Share-Price?utm_source=TM&utm_medium=website&utm_campaign=MCOM&utm_content=market-commentary" \t "_blank" Dr. Lal PathLabs share price as these companies announced their March quarter results (Q4FY20) today.

Dr. Lal PathLabs' net profit declined by 23.3% to Rs 353 million in Q4FY20 as against Rs 460 million during the previous quarter ended March 2019.

In news from the hotel sector, shares of multiplex and hotel operators witnessed selling pressure today after the government extended the nationwide lockdown by another two weeks to contain the spread of coronavirus.

In its fresh guidelines released late on Sunday, the Centre accepted the demands of several states that they be allowed to demarcate zones. The guidelines reiterated that restaurants are permitted to operate kitchens for home delivery of food items.

However, the hospitality sector including hotels and restaurants will remain shut.

The Centre said cinema halls, shopping complexes, malls, swimming pools, gymnasia, large congregations and gatherings including social, political, cultural, and religious will remain banned.

Shares of Chalet Hotels, EIH, Indian Hotels, Lemon Tree Hotels and Wonderla Holidays from the hotel sector fell to their respective 52-week lows today.

Shares of multiplex operators PVR and Inox Leisure also touched their 52-week lows on back of the above news. Selling pressure was also seen as media reports suggested Amazon Prime Video has acquired seven Bollywood and regional films for direct-to-digital premiere.

Moving on, shares of companies engaged in the defence sector surged up to 10% today after the government hiked foreign direct investment (FDI) via automatic route from 49% to 74%.

Shares of Hindustan Aeronautics, BEML, Bharat Dynamics and Bharat Electronics were among the state-owned companies that rallied up to 10%, while Bharat Forge, Astra Microwave Products and Walchandnagar Industries from the private sector were up in the range of 3-5% intraday.

Finance Minister Nirmala Sitharaman on Saturday announced that the FDI limit in defence production was being raised to 74% from 49% for FDI through the automatic route as part of reforms in the defence sector to boost the government's Make in India campaign.

Meanwhile, some weapons and platforms will be banned for imports. Items banned for imports can only be purchased from within the country.

The armed forces will now have to look to local manufacturers or companies that have set up manufacturing bases in India in order to meet their requirements.

In addition to banning the import of weapons, FM said that import spares will be used for indigenisation of manufacturing and the budget will include separate provisioning for domestic capital procurement.

Speaking of the defence sector, for long, India has been known as a military power. But much of it is due to India's military personnel rather than the arsenal they have at hand.

On per capita basis, India's military spending is quite low. This is evident from the chart below:

Scope for Increase in India's Defence Spending?

Here's what Tanushree Banerjee wrote about the defence sector, in of the editions of The 5 Minute WrapUp...

• China with a comparable population, spends almost 3.5 times as much as India does on their military.
  
  China is also spending five times as much on R&D as we do. It's also now exporting twice the amount it was just five years ago.
  
  Will India follow a similar pattern to China in terms of increasing R&D and exports?

With India's big policy push in defence, Tanushree believes this difference between India and China is bound to reduce with time.

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

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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