Sensex Ends 167 Points Higher; Telecom and Power Stocks Witness Buying

Tue, 19 May Closing

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Indian share markets traded on a positive note throughout the day and ended marginally higher.

Benchmark indices rose sharply in early trade today, tracking firm cues from global markets and initial success in coronavirus vaccine trials.

In a significant development, an American biotechnology company Moderna said its initial vaccine tests in people have shown promising results and can stimulate an immune response against the coronavirus.

However, Indian share markets trimmed gains in the last hour of trading, led by weakness in European indices.

European markets fell today as investors turned cautious over bleak economic data and feared of second wave of infections amid re-opening of many countries from lockdown.

At the closing bell, the BSE Sensex stood higher by 167 points (up 0.6%) and the NSE Nifty closed higher by 56 points (up 0.6%).

The SGX Nifty erased most of the gains and was trading at 8,845, up by 19 points, at the time of writing.

The BSE Mid Cap index ended the day up by 0.5%, while the BSE Small Cap index ended down by 0.2%.

On the sectoral front, gains were largely seen in the telecom sector, power sector and automobile sector, while PSU bank stocks witnessed selling pressure.

Asian stock markets ended on a positive note. As of the most recent closing prices, the Hang Seng was up 1.9% and the Shanghai Composite stood higher by 0.8%. The Nikkei was up 1.5%.

Gold prices are currently trading up by 0.1% at Rs 46,707.

The rupee is currently trading at 75.61 against the US$.

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Moving on, market participants were tracking Bajaj Finance share price, Nesco share price and Sanofi India share price as these companies announced their March quarter results (Q4FY20) today.

Nesco reported its net profit at Rs 529 million for Q4FY20 as against Rs 513 million reported in the same quarter previous year.

Meanwhile, Sanofi India reported net profit at Rs 854 million, down 8.1% year-on-year (YoY).

In news from the macroeconomic space, rating agency Moody's Investors Service said the measures announced by the government for financial institutions as part of Rs 20 trillion-economic package will help ease their asset risk, but will not fully offset the negative impact from the Covid-19 outbreak.

Last week, the Centre announced a support package of Rs 3.70 trillion for micro small and medium enterprises (MSME) sector, Rs 750 billion for non-banking financial companies (NBFCs) and Rs 900 billion for power distribution companies (DISCOMs).

On the package for MSMEs, Moody's said the sector was already under stress before coronavirus outbreak and further slowdown in economic growth will lead to more liquidity woes.

For NBFCs, it said the support is far lower than the immediate liquidity requirements of those companies and the sector will continue to pose risks to the banks.

The ratings agency said automatic and uncollateralised loans to MSMEs is the most significant measures announced. Such loans will help improve MSMEs' near-term liquidity and ease asset risks for the banks and NBFCs who are the key lenders to the sector.

Moody's said the relief measures for NBFCs will fall short of solving the liquidity needs of the sector.

This is the first instance of direct support to the NBFC sector from the government, but the size of support is far lower than the immediate liquidity requirements of those companies.

The planned debt purchase represents about 2% of the total outstanding debt of the top 20 NBFCs that represent close to 75% of the assets of the NBFC sector, it added.

For the power sector, the agency said, loans from Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to DISCOMs will allow them to repay amounts owed to power generating companies and help their cash flow, easing asset risks for the lenders to the sector.

Speaking of the stimulus package, note that investors were disappointed by the measures announced over the weekend.

Indian share markets crashed over 3% yesterday as the measures announced failed to provide any near-term relief.

However, it is interesting to note that unlike the previous stimulus packages, this one is no longer a tiny fraction of India's GDP.

This is the largest stimulus package ever announced by India.

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:

Now, executing the package, keeping India's long-term economic interests in mind, will be the key.

Moving on to news from the financial markets space, the markets regulator has granted mutual funds' request for allowing additional exposure to government securities (G-secs) and treasury bills (T-bills) for credit risk fund, corporate bond fund, and the banking & PSU fund.

The regulator has temporarily revised the scheme categorisation norms to make the option available for mutual funds (MFs). The higher limits can be availed for a period of three months.

Earlier, credit risk funds were required to make a minimum investment of 65% in AA-rated and below-rated papers. However, the minimum levels have now been reduced to 50%.

For corporate bond funds, the minimum investment in AA-plus and above-rated papers has been reduced to 65% from 80%.

However, if there is a deviation from the recategorization norms, MFs would need to obtain approval from the Board of Trustees, investment committee and the board of the MF.

In other news, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on Monday decided to reduce the listing fee for their small and medium enterprise (SME) platforms by 25%.

The revised listing fee structure will be applicable for the existing companies, as well as for the firms waiting to be listed on the exchange.

The fee rebate has been declared following Finance Minister Nirmala Sitharaman's several announcements to rescue the ailing MSME sector.

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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