Sensex Ends 307 Points Higher; Metal and Telecom Stocks Witness Buying

Fri, 5 Jun Closing

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Indian share markets traded on a positive note throughout the day and ended higher, tracking positive global sentiments.

At the closing bell, the BSE Sensex stood higher by 307 points (up 0.9%).

The NSE Nifty closed higher by 113 points (up 1.1%).

Gains were largely seen in the metal sector and telecom sector.

IT stocks, on the other hand witnessed selling pressure.

The BSE Mid Cap index ended the day up by 1.8%.

Meanwhile, the BSE Small Cap index ended up by 2.5%.

SGX Nifty was trading at 10,158, up by 141 points, at the time of writing.

Asian stock markets ended on a positive note today as investors focused on government stimulus and shrugged off an upcoming US jobs report that is expected to show the highest unemployment since the 1930s.

As of the most recent closing prices, the Hang Seng was up 1.7% and the Shanghai Composite stood higher by 0.4%. The Nikkei ended higher by 0.7%.

European shares resumed their rally today as a bumper stimulus from the European Central Bank fueled hopes of a faster economic recovery, putting the main benchmarks on course for their best week in two months.

Gold prices are trading down by 0.7% at Rs 46,369.

The rupee is currently trading at 75.58 against the US$.

Speaking of stock markets, as per Richa Agarwal, editor of our premium smallcap service Hidden Treasure, the Covid-19 crisis could be the best investing opportunity in small-cap stocks.

In her latest video, she talks about the stocks that will do well despite the lockdown.

Tune in now...

In news from the FMCG sector, shares of Britannia Industries witnessed selling pressure today after media reports said the Wadias may sell around 5% stake in the company through block deals.

Reportedly, the Wadia Group is looking to sell up to 5% stake in India's largest biscuit maker to raise as much as Rs 40 billion as the Mumbai-based conglomerate is looking to take advantage of a spike in share prices.

The group is expected to infuse these funds into its aviation firm GoAir and textile and real estate company Bombay Dyeing.

Shares of Britannia Industries erased early losses and ended the day up by 0.3%.

To know more, you can read Britannia's latest result analysis on our website.

Moving on to news from the banking sector, State Bank of India (SBI) reported an over four-fold jump in its net profit at Rs 35.8 billion for the March quarter (Q4FY20) compared with Rs 8.4 billion in the same quarter last year.

The profit was supported by one-time gain of Rs 27.3 billion from the stake sale in SBI Cards and Payment Services done during the quarter.

SBI's gross non-performing assets (NPAs) for the quarter eased sequentially to 6.15% of total advances from 6.91% in the December quarter and 7.53% in the year-ago quarter.

Total provisions and contingencies for the quarter fell to Rs 135 billion compared with Rs 165 billion in the year-ago quarter.

The bank said a total of 21.8% of its customers availed the RBI moratorium. In terms of the loan value, it stood at 23%.

The bank further said that 38.9% of its corporate loans have been to PSUs and government departments. While 60.8% of personal retail loans are to low-risk mortgages.

SBI share price ended the day up by 8.9%.

In other news, Axis Bank share price was in focus today.

Digital payment giants Mastercard has tied up with Axis Bank and French payment service provider Worldline, to bring the functionality of Point of Sale devices onto android smartphones of small merchants in India while also providing store owners value added digitization services.

The card network provider along with the private sector lender on Thursday announced the launch of the app that will allow for subscription-based services such as digital onboarding, payment acceptance and digital accounting services on a single interface for small merchants.

Reportedly, the partnership dynamic will be such that Axis Bank will acquire merchants, Worldline will provide the technology expertise and Mastercard will power these transactions.

The product also links with requirements of Indian lenders seeking transactional data to improve underwriting efficiency to expand loans to the MSME sector.

Speaking of the banking sector, note that the Bank Nifty index was underperforming the benchmark index Nifty after they hit their lows in March.

There were several reasons behind its underperformance - a rising NPA risk, lack of credit growth, and overcautious nature of banks in lending.

However, it is interesting to note that these problems haven't gone away, but banks have still managed to outperform Nifty in the last two weeks, as can be seen in the chart below:

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As per Apurva Sheth, lead chartist at Equitymaster, the reason why banks are outperforming over the last two weeks is because of price action.

Here's what he wrote about it in today's edition of Profit Hunter...

• The price action of Bank Nifty when compared to Nifty suggested that banks are beaten down sharply.
  
  Bank Nifty to Nifty ratio had reached an extreme. The ratio had dropped way below its average and reversion to the mean was due.
  
  The ratio is still far below its average and Bank Nifty will attempt to claw back. Obviously, this won't happen in a hurry or in a straight line. There will be lot of zig-zag moves which will create opportunities for smart traders.
  
  To know how you can make the most of such opportunities, I recommend you read this piece.

Meanwhile, I recently reached out to Tanushree Banerjee, who is closely tracking the banking sector in the current scenario. Here's her view on the sector...

• The Covid-19 lockdown has hit cash flows of both individual borrowers and corporates. This, in turn, will impact their loan repayment capability.
  
  The RBI's repo rate cut came as a temporary lifeline for Indian companies with debt on books. It will offer both companies and retail borrowers some breather. If banks use this phase judiciously, it may save the NPA ratios from worsening significantly.
  
  However, only the banks that have adequate capital and provisioning cushion may be able to tide over the economic crisis. Eventually, another round of consolidation in private sector banks, like the one after 2002, cannot be ruled out.

Tanushree's latest StockSelect recommendation is one such midcap bank.

You can read the entire report here (requires subscription).

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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