Sensex Falls 350 Points; ICICI Bank & Sun Pharma Top Losers

Thu, 11 Jun 12:30 pm

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Share markets in India have extended early losses and are presently trading on a negative note.

Benchmark indices edged lower today, tracking a pause in global equities after the US central bank said that recovery from the pandemic would take years triggered.

The US Federal Reserve reassured investors of its support for the economy but projected a 6.5% decline in US GDP this year.

The BSE Sensex is trading down by 355 points, down 1.1%, at 33,900 levels.

Meanwhile, the NSE Nifty is trading down by 101 points.

The BSE Mid Cap index is trading on a flat note, while the BSE Small Cap index is trading up by 0.3%.

Sectoral indices are trading on a mixed note with stocks in the finance sector and energy sector witnessing most of the selling pressure.

The rupee is trading at 75.79 against the US$.

Gold prices are trading up by 1% at Rs 47,110 per 10 grams.

Speaking of Indian stock markets, after the long coronavirus lockdown, the Unlock 1.0 phase has been surprisingly positive for the stock markets.

Most have justified the sharp run of last few sessions in Indian stock markets on the grounds that all negative news is already priced in.

But is that truly the case? Or is there something more to it?

In her recent video, Tanushree Banerjee answers these questions and talks about how investors should act on the Unlock 1.0 market rally.

Tune in to know more...

Moving on, market participants are tracking Future Retail share price.

Kishore Biyani's Future group is reportedly in talks with Mukesh Ambani's Reliance Industries to sell its retail and supply chain businesses. Biyani is said to be looking at an enterprise valuation of Rs 100 billion.

In news from the chemical sector, Dhanuka Agritech on Wednesday reported a 45.8% growth in its profit after tax (PAT) at Rs 390 million for the quarter ended March (Q4FY20).

It had posted a PAT of Rs 267.5 million in the same quarter last year.

The company's total turnover rose 18.1% to Rs 2,275.7 million compared to Rs 1,927.2 million in the same quarter last year.

For the year ended March 2020, the company's PAT jumped 25.7% to Rs 1,414.7 million as compared to Rs 1,125.8 million in FY19.

Dhanuka Agritech share price is presently trading up by 2.6%.

Moving on to news from the banking sector, shares of IndusInd Bank are trading higher for fifth straight day today, rallying 8% intraday, after its promoters said that they would acquire additional shares of the bank from the secondary market.

In the past one week, shares of the private lender have surged about 30%.

The promoters, IndusInd International Holdings Ltd. and IndusInd Ltd., currently hold 14.68% of the paid-up share capital of the bank.

In an exchange filing last week, IndusInd Bank said that the promoters shall now purchase additional shares from the open market within the overall regulatory limit prescribed for promoter equity holding cap.

Earlier in April, the bank had said that the promoters have applied to the Reserve Bank of India (RBI) for increasing their permissible holdings to 26%.

In other news, tech start-up WayCool Foods has received US$ 5.5 million in debt financing from IndusInd Bank guaranteed by US International Development Finance Corporation (DFC).

In a statement, WayCool on Wednesday said that DFC has extended a 100% guarantee to the company's latest round of fund raise of US$ 5.5 million through debt financing from IndusInd Bank.

IndusInd Bank share price is presently trading up by 8.6%.

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:

As per Apurva Sheth, lead chartist at Equitymaster, the reason why banks are outperforming over the past few 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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Indian Share Market Update: Top Gainers and Losers