Sensex Ends 194 Points Lower; Realty and Telecom Stocks Witness Selling

Wed, 12 Jun Closing

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Share markets in India continued to trade in the red during closing hours and ended their trading session lower. Barring metal sector and FMCG sector, all sectoral indices ended on a negative note with realty stocks and telecom stocks witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 194 points (down 0.5%) and the NSE Nifty closed down by 59 points (down 0.5%). The BSE Mid Cap index ended the day down by 0.8%, while the BSE Small Cap index ended the day down by 0.5%.

The rupee was trading at 69.33 against the US$.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.7% and the Shanghai Composite was down by 0.6%. The Nikkei 225 was down 0.4%.

From the banking sector, Yes Bank share price was in focus today.

Stock of the lender witnessed selling pressure after the rating agency Moody's yesterday placed the bank's ratings under review for a downgrade.

The agency placed Yes Bank's ratings under review for a downgrade citing its large exposure to debt-laden non-banking financial companies (NBFC) and the possibility that the bank's loans under watch list could slip into non-performing assets (NPAs).

Meanwhile, Mukesh Sabharwal, chairman of the nomination and remuneration committee of the bank, quit on Tuesday citing personal reasons.

Earlier, ICRA had downgraded Yes Bank's tier-I and tier-II bonds and infrastructure debt on deterioration in the credit quality of large ticket borrowers.

In the news from commodity space, crude oil witnessed selling pressure today. Oil prices fell over 1% on the back of a weaker oil demand outlook and a rise in US crude inventories despite growing expectations of ongoing OPEC-led supply cuts.

The US Energy Information Administration (EIA) cut its forecasts for 2019 world oil demand growth and US crude oil production in a monthly report released yesterday.

The EIA lowered its 2019 world oil demand growth forecast by 160,000 barrels per day (bpd) to 1.22 million bpd. It wound back its forecast for 2019 US crude production to 12.32 million bpd. This is 140,000 bpd less than the May forecast.

Apart from the above, a surprise increase in US crude stockpiles also kept oil prices under pressure.

According to data from the American Petroleum Institute (API), US crude inventories rose by 4.9 million barrels in the week ended June 7 to 482.8 million barrels. That compared with analysts' expectations for a decrease of 481,000 barrels.

Also, ongoing trade tensions between the United States and China, the world's two biggest oil consumers, weighed on prices. US President Donald Trump said on Tuesday he was holding up a trade deal with China.

The next meeting of the Organization of the Petroleum Exporting Countries (OPEC) is going to take place at the end of June and market participants are eyeing whether the world's major oil producers would prolong their supply cuts.

How this pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Speaking of crude oil, note that crude oil prices have quietly creeped up this year.

Oil prices have jumped as much as 3.2% to their highest level since late 2018.

As you know, rising crude oil prices have a big impact on the Indian economy as it imports over 70% of its energy needs.

Rise in crude oil increases input costs for dependent firms. It also means rising inflation. Rising inflation means rising interest rates.

It also puts pressure on the government to cut excise duty, thereby impacting its revenues. We have already seen that happening.

Research Analyst, Richa Agarwal believes that this has the potential to bring down sentiments in the domestic markets. She further believes that, if oil prices continue their upward march in a tight global environment, a broader correction in the sentiment fueled domestic market cannot be ruled out.

In the news from macroeconomic space... In a paper published this month, Arvind Subramanian said that based on various metrics, India did not grow at the heroic 7% per year between 2011-12 and 2016-17, as we were officially informed.

Indeed, as per his remarks, average annual growth stood at a measly 4.5% per year, on average, during FY12-FY17.

He has made two important points to justify his argument. One, he uses 17 key factors, including two-wheeler, tractor and truck sales, electricity consumption, manufacturing numbers, rail freight and so on, as proxies to measure overall growth.

He finds that before 2011, most of these above factors, especially manufacturing production and exports, moved in tandem with overall growth. Thereafter, for no perceptible reason, manufacturing growth raced ahead, dragging GDP growth upward. As per him, while manufacturing is the main culprit, other sectors too followed the same pattern.

Another point to justify his numbers is that India's growth, measured against an average of 71 other growing nations was in line till 2011. Thereafter, compared to all these nations, India shot ahead. As per him this, statistically, is about as likely as locating a needle on the surface of Mars - without a telescope.

You can read more about his analysis and find the entire research paper here.

In an article in The Indian Express released yesterday, Subramanian mulls over the consequences of reduced growth during this period.

So, what does all of this mean for India?

Has the Indian economy slowed down much more than expected?

We don't know. But we do know that over the next few weeks a lot of ink and clicks are going to be devoted to understanding the past.

While there's some merit to that effort...we believe a more beneficial exercise may be to understand what lies ahead.

You see, we believe that India is destined to prosper.

In fact, as per co-head of research, Tanushree Banerjee, there are certain irreversible trends which will set the stage for msassive growth in India over the next decade...leading to what she calls the Rebirth of India.

In all, has discovered 50 irreversible trends that are changing our country for the better. These changes will be permanent, and they will have huge consequences for wealth creation in the stock market.

Tanushree has already identified 7 stocks that are likely to benefit from this trend. She believes these stocks are in the right place at the right time. They're the best stocks to buy on the journey to Sensex 100,000.

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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