Sensex Ends on a Flat Note; IT & Automobile Stocks Witness Selling

Thu, 13 Jun Closing

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Indian share markets traded on a volatile note throughout the day and recovered during the closing hours to end their session on a flat note.

Sectoral indices ended on a mixed note with stocks in the realty sector and power sector witnessing buying interest while IT stocks, automobile stocks and healthcare stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood lower by 15 points and the NSE Nifty closed up by 8 points. The BSE Mid Cap index ended the day down by 0.3% and the BSE Small Cap index ended down by 0.5%.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.1% and the Shanghai Composite was flat. The Nikkei 225 was down 0.5%.

The rupee is trading at 69.50 against the US$.

Tata Sponge Iron share price was in focus today as the company approved the issuance of 3,30,00,000 equity shares of face value of Rs 10 each, on a rights basis.

The issuance was for an amount not exceeding Rs 16.5 billion, and in ratio of 15:7 i.e. 15 equity shares for every 7 equity shares held by eligible equity shareholders of the company as on the record i.e. June 25, 2019.

The issue price is Rs 500 per equity share. The issue opens on July 2 and closes on July 16, 2019.

Market participants were tracking Jain Irrigation share price as the company asserted it has not defaulted on any of its debt obligations.

The company further stated it is confident of executing its plan to bring down its debt by Rs 20 billion through corporate action.

In the news from the finance sector, Indiabulls Housing Finance share price was in focus today. Stock of the company witnessed buying interest after it was announced that Abhay Yadav, who had filed a petition against promoter Sameer Gehlaut and the company over alleged fund misappropriation, has withdrawn his case in the Supreme Court.

As per the company statement, Yadav in his affidavit said that he was not aware of the contents and allegations mentioned in the complaints of the petition.

The company's statement suggested Yadav as saying that "I now realise that such papers, affidavits, applications, etc. were signed by me have been misused to file false complaints against Indiabulls with malafide intentions".

Note that the stock of the company witnessed huge selling this week after a writ was filed in the Supreme Court on Monday against Chairman Sameer Gehlaut for misappropriation of Rs 980 billion public money.

As per an article in a leading financial daily, a plea was filed in the Supreme Court on Monday seeking legal action against the company, its chairman and directors for alleged misappropriation.

The petition alleged that money was siphoned off by Sameer Gehlaut, the chairman of the firm for their personal use.

Speaking of non-banking financial companies (NBFCs), note that NBFCs were flush with funds from banks, insurance companies, and asset management companies i.e. mutual funds in 2016.

And with these funds and without the necessary restrictions, NBFCs become reckless in deploying the funds.

You can see this clear as day in the chart below...

One Chart that Predicted the NBFC and Mutual Fund Crisis Back in 2016

Here's what Tanushree Banerjee wrote about this in today's edition of The 5 Minute WrapUp...

• Let's look back at 2016...
  
  Banks, mutual funds, and insurance companies were competing with each other to lend to NBFCs.
  
  And why not?
  
  Not only were the fast growing NBFCs hungry for funds, they also offered attractive yields.
  
  The NBFCs took more risk than banks by lending without collaterals. But they charged higher interest rates; which meant their margins remained far higher than that of banks.
  
  It's no wonder the NBFCs caught everyone's fancy. In fact, between 2013 and 2016, the top NBFCs saw their valuation multiples move up three to eight times.

As per Tanushree, the problem in the NBFC sector is far from over. But she believes the good quality NBFCs, and housing finance companies will continue to flourish and you can make the most of the opportunity by buying the safest NBFCs.

In the news from commodity space, crude oil prices jumped around 4% today. This was seen as a welcome breather as prices were trading deep in the red yesterday.

The rise in prices came on news of a suspected attack on two tankers in the Gulf of Oman near Iran and the Strait of Hormuz, through which a fifth of global oil consumption passes.

Note that oil prices were trading in the red this week as 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 this week. Also, 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.

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.

To know more about commodity and currency markets and which are the best counters to trade in this space, you can read Vijay Bhambwani's recent article: Why Do I Recommend Trading Only Nickel, Crude oil, Gold, Copper, and USDINR?

And 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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