Sensex Ends Over 300 Points Higher; Energy and Metal Stocks Witness Buying

Tue, 25 Jun Closing

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After opening the day marginally lower, Indian share markets witnessed most of the buying interest during closing hours and ended their trading session on a strong note. Gains were largely seen in the energy sector, metal sector and realty sector.

At the closing bell, the BSE Sensex stood higher by 312 points (up 0.8%) and the NSE Nifty closed higher by 97 points (up 0.8%). The BSE Mid Cap index ended the day up 0.7%, while the BSE Small Cap index ended the day up by 0.3%.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.3% and the Shanghai Composite was down by 0.9%. The Nikkei 225 was down 0.4%.

The rupee was trading at 69.35 against the US$.

The domestic currency is presently trading higher driven by easing crude oil prices and foreign fund inflows.

Yesterday, the rupee recovered from day's low and ended 23 paise higher at 69.35 against the US$ amid weakening of the greenback against other major currencies.

In the last few sessions, the dollar has been weighed down following expectation that the Federal Reserve in the near future is expected to cut rates.

In the news from the retail sector, Trent share price was in focus today. Stock of the company witnessed buying interest today after the company said it was seeking shareholder's approval to allot up to 24.7 million equity shares to Tata Sons.

So far this week, the Tata group retail chain's subsidiary has surged 10% after its board approved raising up to Rs 15.5 billion through a mix of issue of shares to its promoter Tata Sons on a preferential basis, and other options to fund its expansion.

The company said, "total amount to be raised from issuance of shares to the promoter is about Rs 9.5 billion, which the company plans to utilise to finance its expansion and reduce debt,"

After the transaction, the stake of Tata Sons, holding company of Tata Group, in Trent will increase to 33% from the current 28%.

According to reports, accelerated store addition in the Westside format, right-sizing of Star Bazaar stores coupled with consistent growth in Zara are further expected to accelerate Trent's financial performance.

To know more about the company, you can read Trent's latest result analysis on our website.

In the news from the commodity space, oil prices remained steady as concerns over declining crude demand were offset by risks to supply linked to new US sanctions on Iran.

Hopes for progress in the trade war between China and the United States during this week's G20 meeting were dampened by a comment from a senior US official saying US President Donald Trump was "comfortable with any outcome" from the talks.

Demand concerns weighing on oil prices were briefly overcome last week when Brent climbed 5% and US crude surged almost 10%, its strongest week since 2016, after Iran shot down a US drone on Thursday, adding to tensions stoked by attacks on oil tankers in the area in May and June.

We will keep you updated on all the developments from this space. Stay tuned.

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

Moving on to the news from the finance sector, shares of Dewan Housing Finance Corporation (DHFL) slipped over 5% in today's session, breaking the winning streak of last three sessions, when it jumped 25%.

In a BSE filing on Monday, the company said it had paid Rs 26.7 million in interest on its non-convertible debentures.

The board of directors of the company is scheduled to meet on Saturday, June 29, 2019, to consider and approve audited financial results for March quarter and for the financial year ended March 31, 2019.

Media reports also suggested that lenders of DHFL may meet in July first week to work out a rescue package for the debt-ridden firm.

The rescue package may include reworking of loan payments, fresh working capital support, roping in a financial investor and putting a new management team in place.

A number of lenders, including State Bank of India (SBI), HDFC Bank, ICICI Bank, Axis Bank, Union Bank and others have a total exposure of over Rs 400 billion to DHFL.

DHFL share price ended the day down by 3.6%.

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.

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

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

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

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.

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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