Sensex Ends 793 Points Lower; Capital Goods and Realty Stocks Witness Selling

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Indian share markets fell sharply today, extending losses to the second day. The BSE Sensex fell over 900 points intraday and breached the 39,000 mark. Meanwhile, NSE Nifty slumped below 11,600.

All sectoral indices ended on a negative note, with stocks in the capital goods sector, realty sector and automobile sector, leading the losses.

At the closing bell, the BSE Sensex stood lower by 793 points (down 2%) and the NSE Nifty closed down by 253 points (down 2.1%). The BSE Mid Cap index ended the day down 2%, while the BSE Small Cap index ended the day down by 2.5%.

Asian stock markets were also weak today after strong US jobs data tempered expectations for a Fed rate cut. As of the most recent closing prices, the Hang Seng was down by 1.5% and the Shanghai Composite stood lower by 2.6%.

Note that on Friday last week, both the Sensex and Nifty fell nearly 1% after some Budget proposals spooked market sentiments.

While the Budget 2019 failed to cheer Indian stock markets, Tanushree Banerjee's Rebirth of India call remains intact. In the video below, she explains how investors could continue to make the most of the irreversible trends and India's US$ 5 trillion potential.

You can read about the opportunities in Rebirth of India here: defence boom, infrastructure sector reforms, NBFC Crisis and Electric Vehicle Disruption.

Also, speaking of India's US$ 5 trillion potential Prime Minister Narendra Modi last week said that said the Economic Survey 2019, released last week, outlines a vision to achieve a US$5 trillion economy by 2025.

As per him, GST, Jandhan, Aadhaar, Digitisation and Bankruptcy Act could become the pillars to lay the foundation of a US$ 5 trillion economy.

As per us, to double India's GDP within five years, the government will have to be on an overdrive rather than resting on its laurels.

Reforms in agriculture and building infrastructure across the agriculture value chain would be necessary to address the biggest pain points of the economy.

The direct tax mop-up in fiscal 2018, at 6% of GDP, touched a decadal high. But increasing India's tax payer base consistently would be necessary to rid the economy of fiscal paralysis.

Improving Taxpayer Base Necessary for a US$ 5 Trillion Economy

That's not all.

As per Tanushree Banerjee, there are several goals that the government will need to work on to achieve the US$ 5 trillion mark. You can read about them here: The Trade to Make the Most of India's US$ 5 Trillion Potential

Also, Tanushree states what would the above goal of the government mean for the stock markets. Here's what she wrote...

• It is certainly wishful thinking to believe that all these goals would be seamlessly achieved. Or that India's GDP would be perched above the US$ 5 trillion mark by the next elections.
  
  But I believe being anchored to India' GDP goals could be the biggest mistake that stock market investors could make.
  
  You would rather focus on the plan, progress and execution.
  
  To put it differently, it is neither the upcoming Budget nor the timeframe for India's US$ 5 trillion GDP goal that should worry you.
  
  Instead look for stocks that could be the biggest beneficiaries of the economic tailwinds over the next five years. Be it manufacturing, agriculture, defence or even financial sector cleanup, a few businesses will stand head and shoulders above the rest.
  
  And buying those stocks as and when the stock markets goes through temporary turbulence could be your best wealth creating bet. Not just for the next five years, but possibly for a lifetime.

Moving on to the news from the banking sector, Punjab National Bank share price was in focus today. Shares of the lender witnessed selling pressure after the state-run lender declared loan exposure of Rs 38 billion to bankrupt Bhushan Power and Steel as fraudulent.

In a notice to exchanges PNB said it had reported the fraud to the Reserve Bank of India (RBI) on the basis of forensic audit findings.

The fraud exposure of Rs 38 billion includes domestic exposure of Rs 31.9 billion, overseas exposure of US$ 49.7 million at the bank's Dubai branch, and US$ 38.5 million at its Hong Kong branch.

The bank said the company misappropriated bank funds and manipulated books to raise funds from consortium lenders.

The above fraud at PNB comes at a time when it is recovering from the Nirav Modi scam, where it was defrauded of Rs 114 billion.

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

In the news from the commodity space, crude oil witnessed buying interest today. Gains were seen as OPEC and allies rolled over their production cuts into March 2020 this week. This signaled that the oil market is still oversupplied, and demand growth looks weaker at least for the rest of 2019.

Currently, OPEC and its Russia-led non-OPEC partners in the production cut deal focus on reducing inventories and boosting prices.

Gains were also seen on better-than-expected US jobs data.

The buying interest, however, was capped by worries over the prolonged Sino-US trade war.

Note that 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.

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

To know more on crude oil, you can read one of Vijay Bhambwani's recent articles: Is OPEC Dying?

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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