Sensex Ends 86 Points Lower; Capital Goods and Telecom Stocks Witness Selling

Fri, 12 Jul Closing

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India share markets witnessed selling pressure during closing hours and ended their volatile day on a negative note.

At the closing bell, the BSE Sensex stood lower by 86 points (down 0.2%) and the NSE Nifty closed down by 30 points (down 0.3%).

The BSE Mid Cap index ended the day up 0.4%, while the BSE Small Cap index ended the day up 0.2%.

Sectoral indices ended on a negative note with stocks in the capital goods sector and telecom sector witnessing most of the selling pressure.

The rupee was trading at 68.62 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.1% and the Shanghai Composite was up by 0.4%. The Nikkei 225 was up 0.2%.

European markets were also trading on a positive note. The FTSE 100 was up by 0.27%. The DAX was trading up by 0.04%, while the CAC 40 was up by 0.61%.

Speaking of the current mood in Indian share markets, the post-budget reaction saw a negative reaction from the market participants.

Most of the losses came as the Union Budget failed in offering bold plans and a clear roadmap for propping up the economy.

While the markets gave a thumbs-down to the Budget, 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.

In the news from the banking space, IndusInd Bank share price was in focus today as the private sector lender reported a healthy growth in June quarter earnings after the merger of Bharat Financial Inclusion with itself. The numbers are not comparable on a year-on-year (YoY) basis due to this development.

During the quarter, net profit of combined entity stood at Rs 14.3 billion for the quarter ended June 2019.

Net interest income (NII), the difference between interest earned and interest expended, grew by 34% YoY at Rs 28.4 billion.

Gross NPA stood at 2.15% in the June quarter against 2.10% sequentially. Net non-performing assets (NPA) came in at 1.25% compared with 1.2% on a quarter-on-quarter (QoQ) basis.

The lender's absolute gross NPA stood at Rs 42 billion against Rs 39.4 billion in March quarter.

Provisions of the bank inched up to Rs 4.3 billion on a yearly basis from Rs 3.5 billion, while they saw a big slump from Rs 15.6 billion on a quarterly basis.

Speaking of the banking sector, it was reported last week that the scheduled commercial banks (SCBs) credit growth moderated to 12% YoY compared with 12.7% growth in May 2019. The credit growth has improved from 10.9% at end June 2018.

Co-head of Research at Equitymaster, Tanushree Banerjee believes retail and corporate credit are expected to grow by multi-fold over the next few years.

Rising Credit Growth in India

Here's what she wrote about it in one of the recent editions of The 5 Minute WrapUp...

• One theme I strongly believe will play out over the next decade is the credit growth in India.
  
  The growth I foresee will be due to two reasons. Expanding GDP and credit penetration.
  
  Recent reforms like Jan Dhan, Mudra Yojna have helped Small and Medium Enterprises (SME's) and self-employed professionals to gain access to loans.
  
  Credit penetration is also expected to increase in this segment from current levels.
  
  Over the past few years, a lot of banks and NBFCs have started lending to this segment.

So look out for strong well-established financial services players which will benefit the most from this trend.

Moving on to the news from the commodity space, crude oil was witnessing buying interest today. Prices rose as market participants tracked the rebound in global share markets.

Gains were also seen after US oil producers in the Gulf of Mexico cut more than half their output in the face of a tropical storm and as tensions continued in the Middle East.

During the week, crude oil prices traded higher after an industry group reported that US stockpiles fell for a fourth week in a row and on tensions around Iran and OPEC's extended cuts.

The market has been concerned that Russia wouldn't fully comply with the extended cuts.

Also, in other news for crude oil, it was reported that India's crude oil production in May year fell 7% to 2,800 thousand metric tonne (TMT) due to fall in production from fields operated by Oil and Natural Gas Corporation (ONGC), Oil India, and private operators.

The fall in domestic crude oil production pushed the country's crude oil import dependence to 85% in the month as compared to 83.8% recorded in the corresponding month a year ago.

As per the data, cumulatively, domestic crude oil production decreased 7% to 5,519 TMT during the first two months (April-May) of the current financial year (2019-2020), as compared to the corresponding period a year ago.

Note that rising crude oil prices coupled with decreasing production has a big impact on the Indian economy as it imports most 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.

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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