Sensex Ends 560 Points Lower; Auto and Banking Stocks Witness Huge Selling

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Sensex Ends 560 Points Lower; Auto and Banking Stocks Witness Huge Selling

India share markets continued to witness selling pressure during closing hours and ended their day deep in the red.

At the closing bell, the BSE Sensex stood lower by 560 points (down 1.4%) and the NSE Nifty closed down by 90 points (down 1.5%).

The BSE Mid Cap index ended the day down 2%, while the BSE Small Cap index ended the day down 1.8%.

Sectoral indices ended on a negative note with stocks in the auto sector and banking sector witnessing most of the selling pressure.

The rupee was trading at 68.91 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 1.1% and the Shanghai Composite was up by 0.79%. The Nikkei 225 was up 2%.

European markets were also trading on a positive note. The FTSE 100 was up by 0.19%. The DAX was trading up by 0.31%, while the CAC 40 was up by 0.17%.

Market participants were tracking RBL Bank share price, Bandhan Bank share price, and IndiGo share price as these companies announced their June quarter (Q1FY20) results today.

You can also read our recently released Q1FY20 results: Mindtree, Wipro, Yes Bank, Federal Bank, Colgate, Tata Elxsi.

In the news from global financial markets, John Williams, vice chairman of the Fed's rate-setting committee, made a case for aggressive interest rate cut. He said when rates and inflation are low, policymakers cannot afford to keep their powder dry and wait for potential economic problems to materialise.

Meanwhile, Fed Board of Governors Vice Chair Richard Clarida said policymakers might need to act early to stimulate the US economy as an insurance policy against rising risks.

Moving on to the news from the macroeconomic space, Finance Minister Nirmala Sitharaman announced that foreign portfolio investors (FPIs) should consider the option of structuring themselves as companies rather than trusts to avoid paying the increased surcharge announced in Budget 2019.

She said that FPIs registered as trusts will have to pay the new tax surcharge.

The development ruled out hopes that the government may tweak relevant portions of the Finance Bill to ring-fence FPIs from the effects of the super-rich tax.

So far in July, FPIs have pulled out more than Rs 50 billion from the cash segment of the Indian equity markets.

From the banking sector, RBL Bank share price was in focus today as the private sector lender reported double-digit growth across key parameters in June quarter.

Profit during the quarter grew 41% year-on-year (YoY) to Rs 2.67 billion in Q1FY20. The growth here was driven by strong net interest income (NII), operating income, and other income.

Net interest income, the difference between interest earned and interest expended, increased 48% to Rs 8.17 billion YoY. Net interest margin stood at an all-time high of 4.3% and healthy loan growth at 35%.

Asset quality remained stable during the quarter as gross non-performing assets (NPAs) stood unchanged at 1.38% of gross advances and net NPA fell 0.65% against 0.69% on sequential basis.

Slippages, however, remained high at Rs 2.25 billion at the end of June quarter against Rs 2.06 billion in Q4FY19.

Provisions for bad loans increased 6.6% sequentially and 52% YoY to Rs 2.13 billion in the quarter ended June 2019.

As per the management commentary, there is some weakness going ahead due to tight liquidity concerns, which dented investors sentiment and resulted in a sharp fall in stock price.

Speaking of the banking sector, it was reported 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.

In the news from commodity markets, crude oil was witnessing buying interest today. Oil prices rose by more than 1% today after the US Navy destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows.

The above development again stoked tensions in the Middle East.

It was a volatile week for crude oil. The commodity saw losses during the past two sessions after official data showed US stockpiles of products like gasoline rose sharply last week.

As per the data, US domestic crude supplies fell for a fifth straight week. According to data released by the US Energy Information Administration (IEA), US crude inventory for the week ended July 12 fell 3.11 million barrels to 455.88 million barrels.

Meanwhile, volatility was also seen on the back of ongoing geopolitical tensions in the Middle East.

Iran this week said that a small oil products tanker missing in the Strait of Hormuz was in its territorial waters. This stoked fraught relations with Iran's neighbors and the West over threats to shipping in the key oil chokepoint.

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

Speaking of crude oil, in the video below, Vijay Bhambwani explains how trading in crude oil is an evergreen strategy. As per him, trading in crude oil offers excellent opportunities in nearly all market conditions due to its unique standing within the world's economic and political systems.

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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