Sensex Ends 189 Points Lower; Auto and Metal Stocks Witness Huge Selling

Wed, 28 Aug Closing

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

At the closing bell, the BSE Sensex stood lower by 189 points (down 0.5%) and the NSE Nifty closed down by 59 points (down 0.5%).

The BSE Mid Cap index ended the day down 0.9%, while the BSE Small Cap index ended the day down 0.6%.

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

The rupee was trading at 71.72 against the US$.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.19% and the Shanghai Composite was down by 0.29%. The Nikkei 225 was up 0.11%.

European markets were also trading on a mixed note. The FTSE 100 was up by 0.46%. The DAX was trading down by 0.46%, while the CAC 40 was down by 0.45%.

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She also talks about the stock she is looking at in such times. She is very cautious in her approach and looks for the stocks that survive in all the market cycles.

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In the news from the banking sector, Yes Bank share price is in focus today as the lender in a BSE filing said that its board will be considering raising of funds by way of issuance of equity shares when it meets on August 30.

From the power sector, Kalpataru Power Transmission share price was also in focus today. The stock of the company witnessed sharp selling after it said that the World Bank had issued it a notice over alleged irregularities in its Africa business.

In a BSE filling, the company said the World Bank had alleged process violations in the bids it submitted for two projects. The World Bank is providing funds for the works.

How these above developments pan out remains to be seen. Meanwhile, we will keep you updated on all the news for the above companies.

In the news from the macroeconomic space, India Ratings and Research is the latest rating agency to downgrade India's growth forecast.

As per the news, the Fitch Group company expects GDP growth for the financial year 2019-20 to tumble to a six-year low at 6.7%. This compares to the earlier estimates of 7.3%.

As per the rating agency, FY20 will be the third consecutive year of subdued growth primarily driven by a slowdown in consumer demand and uneven monsoon. Apart from that, dwindling manufacturing growth, inability of Insolvency and Bankruptcy Code, 2016 to resolve cases in a timely manner and diminishing exports due to brewing trade tensions will also impact GDP growth.

However, the agency expects GDP growth to recover to 7.4% in the second of FY20, mainly on account of the base effect.

Earlier, in June, the International Monetary Fund (IMF) had cut the GDP forecast to 7%. IMF had earlier revised its projections in April 2019, cutting growth outlook for FY20 by 0.2 percentage points to 7.3% on expectations that weaker domestic demand will limit economic recovery.

It remains to be seen how these projections pan out. We will keep you updated on all the developments from this space.

Speaking of economic growth, a key takeaway from India's budget was the government intent to borrow from overseas markets.

While it seems like a risky move, a look at India's domestic credit data may be the reason why...

Increasing Domestic Credit to Private Sector Key for Economic Growth

Domestic credit to the private sector in India is amongst the lowest in the world.

Here's what Tanushree Banerjee, co-head of research at Equitymaster, wrote about it in one of the editions of The 5 Minute WrapUp...

• A huge chunk of the domestic borrowing is by the government. That leaves very little scope to lend to the private sector.
  
  Low credit to the private sector means low capital available for expansion. A major hurdle for one of the major growth engines of the economy.
  
  With the government set to borrow overseas, a lot of capital is expected to free up at home.
  
  This also coincides with the recent efforts by the Insolvency and Bankruptcy Code (IBC) to resolve bad loans. This will free up further capital for lending.

As per her, a proactive step in this regard will be a huge boost to the economy going forward.

Moving on to the news from the commodity space, crude oil witnessed buying interest today. Gains were seen after an inventory report showed US stockpiles fell more than expected. The data helped in easing worries about economic growth from the Sino-US trade war and meant US crude oil prices gaining around 1%.

Data from the American Petroleum Institute (API) showed US crude stockpiles fell by 11.1 million barrels last week as imports dropped. This was compared with expectations for a 2-million-barrel draw.

Market participants will now be tracking the US government's weekly inventory report. If the official numbers confirm the API data, it would be the biggest weekly decline in nine weeks.

Note that crude oil prices have fallen about a fifth from 2019 highs hit in April, partly because of worries that the trade war is hurting the global economy and could dent oil demand.

Also, India's imports of crude oil have stalled in recent months, with both coal and liquefied natural gas (LNG) also soft.

This fall could be attributed to Indian refiners adjusting to the loss of cargoes from Iran after the United States did not extend waivers to buyers of Iranian crude oil beyond the beginning of May.

To know more about crude oil and the recent developments in this space, you can read Vijay Bhambwani's article here: Message of the Markets - What is Crude Oil Indicating?

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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