Sensex Ends 337 Points Higher; Automobile and Power Stocks Witness Buying

Fri, 6 Sep Closing

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Indian share markets witnessed buying interest throughout the day and ended on a strong note.

Barring realty sector and FMCG sector, all sectoral indices ended on a positive note with stocks in the automobile sector, power sector and metal sector witnessing maximum buying interest.

At the closing bell, the BSE Sensex stood higher by 337 points (up 0.9%) and the NSE Nifty closed higher by 98 points (up 0.9%). The BSE Mid Cap index ended the day up by 0.6%, while the BSE Small Cap index ended up by 0.8%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 0.7% and the Nikkei was up by 0.5%. The Shanghai Composite stood higher by 0.5%.

The rupee was trading at 71.69 to the US$ at the time of writing.

In news from the power sector, market participants were tracking Power Grid share price. The state-owned company on Thursday, announced a final dividend of Rs 13.1 billion in addition to Rs 30.5 billion interim dividend for 2018-19, taking the total payout to Rs 43.6 billion.

In addition to this, an interim dividend of Rs 16.3 billion (government's share) was earlier paid to the Ministry of Power for 2018-19, the company said.

In news from the pharma sector, shares of Sun Pharma witnessed selling pressure today after the drug-maker informed the exchanges about a forensic audit being undertaken by markets' regulator.

The company in a filing said, "a forensic audit has been ordered by the regulator w.r.t. the financial statements of Sun Pharmaceutical Industries for the financial years ending FY16, FY17, and FY18."

Earlier, media reports said that the audit was ordered based on allegations made by a whistleblower in a 150-page complaint to the regulator, accusing Sun Pharma of committing corporate governance and tax-related offences and securities market-related violations.

The whistleblower had complained of a fund diversion of Rs 420 billion and of personal profits being made to the tune of Rs 100 billion.

In February, Sun Pharma told stock exchanges that it had received two queries from markets regulator related to a 2004 foreign currency convertible bonds (FCCB) issuance and about Sun's business with Aditya Medisales (AML), and it had responded to both of them.

Media reports then said that the queries were a result of the anonymous whistle-blower complaint, which had questioned transactions amounting to over Rs 58 billion between AML and Suraksha Realty from money generated by the publicly listed company.

Sun Pharma share price ended the day down by 1.8%.

To know more about the company, you can read Sun Pharma's latest result analysis and Sun Pharma's 2018-19 annual report analysis on our website.

Moving on to news from the commodity space, gold and silver prices in India continued their slide today, tracking similar global trend. Improved risk sentiment across the globe put pressure on gold prices.

October gold futures prices were down 0.4% to Rs 38,747 per 10 grams, off over Rs 1,000 from all-time highs of Rs 39,885 hit earlier this week.

Silver prices also saw a sharp fall, with futures on the Multi Commodity Exchange (MCX) sliding 1.3% to Rs 48,815 per kg, down over Rs 2,500 from recent high of Rs 51,489.

On Thursday, gold prices slumped over 2% and silver fell over 4% amid stronger-than-expected US economic data. Risk sentiment improved after data released on Thursday showed US private employers' payrolls rose and the growth of the US services sector accelerated in August.

Selling pressure was also seen amid hopes of a thaw in the US-China trade war. US and China are set to restart their trade talks early next month.

Speaking of gold, globally, gold prices are up around 20% so far this year amid inflows into gold-backed assets. US-China trade war, volatility in risk assets like equities, and central banks signaling a looser monetary policy have boosted the safe-haven appeal of gold.

As per a Bloomberg report, inflows into gold-backed exchange traded funds (ETFs) topped 100 tons in August, the highest since February 2013. Holdings rose 101.9 tons, bringing total known assets to 2,453.4 tons, the third straight monthly increase after the addition of a combined 154.1 tons in June and July.

For domestic markets, jewelers hope that upcoming festive season will improve gold demand, which has been hurt due to high prices.

As many central banks diversify their portfolio, they are adding gold as global growth slows and trade and geopolitical tensions rise.

Also, speaking of gold, co-head of research, Tanushree Banerjee shares some interesting information on the Sensex to Gold (per 10 grams) ratio going back 15 years.

Have a look at the chart below:

Sensex versus Gold in Fairly Valued Zone

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

• While the ratio has been quite volatile, the average ratio turns out to be 1.
  
  In other words, whenever the Sensex has risen at a much faster pace than gold prices, its fall has also been equally precipitous. The reason behind this volatility is not hard to find.
  
  Stock markets are more amenable to manipulation than gold prices are.
  
  Thus, if the Sensex to gold price ratio is way more than one, it could be a signal the Sensex is overvalued.
  
  Alternatively, if it is way below one, it could mean that Sensex is undervalued.
  
  The ratio stands at around 1.09 currently, indicating that the Sensex is trading pretty close to its fair value!

Thus, even though the market correction seems overdone in mid and smallcaps, the bluechips, particularly those in the Sensex, aren't undervalued yet.

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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