Sensex Ends 504 Points Lower; Automobile and Realty Stocks Witness Selling

Wed, 25 Sep Closing

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Indian share markets witnessed negative trading activity throughout the day amid political uncertainty in the US and across the board selling. The BSE Sensex snapped its three-day winning streak and fell over 580 points intraday.

Barring IT sector and power sector, all sectoral indices ended on a negative note with stocks in the automobile sector, realty sector and metal sector, leading the losses.

At the closing bell, the BSE Sensex stood lower by 504 points (down 1.3%) and the NSE Nifty closed down by 148 points (down 1.3%). The BSE Mid Cap index ended the day down by 1.8%, while the BSE Small Cap index ended the day down by 1.5%.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.4% and the Shanghai Composite stood lower by 1%. The Nikkei was down 0.4%.

The rupee is trading at 71.02 against the US$.

Speaking of Indian stock markets, if you look at the returns over the years, you will see that the markets have never moved in a linear fashion.

It has never been a one-way street - only up or down.

Stock markets have always moved in cycles.

If you would have bought stocks when either the Sensex or the Smallcap index was in a downturn, you would have made big returns once the cycle turned and the bulls took over.

The Time to Buy Stocks is Now

The economic slowdown does not herald the end of the world or for that matter the end of India. It's a phase and like all phases - This too shall pass.

The real question is - Are you taking advantage of these price declines to buy quality stocks?

In news from the global space, investor sentiments were dented after US lawmakers on September 24, called for an impeachment inquiry into President Donald Trump, increasing the prospects of prolonged political uncertainty in the world's largest economy.

The move by House of Representative Democrats dented sentiments which were already shaken by fresh US-China trade worries.

Nancy Pelosi, the speaker of the House of Representatives, said that Trump betrayed his oath of office by seeking help from a foreign power to hurt democratic rival Joe Biden.

Reports state that Trump had attempted to pressure the president of Ukraine, Volodymyr Zelensky, to open a corruption investigation into Biden and Biden's son Hunter, who had done business in the Eastern European country.

However, Trump has denied the claims, saying he would release the full transcript of the controversial call. In a series of tweets, he said that "I have authorized the release tomorrow of the complete, fully declassified and unredacted transcript of my phone conversation with President Zelensky of Ukraine."

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

In news from the banking sector, Yes Bank share price was in focus today after Rana Kapoor-controlled Morgan Credits, a promoter, paid Rs 700 million to Reliance Nippon Asset Management (RNAM), taking its total prepayments to Rs 7.9 billion.

The entity last week sold 2.3% of the promoter holding in the bank in a bulk deal to reduce Kapoor group's ownership of the embattled bank to 7.4%.

Note that Morgan Credits had raised money by issuing non-convertible debentures, which were subscribed by various schemes of RNAM and were due in April 2021.

A Morgan Credits statement said the payment constitutes a substantial portion of the outstanding NCDs and has been done with interest.

The stock of Yes Bank has been under pressure ever since the Reserve Bank of India (RBI) curtailed its promoter-chief executive Kapoor's term on corporate governance concerns. Many of the bank's past lending bets under Kapoor are haunting the earnings now and keeping the share prices depressed.

Shares of Yes Bank ended the day down by 4.2%.

Moving on to the news from media space, Zee Entertainment Enterprises (ZEEL) share price was also in focus today. The stock of the company witnessed buying interest on reports that lenders have unanimously agreed to extend the timeline for Essel Group to repay debt.

In latest developments from the IPO space, state-owned Indian Railway Catering and Tourism Corp (IRCTC) has set its price band at Rs 315-320 per share for its IPO.

The IPO will open for subscription on September 30 and will close on October 3.

The proposed IRCTC IPO is expected to see the government sell stake worth Rs 4.8 billion through an offer for sale. The company will announce the price band for the IPO on Wednesday.

As per a leading financial daily, the government is looking to offload up to 20 million shares in IRCTC via the IPO. The stake sale will result in the government reducing its stake in the company by about 12.5%.

IRCTC's business is divided into four segments - internet ticketing, catering, packaged drinking water under the 'Rail Neer' brand, and travel and tourism.

According to the draft red herring prospectus (DRHP) filed with the regulators in August, IRCTC's sales rose 25% year-on-year to Rs 19 billion. Profits grew by 23.5% to Rs 2.7 billion in FY19.

More than half of its revenues at Rs 10.4 billion came from the catering business, while internet ticketing business contributed about 12%.

Note that the company's plan to launch initial share sale comes immediately after a sharp turnaround in the Indian stock markets, following the finance minister's announcement last week to cut corporate taxes.

How this IPO sails through remains to be seen. We will keep you updated on all the news from this space.

Speaking of IPOs in general, despite lackluster activity in India's primary markets, there have been attractive money-making opportunities for attentive investors.

Ankit Shah recommended applying to the IPO of Polycab India and the IPO of IndiaMART InterMESH. Both IPOs were subscribed many times over. And both gave handsome double-digit returns on the listing date.

At Equitymaster, we believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

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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