Sensex Ends 456 Points Lower; Midcap and Smallcap Stocks Witness Heavy Selling

Wed, 20 Oct Closing

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After opening the day on a flat note, Indian share markets witnessed heavy selling in the afternoon session and ended lower.

Benchmark indices extended losses as the session progressed amid heavy selling seen in consumer durable, realty and metal stocks.

The yield on 10-year benchmark government bond rose to its highest level in one-and-a-half years today as a relentless rise in crude oil prices and worries of inflation, led to a speculation that RBI will tighten its monetary policy soon.

At the closing bell, the BSE Sensex stood lower by 456 points (down 0.7%).

Meanwhile, the NSE Nifty closed lower by 152 points (down 0.8%).

Bharti Airtel and SBI were among the top gainers today.

Titan and Hindalco, on the other hand, were among the top losers today.

The SGX Nifty was trading at 18,326, down by 107 points, at the time of writing.

Broader markets witnessed heavy broad-based selling today. The BSE Mid Cap index and the BSE Small Cap index plunged 1.9% and 2.3%, respectively.

Barring telecom stocks, all sectoral indices ended in red with stocks in the metal sector, and consumer durables sector witnessing most of the selling.

Shares of SBI and L&T Infotech hit their respective 52-week highs today.

Asian stock markets ended on a positive note today, fuelled by strong earnings. Investors kept tabs on comments from the Federal Reserve as it prepares to bring an end to its vast financial support program.

The Hang Seng and the Nikkei ended up by 1.4% and 0.1%, respectively. The Shanghai Composite ended down by 0.2%.

European share markets are flat as strong results from Nestle boosted food company stocks and made up for disappointing earnings from a clutch of firms.

US stock futures are trading on a flat note today with Dow Futures trading up by 30 points.

The rupee is trading at 74.84 against the US$.

Gold prices for the latest contract on MCX are trading up by 0.2% at Rs 47,380 per 10 grams.

Speaking of the stock markets, Brijesh Bhatia, Research Analyst at Fast Profits Report talks about how to be cautious while trading banking stocks, in his latest video for Fast Profits Daily.

Tune in to the video below to find out more:

In news from the banking sector, non-performing assets (NPAs) of banks are likely to rise to 8-9% in the financial year 2022 from 7.5% as of March 2021, driven by defaults in the retail and small business segment.

However, this rise of 50-150 basis points (100bps = 1%) would be still lower than the peak of 11.2% in March 2018 and 9.1% in March 2019 as the corporate sector continues to be resilient.

According to a report by Crisil, Covid relief measures like the restructuring dispensation and the emergency credit line guarantee scheme (ECLGS) will help limit the rise.

With around 2% of bank credit expected under restructuring by the end of this fiscal, stressed assets comprising gross NPAs and loan book under restructuring, should touch 10-11%.

The rating agency's senior director Krishnan Sitharaman said,

• The retail and MSME segments, which together form about 40% of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around. Stressed assets in these segments are seen rising to 4-5% from 3% last fiscal and 17-18% from around 14%, respectively, by this fiscal end.
  
  The numbers would have trended even higher but for write-offs, primarily in the unsecured segment.

According to Crisil, the retail segment, which had a relatively stable run over the past decade, has been singed by the pandemic with salaried and self-employed borrowers alike facing significant income challenges and higher medical expenses, especially in the second wave.

Despite the measures, the rating agency stressed assets in the retail segment will rise. While home loans, the largest segment, will be the least impacted, unsecured loans are expected to bear the brunt of the pandemic.

We will keep you updated on all the developments from this space. Stay tuned.

Moving on to news from the cement sector...

ACC Reports 24% Rise in Profits

ACC on Tuesday reported a 24% year on year (YoY) rise in consolidated net profit for July-September quarter at Rs 4.5 bn despite a steep rise in energy costs.

The cement maker's net sales rose 5% YoY to Rs 36.5 bn. The company follows January-December financial year.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 6% YoY to Rs 7.1 bn, while EBITDA margin expanded by 10 basis points to 19.5%.

While cement sales volume rose 1% to 6.6 m tonnes, net selling price increased by 4% YoY to Rs 5,058 per tonne.

The company saw a sharp rise in its expenses, with raw material cost rising 13% to Rs 490 per tonne, and power and fuel cost jumping 26% to Rs 1,165 per tonne.

In a press release, ACC said,

• Despite steep increase in fuel costs, our cost efficiency measures under project 'Parvat' have enabled us to maintain robust performance.

On the outlook, ACC said economic activity is gaining momentum, driven by accelerated progress in vaccination drive and reduction in Covid-19 cases.

The government's impetus on infrastructure and housing will augur well for cement demand in the next quarters, and the sector would benefit from increasing demand in various sectors such as housing, commercial, and industrial construction, it added.

ACC share price ended the day up by 0.7% on the BSE.

Speaking of stocks, here's a pattern that if you see, you must sell your position. After all, exits are more important than entries.

In the chart below, we can see the head and shoulder pattern - the stock goes up, makes a high, falls a little bit, goes up to a higher high, does not make a higher low, rallies again, fails to make a new high, and then starts to break down.

This usually happens in a situation where a stock or index has typically been in a bull trend for a while. Spotting this correctly can help you save money.

If you're interested in trading and want to know how you can use this pattern, you can read about it in one of the editions of Profit Hunter here: It's When You Sell that Counts

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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