Sensex Opens Marginally Lower; IndusInd Bank Gains 4%

Mon, 26 Oct 09:30 am

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Asian stock markets are trading on a mixed note today as surging coronavirus cases in Europe and the United states threaten the economic outlook, even as growth in China provides some support to Asia.

The Nikkei is trading up by 0.1% and the Shanghai Composite is trading down by 0.7%.

In US, Wall Street indices ended marginally higher on Friday, with investors keeping a close eye on negotiations on a US stimulus package that would ease the economic shock caused by the coronavirus pandemic.

The Dow Jones Industrial Average ended down by 0.1%, while the Nasdaq gained 0.4%. The S&P 500 gained 12 points, or 0.3%.

Back home, Indian share markets have opened the day on a negative note.

Market participants are tracking Angel Broking share price and SBI Life Insurance share price as these companies are slated to announce their financial results for the September quarter today.

The BSE Sensex is trading down by 103 points. The NSE Nifty is trading lower by 28 points.

IndusInd Bank is among the top gainers today. Reliance Industries, on the other hand, is among the top losers today.

The BSE Mid Cap index has opened down by 0.1%. The BSE Small Cap index is trading up by 0.3%.

Sectoral indices are trading mixed with stocks in the energy sector and metal sector witnessing selling pressure. FMCG stocks, on the other hand, are trading in green.

The rupee is trading at 73.78 against the US$.

Gold prices are trading down by 0.3% at Rs 50,690 per 10 grams.

Speaking of the current stock market scenario, note that the Sensex is trading at a price to earnings multiple of 30 times, a valuation that would make conventional value investors shake their heads in disgust.

In her latest video, lead smallcap analyst at Equitymaster, Richa Agarwal shares the fallacies in this broad and sweeping narrative and an interesting approach to playing the markets for healthy returns.

Tune in to the video to find out more:

In news from the mutual funds space, the Karnataka High Court on Saturday, ruled that Franklin Templeton Mutual Fund will need to obtain prior consent of the unit holders before winding up six debt fund schemes.

Earlier this year in April, Franklin Templeton Mutual Fund had shut six debt schemes in India amounting to about Rs 280 billion, citing lack of market liquidity and redemption pressures arising from the Covid-19 pandemic.

"We hold and declare that the decision of the Franklin Templeton Trustee Services to wind up six schemes cannot be implemented unless the consent of the unit-holders is obtained," the division bench of Chief Justice Abhay S Oka and Justice Ashok S Kinagi said, while hearing a petition challenging Franklin Templeton's decision to wind up its schemes.

Responding to the court's order, Franklin Templeton said the court had upheld the decision taken by its trustees to wind up the schemes, but had ordered that approval of the unit holders is required.

Reports also state that Franklin Templeton may turn to the Supreme Court over certain aspects of the Karnataka High Court order.

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

Speaking of mutual funds, last month on September 11, the capital markets regulator issued a circular directing multi-cap schemes to deploy at least 25% each in large-, mid-, and small-caps. At present, such schemes manage Rs 1.47 trillion in assets.

Assuming every fund rebalances, the circular is expected to trigger a move of around Rs 280 billion from largecaps to smallcaps.

Richa Agarwal, lead smallcap analyst at Equitymaster, believes this move would be net positive for select smallcap stocks. As per Richa, there could be a speculative rally across smallcaps.

Here's what she wrote about it in a recent edition of the Profit Hunter:

• It would be myopic and imprudent to bet on any smallcap in the hope of a regulation driven rally.
  
  That said, you must invest in smallcaps selectively with long-term horizon in mind.
  
  Here's why...

• You see, despite the rally in smallcaps since March, there is still a huge valuation gap between smallcaps and Sensex.
  
  The ratio of smallcaps to Sensex stands at 0.37 now, as compared to long-term average of 0.44 times.
  
  This means certain smallcaps will witness a significant rebound, irrespective of regulations.

Richa believes this could be a once in a decade opportunity to get rich from select smallcaps.

Moving on to stock specific news...

Kotak Mahindra Bank is among the top buzzing stocks today.

As per a leading financial daily, Kotak Mahindra Bank is exploring a potential takeover of smaller rival IndusInd Bank.

The promoters of Kotak Bank and their counterparts in IndusInd Bank have engaged in discussions for the merger via a share swap.

Reports state that if such a deal is clinched, it could significantly expand Kotak Mahindra's presence in the Indian banking sector, particularly in the retail segment.

However, the promoter of IndusInd Bank, IndusInd International Holdings (IIHL), completely denied the said rumour.

IIHL is promoted by the Hindujas and broad base of other successful NRIs from the overseas Indian diaspora.

Kotak Mahindra Bank is also scheduled to announce its September quarter earnings today.

Report state that the private lender is expected to see around 20% year-on-year decline in its Q2FY21 profit due to a potential spike in provisions.

Kotak Mahindra Bank share price has opened the day down by 0.6%.

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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