Sensex Ends 143 Points Higher; Banking and Finance Stocks Rally

Mon, 2 Nov Closing

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After opening the day on a flat note, share markets in India witnessed volatility throughout the day. They, however, managed to witness gains during closing hours and ended marginally higher.

At the closing bell, the BSE Sensex stood higher by 143 points (up 0.4%).

The NSE Nifty closed higher by 26 points (up 0.2%).

IndusInd Bank and ICICI Bank were among the top gainers today.

The SGX Nifty was trading at 11,669, up by 34 points, at the time of writing.

The BSE Mid Cap index ended up by 0.4%. On the other hand, the BSE Small Cap index ended down by 0.7%.

On the sectoral front, gains were largely seen in the banking sector and finance sector.

Energy stocks, on the other hand, witnessed selling pressure.

Asian stock markets ended on a positive note. As of the most recent closing prices, the Hang Seng ended up by 1.5% and the Shanghai Composite ended flat. The Nikkei ended up by 1.4%.

Global stock markets were trading on a mixed note today on worries about global demand as many economies slid back into second wave of coronavirus lockdowns while upcoming US presidential elections led to heightened caution.

The rupee is trading at 74.44 against the US$.

Gold prices were trading up by 0.3% at Rs 50,840 per 10 grams on MCX at the time of writing.

Note that gold prices are now down Rs 6,000 in Indian markets from their August highs. However, the precious metal may benefit from safe-haven buying amid increasing challenges to global economy.

To know more about gold, visit our YouTube Playlist on gold investing.

Speaking of stock markets, Rakesh Jhunjhunwala, one of India's most famous investors, recently made Rs 5 billion investment in Tata Motors.

In his latest video, co-head of Research at Equitymaster, Rahul Shah discusses Rakesh Jhunjhunwala's Tata Motors Bet from a value investing perspective.

Is there enough margin of safety in the current valuations or the run up in recent months has made it a risky bet?

Tune in to the video to find out more:

Moving on to stock specific news...

HDFC was among the top buzzing stocks today.

Housing Development Finance Corporation (HDFC) posted a 27.5% year-on-year (YoY) fall in September quarter (Q2FY21) standalone net profit at Rs 28.7 billion.

Net interest income (NII) for the September quarter rose 20.7% YoY to Rs 36.4 billion against Rs 30.2 billion in Q2FY20.

Net interest margin (NIM) for the quarter stood at 3.3% and for the half-year ended stood at 3.2%.

The company's total standalone revenue from operations for the said quarter came at Rs 117.2 billion against Rs 134.8 billion in the year-ago period.

As per the company's statement, provisioning, including provisioning for the impact of COVID-19 stood at Rs 4.3 billion.

The company said for the quarter ended September 30, individual loan approvals grew 9%. Individual loan disbursements for the month of September 2020 were 11% higher than in September 2019.

The company has made a provision of Rs 12 billion towards COVID-19 related provisioning.

HDFC said it continues to raise resources from a diversified base and deposit growth has remained strong, registering a growth of 21% as of September 30, 2020.

The assets under management (AUM) as on September 30, 2020, stood at Rs 5,402.7 billion as against Rs 4,900.7 billion in the previous year and individual loans comprise 75% of the AUM.

On an AUM basis, the growth in the individual loan book was 9%, that in the non-individual loan book was 13%, and in the total loan book on an AUM basis was 10%.

At the closing bell, HDFC share price was trading up by 6.2% on the BSE.

Speaking of the finance sector, note that the market crash impacted all stocks, but finance stocks took the worst hit.

Even as the Sensex made a comeback to pre-Covid levels, the slowdown and asset quality concerns amid the moratorium extension, is an overhang on the financial sector. This is evident in the chart below:

Richa Agarwal, lead Smallcap Analyst at Equitymaster, expects a long road to recovery for this sector.

Here's what she wrote about it in one of the editions of the Profit Hunter:

• Just to be sure, being cautious in this sector makes sense to me. However, I believe it would be folly to paint all financial stocks with the same brush.
  
  Financials, especially NBFCs, have gone through multiple disruptions and challenges in the last few years - demonetisation, the IL&FS crisis, and now...coronavirus and moratoriums. This has led to a liquidity squeeze for these players, due to a risk aversion attitude among investors and lenders.
  
  The streak of disruptions will force inefficient and unorganised players in this sector to scale back. I also see a consolidation happening. The survivors and beneficiaries of this shift will be the well capitalised companies with balanced growth and high asset quality.
  
  Investors who identify these stocks now and are willing to be patient with returns, will be rewarded with huge rebound gains.

Richa recently recommended one such stock - a high quality NBFC. Subscribers can read the report here (requires subscription).

And if you are not a Hidden Treasure subscriber, here's where you can sign up.

India Manufacturing PMI Strongest in Over a Decade

In news from the macroeconomic space, India's manufacturing sector activity improved for the third straight month in October with companies raising output to the greatest extent in 13 years amid robust sales growth.

The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) rose from 56.8 in September to 58.9 in October. This is the strongest improvement in the health of the sector in over a decade.

In April, the index had slipped into contraction mode, after remaining in the growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

Manufacturers indicated that the ongoing relaxation of COVID-19 restrictions, better market conditions and improved demand helped them to secure new work in October.

On the employment front, the compliance of government guidelines related to the COVID-19 pandemic caused a further reduction in employment. This was the seventh straight fall, albeit the weakest in this sequence, according to the release.

Export orders picked up, recording a rise most pronounced in close to six years.

Although input costs increased at a quicker pace than in September, the overall rate of inflation was modest by historical standards. While a few firms increased output charges, most left prices unchanged over the previous month. As such, the overall rate of charge inflation was negligible.

It would be interesting to see how these numbers pan out in the coming months. While India is currently witnessing recovery in these areas the situation can be different few months from now with the ongoing second wave of coronavirus and lockdown measures worldwide.

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

And 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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