Sensex Ends 257 Points Lower, Nifty Falls Below 17,850; Banking & Telecom Stocks Witness Selling

Wed, 3 Nov Closing

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Indian share markets witnessed volatile trading activity throughout the day today and ended lower.

After opening on a positive note, benchmark indices slipped into the red on account of weakness in select index heavyweight stocks Sun Pharma, ICICI Bank, and HUL.

At the closing bell, the BSE Sensex stood lower by 257 points (down 0.4%).

Meanwhile, the NSE Nifty closed lower by 60 points (down 0.3%).

Larsen & Toubro and Asian Paints were among the top gainers today.

Sun Pharma and IndusInd Bank, on the other hand, were among the top losers today.

The SGX Nifty was trading at 17,862, down by 54 points, at the time of writing.

The BSE Mid Cap index and the BSE Small Cap index ended down by 0.2% and 0.3%, respectively.

Sectoral indices ended on a mixed note with stocks in the telecom sector and banking sector witnessing most of the selling pressure.

Engineering and realty stocks, on the other hand, witnessed buying interest.

Shares of Sheela Foam and Oberoi Realty hit their respective 52-week highs today.

Asian stock markets ended on a negative note today.

The Hang Seng and the Shanghai Composite ended down by 0.3% and 0.2%, respectively. The Nikkei ended down by 0.4% in today's session.

US stock futures are trading on a flat note today with the Dow Futures trading down by 25 points.

The rupee is trading at 74.46 against the US$.

Gold prices for the latest contract on MCX are trading down by 0.5% at Rs 47,371 per 10 grams.

Speaking of stock markets, Brijesh Bhatia shares his best trading ideas for the coming year, in his latest video for Fast Profits Daily.

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In news from the banking sector, SBI was among the top buzzing stocks today.

Shares of the country's largest lender State Bank of India (SBI) surged as much as 4% to hit record high of Rs 542 after it reported highest ever quarterly profit in September quarter.

SBI's net profit in second quarter of the current financial year jumped 67% to Rs 76.3 bn from Rs 45.7 bn during the same quarter last year.

Sharp increase in net profit in September quarter came on account of steep decline in provisioning for bad loans and uptick in asset quality.

The Mumbai-based lender's provisioning for bad loans, declined 46% sequentially to Rs 27 bn from Rs 50.3 bn in the previous quarter. On an annual basis, its provisions more than halved from Rs 56.2 bn.

State Bank of India's net interest income or the difference between interest earned on loans and interest expended on deposits jumped 11% to Rs 311.8 bn from Rs 281.8 bn.

SBI's asset quality improved in September quarter as its gross non-performing assets, as a percentage of total advances, came in at 4.9% versus 5.3% in the previous quarter. Its gross non-performing assets (NPAs) stood at Rs 1.2 tn.

Most large Indian banks have reported higher profits for the September quarter, buoyed by a rebound in credit demand as the economy reopened fully and low interest rates boosted spending on automobiles and homes.

SBI share price ended the day up by 1.8% on the BSE.

Speaking of public sector undertakings (PSU), have a look at the chart below which shows the performance of BSE PSU index compared to BSE Sensex over the past few years.

As can be seen from the chart above, over the last decade, Rs 100 invested in BSE-PSU index would have eroded to Rs 80, compared to almost 3x gains for the Sensex.

Here's what Richa Agarwal, lead Smallcap Analyst at Equitymaster, wrote about PSU stocks in one of the edition of Profit Hunter:

• However, it will be folly to paint all PSUs with the same brush. There are some exceptions in this space, which put their private peers to shame.
  
  In a recent editorial, I shared an opportunity in a PSU stock that is riding and enabling an irreversible megatrend - digitisation.

One of Richa's stock recommendation (subscription required) is a stock from this space. This smallcap PSU is leading the digitisation drive from the frontlines.

Richa believes it could be a perfect bet for these uncertain times. Hidden Treasure subscribers can read the recommendation here.

And if you're not a subscriber, here's where you can sign up.

Moving on to news from the finance sector...

Poonawalla Fincorp to Divest Stake in Magma HDI General Insurance

The board of directors of Poonawalla Fincorp (PFL) has approved divestment of the company's direct and indirect shareholding in Magma HDI General Insurance in order to comply with requirements of the Reserve Bank of India and IRDAI.

Sanoti Properties, which is held by Adar Poonawalla and Serum Institute of India has agreed to acquire the direct and indirect stake of the company in Magma HDI.

This structure is in line with other financial services groups with NBFC and general insurance operations and will also allow a framework for continued business relationship between PFL and Magma HDI.

As part of the divestment, the company will also divest its of 48.89% shareholding in Jaguar Advisory, which consequent to the above transaction of divestment in MHDI shares will own only cash and cash equivalent, to Celica Developers, the joint venture partner in Jaguar Advisory.

In addition to complying with the sector regulators requirements, the divestment is in line with PFL's strategy to focus on the core lending business. By monetising the investment in Magma HDI, the company will have full capital allocation to its core lending businesses.

The proposed transactions will result in a pre-tax profit of Rs 3.5 bn for Poonawalla Fincorp and sale of stake will result in an effective increase in Tier 1 capital adequacy ratio from 52.2% to 56.1%.

The valuation for the transaction is proposed to be at a post-money valuation of Rs 15 bn for Magma HDI (including the proposed equity issuance of Rs 2.5 bn by Magma HDI announced in March 2021, presently awaiting regulatory approvals).

Poonawalla Fincorp share price ended the day down by 1.2% on the BSE.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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