Sensex Ends 54 Points Lower; Consumer Durables and Healthcare Stocks Witness Selling

Tue, 5 Nov Closing

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Indian share markets witnessed volatile trading activity throughout the day and ended on a flat note.

Barring telecom stocks and FMCG stocks, all sectoral indices ended on a negative note with stocks in the consumer durables sector and healthcare sector witnessing maximum selling pressure.

At the closing bell, the BSE Sensex stood lower by 54 points and the NSE Nifty closed down by 24 points. The BSE MidCap index ended the day down by 1.1%, while the BSE SmallCap index ended down by 0.8%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up 0.5% and the Nikkei was up by 1.8%.

The rupee is trading at 70.68 against the US$.

Amid the volatility witnessed in stock markets lately, Tanushree Banerjee, in the video below, talks about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times.

Tune in to find out more...

In news from the FMCG sector, Dabur India reported a 7% jump in consolidated net profit at Rs 4,030 million for the September quarter against Rs 3,766 million in the same period last year.

In a press release, the company said that net profit was impacted by one-time impairment in value of investments to the tune of Rs 400 million.

Revenues were up 4.1% at Rs 22.1 billion against Rs 21.3 billion.

Earnings before interest, tax, depreciation and amortization (EBITDA) rose 8.6% at Rs 4,895 million versus Rs 4,509 million last year.

The board also declared an interim dividend of Rs 1.40 per share.

Dabur India share price ended the day up by 5%.

In the news from the macroeconomic space, India's services sector activity growth contracted for a second consecutive month in October due to muted demand, said a private survey indicating that the economic slowdown in Asia's third largest economy was showing little signs of improvement.

Although the IHS Markit Services Purchasing Managers' Index rose to 49.2 last month from 48.7 in September, it remained below the 50-mark threshold separating contraction from growth on a monthly basis.

The Composite PMI Output Index fell from 49.8 in September to 49.6, signaling a marginal rate of reduction overall.

Note that, the last time services activity contracted for two consecutive months was in August 2017 following the implementation of a Goods and Services Tax (GST).

The slowdown in job creation was widespread across the manufacturing and service sectors. The government and the Reserve Bank of India (RBI) have been taking steps to arrest the slowdown.

The RBI last month slashed its policy rates for the fifth time this year taking the cumulative reduction so far this year to 135 basis points to support growth.

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

Moving on to news from the commodity space, India's gold imports in October fell a third from a year earlier, dropping for the fourth straight month as near record-high prices dampened festive buying in the world's second-biggest consumer of the metal.

Reportedly, India imported 38 tonnes of gold in October, down 33% from 57 tonnes a year earlier.

In value terms, the October imports were at US$ 1.84 billion, up 4.5% from US$ 1.76 billion last year.

Note that lower imports by India could cap gains in global prices that are trading near their highest level in over six years.

Gold prices are up around 22% so far this year amid inflows into gold-backed assets. US-China trade war, volatility in risk assets like equities, and central banks signaling a looser monetary policy have boosted the safe-haven appeal of gold.

In September, local gold futures hit an all-time high of Rs 39,885 per 10 grams tracking a rally in global prices and due to a depreciation in the rupee.

As per a Bloomberg report, inflows into gold-backed exchange traded funds (ETFs) topped 100 tons in August, the highest since February 2013. Holdings rose 101.9 tons, bringing total known assets to 2,453.4 tons, the third straight monthly increase after the addition of a combined 154.1 tons in June and July.

For domestic markets, jewelers hope that upcoming festive season will improve gold demand, which has been hurt due to high prices.

As many central banks diversify their portfolio, they are adding gold as global growth slows and trade and geopolitical tensions rise.

Speaking of gold, co-head of research, Tanushree Banerjee shares some interesting information on the Sensex to Gold (per 10 grams) ratio going back 15 years.

Have a look at the chart below:

Sensex versus Gold in Fairly Valued Zone

Here's what she wrote about it in one of the editions of The 5 Minute WrapUp...

• While the ratio has been quite volatile, the average ratio turns out to be 1.
  
  In other words, whenever the Sensex has risen at a much faster pace than gold prices, its fall has also been equally precipitous. The reason behind this volatility is not hard to find.
  
  Stock markets are more amenable to manipulation than gold prices are.
  
  Thus, if the Sensex to gold price ratio is way more than one, it could be a signal the Sensex is overvalued.
  
  Alternatively, if it is way below one, it could mean that Sensex is undervalued.
  
  The ratio stands at around 1.09 currently, indicating that the Sensex is trading pretty close to its fair value!

Thus, even though the market correction seems overdone in mid and smallcaps, the bluechips, particularly those in the Sensex, aren't undervalued yet.

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

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