Sensex Ends 229 Points Lower; Banking and Metal Stocks Witness Selling

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Indian share markets fell sharply during closing hours today amid weak global cues and disappointing domestic factory output data.

Investors turned cautious ahead of the consumer price index-based inflation and wholesale price index-based inflation data for October, which is scheduled to be released later today.

The trade war between the world's two biggest economies diminished investor sentiments as uncertainty still remained over whether the United States and China could end their damaging trade war.

Sectoral indices ended on a mixed note with stocks in the metal sector, banking sector and realty sector leading the losses, while energy stocks and IT stocks witnessed buying interest.

At the closing bell, the BSE Sensex stood lower by 229 points (down 0.6%) and the NSE Nifty closed down by 73 points (down 0.6%).

The BSE Mid Cap index ended the day down by 0.8%, while the BSE Small Cap index ended the day down by 1.1%.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.8% while the Nikkei was down 0.9%. The Shanghai Composite ended down by 0.3%.

The rupee was trading at 72.02 against the US$.

The domestic currency opened at a two-month low today due to weak domestic macro-economic data and tracking Asian currencies which fell on fresh doubts over the US-China trade deal.

India's factory output contracted for the second straight month at 4.3% in September, recording its worst show since the series was launched in April 2012.

The rupee opened lower by 29 paise at 71.75 per dollar versus Monday's close 71.46.

According to a Reuters poll, a slowing domestic economy will prevent rupee from recouping this year's losses against the dollar in 2020, with optimism around an easing in the US-China trade dispute not enough to give it a further boost.

The domestic unit had touched a low of 72.40 per dollar on September 4. Since then, it has recovered nearly 2% amid hopes of a possible trade deal between the world's two largest economies.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

In news from the media sector, shares of Sun TV tumbled up to 12% today after higher operational expenses dragged the company's consolidated profit before tax (PBT) 26% lower at Rs 4 billion, in the September quarter (Q2FY20).

The company's operational revenue went up 6% at Rs 8.3 billion, while total expenses jumped 66% to Rs 5 billion over the corresponding quarter of the previous year.

Additionally, the company's advertisement revenue came in at Rs 3.4 billion, down 1.5% year-on-year (YoY), impacted by a weak economic environment.

EBITDA (earnings before interest, tax, depreciation and amortization) declined 15% at Rs 4.7 billion on YoY basis.

On a consolidated basis, net profit remained flat YoY at Rs 3.7 billion due to lower tax provisioning.

Sun TV share price ended the day down by 11.3%.

In other news, Britannia share price was in focus today. The biscuit maker on Monday posted a PBT of Rs 5 billion for Q2FY20.

The company's net profit grew 33% to Rs 4 billion on a YoY basis on account of re-measurement of deferred tax in accordance with lower corporate tax rate. It reported a consolidated revenue growth of 7% for the quarter at Rs 31.2 billion on YoY basis.

Shares of the company ended 5% higher today on back of the above news.

Speaking of quarterly results and corporate profits, economic growth (GDP) and corporate profit growth hardly go hand in hand.

Over the past few years, the share of corporate profits to GDP has steadily declined.

This is evident in the chart below:

Rebound in Corporate Profits May Not Immediately Reflect in GDP

As per Tanushree Banerjee, the revival of capex cycle may cause corporate profits to soar much faster than the GDP growth.

Investors who stay focused on macro numbers may miss this bus.

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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