Sensex Ends 248 Points Lower; Power and IT Stocks Witness Selling

Tue, 10 Dec Closing

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Indian share markets fell sharply during closing hours today and ended deep in the red. The BSE Sensex stood lower by 248 points, while the NSE Nifty closed down by 81 points.

The BSE Mid Cap index ended the day down by 1.1%, while the BSE Small Cap index ended down by 1%.

All sectoral indices ended on a negative note with stocks in the power sector, IT sector and FMCG sector leading the losses.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down 0.2% while the Nikkei was down 0.1%.

The rupee was trading at 70.92 against the US$.

In news from the banking sector, Yes Bank share price was in focus today.

Shares of the private lender slipped over 10%, ahead of the board meeting scheduled for later today to finalize and approve the details of the preferential allotment.

Several foreign and domestic investors have showed interest in investing in the company, which includes Capital International, a part of the US$ 1.87-trillion Capital Group based in the US, who has committed to invest at least US$ 120 million in the lender.

Other investors include Discovery Capital, Ward Ferry, SPGP Holdings, Rakesh Jhunjhunwala and Aditya Birla Family Office.

However, media reports suggest that Yes Bank is likely to reject the offer that made up more than half of its planned US$ 2 billion capital raising, and is talking to institutional investors about making up the shortfall.

How the above fund-raising plan pans out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

In other news, a Reserve Bank of India (RBI) risk assessment report has found that State Bank of India (SBI) under reported bad loans by Rs 119.3 billion in FY19.

According to the regulatory filing filed by SBI, the central bank found that the divergence in provisioning for these non-performing assets (NPAs) stood at Rs 120.4 billion in FY19.

Note that in the recent months, there have been several instances of under-reporting of bad loans by lenders.

In October, the markets regulator asked publicly traded banks to disclose bad loan divergences with the RBI's assessment within a day of receiving a final report from the banking regulator, tightening norms for asset quality disclosures.

SBI share price ended the day down by 1.1%.

Moving on to news from the commodity space, gold prices remained weak in Indian markets, falling for the fifth straight day amid weak global cues.

In five days, gold prices are down about Rs 750 per 10 gram.

In global markets, gold prices were flat today, down to US$ 1,460.95 per ounce as investors remained cautious ahead of a December 15 deadline for the next round of US tariffs on Chinese imports to take effect.

Reports state that optimism over trade talks and a higher rupee is putting pressure on gold prices.

The rupee opened at a one month high of 70.96 per dollar versus previous close of 71.05, amid softening crude oil prices and weakening of the greenback against other currencies overseas.

Gold is considered a safe store of value during times of economic or political uncertainty.

What effect the US-China trade talks have on gold in the coming days remains to be seen. We will keep you updated on all the developments from this space.

Speaking of gold, how lucrative gold has been as a long-term investment in India?

The chart below shows the annual returns on gold over the last 15 years...

Gold Has Been a Shining Long-Term Investment

As you can see, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.

Here's what Ankit Shah wrote about this in one of the editions of The 5 Minute WrapUp...

• In fact, gold has delivered double-digit gains in 10 of the last 15 years.
  
  During the entire 15-year period, gold has shot up 555% (compounded annual return of 12.1%).
  
  During the same period, the Sensex surged 511% (compounded annual return of 12.0%). If you include dividends, the Sensex returns would be higher than gold by a couple of percentage points.
  
  One must note that the Sensex returns are not representative of the broader market returns. Moreover, gold was a no-brainer. You didn't have to study financial statements, business models and forecast future earnings growth to get a double-digit return on your investment.

Meanwhile, Vijay Bhambwani talks about how gold has been relied upon by humankind for 3000 years in one of his videos.

If you consider street inflation, your fixed deposits are giving negative yields. In times like these, Vijay considers gold as a safe haven.

So, is it the time to buy gold?

Tune in to find out...

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