Indian share markets traded on a volatile note throughout the day and ended higher. Benchmark Indices were highly volatile swinging between positive and negative territory.
Gains were largely seen in the IT sector and banking sector, while telecom stocks witnessed selling pressure.
At the closing bell, the BSE Sensex stood higher by 170 points (up 0.4%) and the NSE Nifty closed higher by 30 points (up 0.3%). The BSE Mid Cap index ended the day up by 0.1%, while the BSE Small Cap index ended down by 0.1%.
Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng was down 0.9% and the Nikkei was down 0.8%. The Shanghai Composite stood higher by 0.2%.
The rupee was trading at 71.91 to the US$ at the time of writing.
Amid the volatility witnessed in Indian 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 macroeconomic space, Moody’s Investors Service cut India’s economic growth forecast to 5.6% for 2019, saying government measures do not address the widespread weakness in consumption demand.
It said that, “we have revised down our growth forecast for India. We now forecast slower real GDP growth of 5.6% in 2019, from 7.4% in 2018. India’s economic slowdown is lasting longer than previously expected.”
Note that last week, Moody’s had downgraded India’s outlook to negative from stable.
Last month on October 10, Moody’s slashed India’s economic growth forecast for 2019-20 fiscal to 5.8% from an earlier estimate of 6.2%. It had attributed the deceleration to an investment-led slowdown that has broadened into consumption, driven by financial stress among rural households and weak job creation.
In its Global Macro Outlook 2020-21, Moody’s said economic activity in India will pick up in 2020 and 2021 to 6.6% and 6.7%, respectively, but the pace to remain lower than in the recent past.
Moody’s said the Reserve Bank of India (RBI) has aggressively cut rates this year, and more rate cuts are likely.
Note that the government has undertaken several measures in order to revive economic slowdown.
In September, it announced a cut in the corporate tax rate to 22% from 30%. It also lowered the tax rate for new manufacturing companies to 15% to attract new foreign direct investments.
Other measures include merger of banks, plans for infrastructure spending, tax benefits for startups and the recent real estate bailout package of Rs 250 billion.
Speaking of rating agencies, as per co-head of research at Equitymaster Tanushree Banerjee, investors who take Moody’s downgrade of India too seriously will either suffer losses or miss the bus on the upside.
Here’s what she wrote about this in a recent edition of The 5 Minute WrapUp…
Every time, Moody’s has slashed India’s rating below the ‘stable’ category, the economy has bottomed out. And a stock market boom followed.
So, smart investors who bought stocks after Moody’s rating downgrade in 1992 and 2002, created life-changing wealth for themselves.
Take advantage of the negativity in the stock market and buy the best stocks that are poised to ride India’s economic recovery.
So don’t be in a hurry to see markets soar.
Stay assured that the Moody’s rating downgrade is a final indicator of an inflection in India’s economic and stock market potential.
Moving on to news from the finance sector, shares of Muthoot Finance surged 9% today after the company reported a 41% year-on-year (YoY) growth in profit before tax (PBT) at Rs 10.5 billion for September quarter (Q2FY20), on the back of strong operational income.
Net profit rose 77% to Rs 8.6 billion from Rs 4.8 billion in the year-ago quarter.
The company’s net interest income (NII) jumped 32% YoY to Rs 14.7 billion against Rs 11.1 billion in the corresponding quarter of the previous fiscal.
The company’s management said the demand for gold loans remained strong and the company has tapped various funding avenues.
In other news, shares of Suven Life Sciences gained over 10% after the company reported healthy earnings growth in Q2FY20.
The pharma company reported consolidated profit at Rs 633 million during the July-September period against Rs 39 million in the same period last year, driven by higher revenue and operating income.
Consolidated revenue grew by 206% YoY to Rs 2,743 million in Q2FY20.
Earnings before interest, tax, depreciation and amortization (EBITDA) shot up 10 times to Rs 1.1 billion and margin expanded 2,570 bps YoY to 37.2% in the quarter ended September 2019.
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.
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