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Sensex Ends 260 Points Lower; Finance and Banking Stocks Witness Huge Selling

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Indian share markets witnessed negative trading activity today and ended their trading session lower.

The Reserve Bank of India’s (RBI) move to cut repo rate by 40 basis points (bps) failed to cheer markets.

Selling pressure was seen as RBI Governor Shaktikanta Das said the GDP growth in FY21 is expected to be in negative territory.

Sectoral indices ended on a mixed note with stocks in the finance sector and banking sector witnessing selling pressure, while IT stocks and healthcare stocks ended in green.

At the closing bell, the BSE Sensex stood lower by 260 points and the NSE Nifty closed down by 67 points.

The SGX Nifty was trading at 9,041, down by 34 points, at the time of writing.

The BSE MidCap index and the BSE SmallCap index ended their day down by 0.8% and 0.2%, respectively.

Asian stock markets finished on a negative note. Japanese shares fell today as risk sentiment was hit after China’s plans to impose a new security legislation on Hong Kong fueled worries over Sino-US tensions.

The Nikkei erased early gains and dropped 0.8%. Meanwhile, the Hang Seng tumbled the most in almost five years on back of the above news.

The Hang Seng dipped 5.6%, or 1,349.89 points today, its biggest decline since July 2015.

Gold prices are currently trading up by 1.2% at Rs 46,944.

The rupee is trading at 75.95 against the US$.

Note that the coronavirus impact has shaken markets worldwide. After all, 2020 has already seen one of the worst market crashes in history.

Will the 2020 Market Crash Be Worse than 2009?

Stock market crashes 1929 - 2020

Naturally, there is an atmosphere of fear all round.

Is it time to sell stocks now? Will the correction get worse?

History has shown that after years like the one we had just now, the next 3 years are good for the markets. In fact, these corrections are the rare times when you find businesses with solid fundamentals at reasonable valuations.

If you can find good businesses that can survive the current crisis, you will do well in the long run.

Meanwhile, in the video below, Rahul Shah, talks about how you can be ‘Aatma Nirbhar’ or self-reliant in your stock selection. He talks about some simple methods and principles so that you are able to buy stocks on your own and not be dependent on anyone.

Tune in here to find out more…

Moving on, market participants were tracking shares of Bosch, UPL and JSW Steel as these companies announced their March quarter results (Q4FY20) today.

In news from the IT sector, shares of NIIT Technologies surged 9% intraday today after the company announced that its Rs 3,374-million buyback offer will commence from May 29.

The company, in a regulatory filing, said that the regulator had provided an extension for dispatching the letter of offer within 15 days from the closure of the lockdown as mandated by the government.

The buyback offer will open on May 29 and close on June 11.

Last year in December, the company had said its board has approved a proposal to buy back up to 1.95 million fully paid-up equity shares of a face value of Rs 10 each at a price of up to Rs 1,725.

Earlier this month, the company’s board also approved the change of name of the company from ‘NIIT Technologies’ to ‘Coforge’, subject to shareholders’ approval and other necessary approvals, if any.

Note that last month, the markets regulator had eased the 12-month cooling-off period that companies have to observe between buybacks and equity fundraising.

A company is restricted from raising further capital for one year from the expiry of the buyback period.

The market regulator had said “to enable quicker access to capital, it has been decided to temporarily relax the period of restriction provided in regulation 24(i)(f) of the buyback regulations. Accordingly, the words “one year” shall be read as “six months” in the said regulation.”

Many companies have launched share buybacks amid a sharp fall in their stock prices. Some of these companies include Motilal Oswal Financial Services, Delta Corp, Dalmia Bharat, Emami and Kalpataru Power.

Speaking of buybacks, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible, use it to your advantage to rake in some cash.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here’s an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that’s what will help it continue to grow at a healthy pace.

Moving on to news from the finance sector, shares of SBI Cards and Payment Services witnessed huge selling pressure today after the Reserve Bank of India (RBI) announced an extension of the moratorium on loan EMIs by three months.

The non-banking finance company’s stock was trading at its lowest level since listing on March 16, 2020.

In a surprise move, the RBI today decided to cut the repo rate by 40 basis points from 4.4% to 4%. The reverse repo rate has been reduced to 3.35%.

It also extended the moratorium on loan repayments by three more months. In March, the central bank had allowed a three-month moratorium on payment of all term loans due between March 1, 2020, and May 31, 2020.

For the working capital facilities, the interest payment has been deferred by another three months, in-line with extension of moratorium on term loans.

SBI Cards is the second largest credit card issuer in India.

Earlier this month, the company had reported a 71% year-on-year (YoY) decline in pre-tax profit at Rs 1.1 billion Q4FY20, due to additional bad loan provisioning of Rs 4.9 billion factoring in Covid-related disruption.

Apart from SBI Cards, shares of other financials including banks, housing finance companies and non-banking finance companies (NBFCs) witnessed selling pressure today, on back of the above news.

Shares of AU Small Finance Bank, Bajaj Finance, Axis Bank, Bandhan Bank, HDFC and ICICI Bank fell in the range of 4-8%.

Meanwhile, shares of Union Bank of India, Power Finance Corporation and Mahindra & Mahindra Financial Services hit their respective 52-week lows in intraday trade today.

What effects RBI’s measures have on Indian stocks markets and the Indian economy remains to be seen. Meanwhile we will keep you updated on the latest developments from this space.

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

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