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Sensex Ends 281 Points Higher; Oil & Gas and Banking Stocks Witness Buying

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Indian share markets witnessed buying interest during closing hours and ended on a strong note.

Barring the healthcare sector and telecom sector, all sectoral indices ended on a positive note with stocks in the oil & gas sector, consumer durables sector and metal sector witnessing maximum buying interest.

At the closing bell, the BSE Sensex stood higher by 281 points (up 0.8%) and the NSE Nifty closed higher by 93 points (up 0.9%). The BSE Mid Cap index ended the day up by 0.4%, while the BSE Small Cap index ended up by 0.8%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 0.8% and the Nikkei was up by 1.1%. The Shanghai Composite stood higher by 0.8%.

The rupee was trading at 71.06 to the US$ at the time of writing.

In news from the commodity space, oil witnessed selling pressure today. Prices slipped to around US$ 60 a barrel as concerns about a slowdown in the global economy and oil demand outweighed hints of progress in the US-China trade dispute.

The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) both issued reports this week pointing to an oil surplus next year, despite an OPEC-led pact to cut supply that runs until March.

An OPEC+ monitoring committee met earlier this week and secured pledges from OPEC members Nigeria and Iraq to deliver their share of the cut, something they have failed to do so far, but made no progress on possibly deepening the supply cut.

In news from the banking sector, Yes Capital and Morgan Credits, the two promoter shareholders of Yes Bank have written to the surveillance departments of stock exchanges alleging that short sellers are hammering the stock by spreading negative messages about the private lender.

Yes Capital and Morgan Credit are facing heat from investors and stake holders over multiple rating downgrades and stakes in fraud-hit CG Power.

The letter said, “we continue to witness unabated speculation in Yes Bank stock, particularly by short sellers who appear to be speculating on the back of unpublished information led by the countless highly negative messages circulated on WhatsApp chat group banking institution – Yes Bank. We request you to kindly (look into) this highly serious matter.”

Note that the two shareholders had sent a similar letter to the stock exchanges last month as well.

Last month, global rating agency Moody’s Investors Service had downgraded the lender’s long-term foreign currency issuer rating, citing the bank’s capital raise that fell short of its expectations.

Yes Bank shares ended the day down by 0.2%.

Moving on to news from the finance sector, Dewan Housing Finance Corporation (DHFL) has defaulted on a Rs 1966.5 million bond repayment obligation.

The default by the company is towards principal and interest on non-convertible debentures (NCDs) worth Rs 3500 million issued by it.

In other news, foreign private equity backed Altico Capital, a lender to real estate companies said it has defaulted on interest payments to Mashreq Bank of Dubai.

As per the regulatory filing with the exchanges, an interest payment of Rs 199.7 million was due on September 12. The gross principal amount for the external commercial borrowing on which Altico Capital has defaulted stands at Rs 3.4 billion.

The company further said that its failure to repay the amounts may result in an acceleration of interest repayment / redemption obligations in respect of non-convertible debt securities issued by the company and may trigger a default in their timely repayments.

Reports state that the company has borrowed Rs 43.6 billion from banks and financial institutions.

The default by Altico comes after a rating downgrade by India Ratings and the resignation of its chairperson and independent director Naina Lal Kidwai, earlier this month.

On September 3, India Ratings and Research downgraded Altico Capital’s long-term issuer rating to “IND A+” from “IND AA-” and short-term issuer rating to “IND A1″ from “IND A1+”, with a negative outlook.

The ratings agency added that Altico’s loan book is concentrated, given the high single party exposures. The top ten individual exposures accounted for 39% of the loan book and the top 10 group exposures accounted for 60% of the loan book as on Q4FY19.

Shares of non-banking financial companies (NBFCs) witnessed selling pressure today on back of the above news. LIC Housing Finance, M&M Financial Services, and Power Finance Corporation (PFC) fell over 3% in early trade today.

Speaking of NBFC space, the liquidity crisis, a slew of corporate defaults, and the bloodbath in many stocks from this sector has left investors in deep fear and panic.

However, it is not that all NBFCs have fared badly.

In a recent edition of The 5 Minute WrapUp, Ankit Shah has picked the top three NBFC gainers and losers (in terms of market capitalisation) over the last one year.

As can be seen in the chart below, while several NBFCs have suffered badly and destroyed investor wealth, there have also been quality NBFC stocks that have been wealth creators.

NBFC Crisis – Top Gainers and Losers

So, the key takeaway here is to never write off an entire sector and to always stay on the lookout for quality stocks in sectors going through temporary headwinds.

In fact, in Ankit’s premium newsletter Insider, one of his cherry-picked housing finance stock has performed quite well despite the NBFC crisis.

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

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