Sensex gives up early gains to end 81 points low; financial stocks drag markets in closing session
Sensex gave up all its early gains to end 81 points lower on Monday, dragged by losses in financial stocks as lenders beefing up provisions against COVID-19 risks stoked slippages worry.
The markets made a Gap-up opening tracking positive global cues and optimism due to the partial opening of the economy and public services. However, selling in banking stocks due to mixed numbers by ICICI bank dragged down the market ending the session with 0.1 percent.
Sectorally, indices traded mixed in today’s session. Auto stocks got a sharp buy amid reports that the companies are resuming operations. In stock specific front, HeroMotoCorp, Tata Motors and Bajaj Auto lead the gains while Dr Reddy, BPCL and ICICI Bank remained the top laggards.
#MarketAtClose | Market fails to hold opening gains, closes with a minor cut; Sensex slips 740 points to end 81 points lower at 31,561, Nifty falls 201 points from highs to close 12 points lower at 9,239 pic.twitter.com/JZ5Qo0Mh5G
— CNBC-TV18 (@CNBCTV18Live) May 11, 2020
Sensex gave up all its early gains to end 81 points lower on Monday, dragged by losses in financial stocks as lenders beefing up provisions against COVID-19 risks stoked slippages worry. Besides, spiking COVID-19 cases in the country and tepid cues from global markets weighed on investor sentiment.
After gyrating over 800 points during the day, the 30-share index settled 81.48 points or 0.26 percent lower at 31,561.22. Similarly, NSE Nifty fell 12.30 points, or 0.13 percent, to 9,239.20.
Joining peers, ICICI Bank made COVID-19 related provisions of Rs 2,725 crore to further strengthen the balance sheet--causing worries on fiscal slippages front.
"The Indian market opened on a positive note following global cues as trade-war fears receded and more countries announced plans to ease their lockdown restrictions amid hopes of global economies reopening,” said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi to PTI.
The traders also took note of Prime Minister Modi’s meeting with chief ministers of all states which is expected to discuss the plan for exit from the ongoing nationwide lockdown to prevent the spread of coronavirus.
However, the market couldn't hold the strength during the day as selling pressure was witnessed in heavy index weighing sectors like financial and bank stocks, erasing majority of gains in afternoon session as COVID-19 related one time provision were seen undercutting the earnings on the financial companies, he added.
Going ahead, the market will be driven by the key factors such as IIP and CPI data, the coronavirus situation and lockdown decision in the country, the US-China relationship and results of big firms.
During this week, Maruti, Nestle and Havells will announce their annual results.
Deepak Jasani, Head Retail Research, HDFC Securities, said the benchmark indices failed to sustain early gains and ended with marginal loss after profitbooking in the afternoon erased all intraday gains.
Automobiles, airline companies did well on news and expectation of restarting of operations. Materials stocks (including metals and cement) also ran up. Financials fell on worries about asset quality and rising bond yields.
The Asian stock markets rose on Monday as investors looked past dismal US jobs and other data toward hopes for a global recovery from the coronavirus pandemic. Chinese car sales rose for the first time in almost two years in April, up 4.4 percent from a year ago to 2.07 million vehicles.
Markets were also lifted by comments from the People’s Bank of China over the weekend that it would take “more powerful policies” to support the economy.
The European markets also got off to a positive start, but are now down again, as optimism over the easing of lockdown restrictions in France, Belgium, Greece and the UK faded.
Technically, the markets have once again sold off from close to 9400 Nifty level. Nifty could remain in the 9140-9440 band for some more time and a breakout of this band could determine the near term direction, Jasani said.
The benchmark 10-year bond yield surged on Monday following the government’s decision to sharply increase market borrowing amid a major hit to the economy and public finances from the coronavirus pandemic.
The government plans to borrow 12 trillion rupees ($160 billion) in the fiscal year to March 2021, up from the previously budgeted 7.8 trillion rupees, to cushion the blow from the pandemic, it said on Friday.
The government did not specify whether the additional borrowing would be used to cover the revenue shortfall caused by a national lockdown since March 25 or used to fund additional expenditures. However, analysts broadly believe the additional borrowing announced last week would push the government’s fiscal deficit for the current year up to at least 5.5% of GDP, 200 basis points above the current projection.
Rupee settles 19 paise lower at 75.73 against dollar
The rupee slipped 19 paise to close at 75.73 against the US dollar on Monday as strengthening American currency overseas and rising coronavirus cases in the country weighed on investor sentiment.
#Rupee ends mildly stronger versus the dollar today.
— CNBC-TV18 (@CNBCTV18Live) May 11, 2020
Forex traders said while positive domestic equities supported the local unit, market participants were concerned about the impact of spiking coronavirus cases on the economy, according to PTI.
The local unit opened at 75.55, then lost further ground and finally settled at 75.73 against the greenback, down 19 paise over its previous close.
It had settled at 75.54 against the US dollar on Friday.
During the day, the local unit saw an intra-day high of 75.55 and a low of 75.77.
In India, the death toll due to COVID-19 rose to 2,206 and the number of cases climbed to 67,152 in the country, according to the Health Ministry.
Meanwhile, the number of cases around the world linked to the disease has crossed over 41.02 lakh and the death toll has topped 2.8 lakh.
The dollar index, which gauges the greenback''s strength against a basket of six currencies, was trading 0.33 per cent up at 100.06.
Bond yields surge as government borrowing balloons
The benchmark 10-year bond yield rose as much as 27 basis points to 6.24% in opening deals and was last trading at 6.17% at 0628 GMT.
The new 10-year bond issued last week also climbed as much as 22 bps to 5.94%.
Traders said yields were likely to settle around these levels in the near-term but a lack of any clear central bank guidance on whether it plans to support the market through additional bond purchases may push yields up further.
“While we do not believe that private placements are ideal, depending on the market conditions, we think that the RBI will continue to provide some support through open market operations, as it has in recent weeks, without necessarily announcing an OMO (open market operation) schedule,” Rahul Bajoria, an economist with Barclays, wrote in a note.
Traders said any OMO calendar or indication of RBI market support would be crucial.
“There is new supply from Friday and nothing from the RBI so far. But we should settle down around current levels for now and see how it goes,” a senior trader at a private bank said.
BSE Midcap fell over 1 percent while BSE Smallcap declined almost 3 percent. India VIX slid to 22.41 levels. Metal slid almost 4 percent, while FMCG was the biggest gainer
Metal was the biggest drag while auto was the top gainer. BSE Midcap and Smallcap indices rose around 0.5 percent. Bank Nifty inched up 0.08 percent to 33,339.00
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