Gaining ground: Sensex jumps 499 pts as macro data bolster recovery hopes

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July 2, 2020 8:27 AM

Stocks were helped by strong global cues and improvement in India’s Manufacturing Purchasing Managers’ Index

Sensex, Financial stocks,stock markets, PMI, Nifty bank, Foreign portfolio investors, Credit Suisse, nifty mid capAccording to market experts the underperformance of Nifty bank has more to do with the underperformance of public sector bank stocks.

Financial stocks pulled the benchmarks higher on Wednesday after two consecutive sessions of losses. The Indian stock markets were also helped by strong global cues and the improvement of India’s Manufacturing Purchasing Managers’ Index (PMI). The benchmark Sensex rallied 1.43% or 498.65 points to close at 35,414.45 whereas, Nifty gained 1.24% or 127.95 points to close at 10,430.05. Nifty Bank was up by 2.84% to close at 21,977.6.

Financial stocks were among the top gainers on Nifty during Wednesday’s trading session. Within Nifty Bank, the biggest gainers were Axis Bank, Bank of Baroda, Punjab National Bank, Federal Bank, and IndusInd Bank. Axis Bank rallied by 6.34% followed by Bank of Baroda which was up by 5.76%. Punjab National Bank, Federal Bank, and IndusInd Bank, were up by 4.89%, 4.31%, and 3.66%. Banking and financial stocks have been under pressure and extremely volatile since the start of the equities rout in March over concerns about asset quality because of the lockdown and the uncertain impact of the loan moratorium. Nifty Bank has till date risen by 29.9% since its March 23 lows. It has underperformed the gains made by the benchmark Nifty which is up by 37.05% for the same period.

According to market experts the underperformance of Nifty bank has more to do with the underperformance of public sector bank stocks. Deven Choksey, managing director, KR Choksey Investment Managers, said, “The reason for the underperformance on Nifty bank compared to the benchmark indices is the public sector banks. They have some weightage in the benchmarks and have not participated as much in the rally, whereas most private sector banks have recovered from their lows. The PSUs have underperformed because they lack continuity in business strategy and policies which is always a big question. Lack of visibility in future outcome of business strategy results in poor to underperformance in their stock price.’”

Foreign portfolio investors (FPIs) turned into fierce buyers in June pumping in as much as $2.73 billion into the Indian equity markets. According to provisional data on the exchanges, FPIs sold stocks worth $263.15 million on Tuesday whereas domestic institutional investors bought stocks worth $269.9 million. “Investors in this market should play selective and buy stocks where promoter and management has skin in the game, and are ethical in running the business,” said Deven Choksey.

The domestic markets also cheered the improvement in the manufacturing PMI which rose to 47.2 in June against 30.8 in May. Indicating an improvement in the manufacturing activity in the country. The gauge had fallen to an all-time low in April at 27.4. A print below 50 however, signals a contraction in activity. There have been other macro-economic indicators that have shown improvement. According to a report by Credit Suisse, power generation, e-way bill generation and new car registrations have improved in June. The foreign brokerage said that some indicators however, are showing signs of flattening. “The slope of some indicators is already flattening, for instance, mobility around offices and retail (malls), e-way bills, and to some extent even vehicle registrations. Mobility around grocery stores has mostly normalised, only Delhi, Maharashtra and Tamil Nadu are below last year’s; these also being 68% of incremental cases, show how rising caseload or deaths can influence behaviour even after lockdowns have been lifted,” said Credit Suisse in its report.

After Wall Street announced its best quarter since 1988, the stocks in Asia extended the gains and closed higher. Asian indices in Hong Kong, Taiwan and China were up between 0.52% to 1.38%. The broad-based economic recovery in China also helped uplift the sentiment. European shares, however, were trading negative at the time of press, with stock markets in France, Germany, and the United Kingdom down by 0.8% to 1.03%. Dow Jones Mini futures were also indicating a negative start for the US markets which were likely to react to manufacturing numbers, private payroll data and weekly mortgages numbers. The Dow Futures were down by 211 points.

The futures and options segment witnessed a turnover worth Rs 16.59 lakh crore against the six month average of Rs 14.49 lakh crore. The biggest gainers on Nifty were Axis Bank, UPL, Bajaj Finserv, HDFC, and ITC, up by 6.34%, 5.27%, 5.2%, 4.68%, and 4.65%. The biggest losers were NTPC, Nestle India, Larsen and Toubro, Shree Cement, as well as Cipla down by 2.14%, 2.06%, 1.99%, 1.96% and 1.88%. The biggest sectoral gainers were Nifty PSU Bank, Nifty Bank, Nifty Private Bank, Nifty Financial Services, and Nifty Media. Among the broader indices, Nifty Midcap and Nifty Smallcap were up by 0.5% and 0.85%.

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