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Budget News

  • Sensex, Nifty soar on US economic rescue deal
  • March 25,2020  17:20
  • The domestic stock market surged on Wednesday, tracking strong global shares. The rally was triggered by the US policymakers reportedly clearing a $2 trillion stimulus package to fight against fast-spreading coronavirus. The Nifty settled above the 8,300 mark, backed by strength in index major Reliance Industries and private sector banks.

    The barometer index, the S&P BSE Sensex, surged 1,861.75 points or 6.98% at 28,535.78. The Nifty 50 index jumped 516.80 points or 6.62% at 8,317.85.

    Trading was volatile in morning trade as India entered into a 21-day lockdown starting 24 March midnight to curb the Covid-19 outbreak. The virus has infected more than 434,000 people and killed more than 19,600 across the world. More than 111,800 people have recovered. India has reported 11 deaths and over 562 cases so far.

    The broader market bounced. The S&P BSE Mid-Cap index rose 3.53% while the S&P BSE Small-Cap index added 2.84%.

    The market breadth was positive. On the BSE, 1213 shares rose and 989 shares fell. A total of 154 shares were unchanged.

    Foreign Markets:

    Shares in Europe and Asia surged on Wednesday, after the media reported that US lawmakers have struck a $2 trillion stimulus deal to provide economic relief to American taxpayers and businesses hit by the coronavirus pandemic, in what stands to be the largest congressional bailout in US history.

    In US, markets on soared Tuesday, with the Dow Jones Industrial Average notching its biggest one-day point gain ever and its best percentage gain since 1933, a day after plumbing the lowest levels since 2016, amid growing optimism for a fiscal stimulus package aimed at combating the economic impact of the coronavirus epidemic.

    Buzzing Indian Index:

    The Nifty Bank index jumped 8.43% to 18,549.05, extending its winning run to second day in a row. The index has gained 9.64% in last two trading sessions from its previous closing low of 16917.65 posted on 23 March 2020. The index is still down 43.12% from its record high of 32,613.10 hit on 30 December 2019.

    Among private banks, Kotak Mahindra Bank (up 12.65%), HDFC Bank (up 11.77%), Axis Bank (up 7.83%), ICICI Bank (up 6.93%), City Union Bank (up 4.94%), RBL Bank (up 4.23%) and Federal Bank (up 1.46%) advanced.

    Among PSU banks, State Bank of India (up 3.6%), Bank of Baroda (up 5.15%), Canara Bank (up 3.03%), Central Bank (up 1.31%) and United Bank of India (up 1.56%) climbed.

    The Nifty Bank index made a strong comeback after correcting sharply in past one month. Investor and traders turned bullish on banking stocks after Finance Minister Nirmala Sitharaman indicated that her ministry was readying an economic package to help the industry deal with the coronavirus crisis.

    Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) on Wednesday gave its approval for continuation of the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum regulatory capital to RRBs for another year beyond 2019-20, that is, up to 2020-21 for those RRBs which are unable to maintain minimum Capital to Risk weighted Assets Ratio (CRAR) of 9%, as per the regulatory norms prescribed by the Reserve Bank of India.

    The CCEA also approved utilization of Rs 670 crore as central government share for the scheme of Recapitalization of RRBs (i.e. 50% of the total recapitalization support of Rs 1340 crore), subject to the condition that the release of Central Government's share will be contingent upon the release of the proportionate share by the sponsor banks.

    A financially stronger and robust Regional Rural Banks with improved CRAR will enable them to meet the credit requirement in the rural areas.

    Stocks in Spotlight:

    Reliance Industries (RIL) surged 14.65% to Rs 1,081.25. According to the media reports, the social media giant, Facebook, was close to an initial agreement to pick up a 10% stake in Jio, but discussions could not advance due to the global disruption following the coronavirus outbreak. A deal was to have been announced by March end, reports added. Report suggested that a deal with Facebook will help Mukesh Ambani achieve his ambition of cutting parent company RIL's debt to zero by March 2021. Meanwhile, reports further added that Google had also been engaged in separate talks with Reliance Jio.

    Shares of insurance companies were in demand. ICICI Prudential Life Insurance Company (up 25.2%), ICICI Lombard General Insurance Company (up 16.44%), HDFC Life Insurance Company (up 10.68%), SBI Life Insurance Company (up 7.29%) and General Insurance Corporation of India (up 4.94%), surged.

    Bajaj Finance rose 4.03% to Rs 2585.90. The company informed that it has learned about a con-call invite allegedly scheduled on 24 March 2020 between Bajaj Finance and analysts/investors was in circulation. The company clarified that it did not schedule the con-call. The invite was fake and could have been circulated with malafide intent. Investors are hereby requested not to take cognizance of such false/fake circulation without verifying the same with the company or on websites of stock exchanges, it added.

    ONGC fell 1.60% to Rs 61.50. Moody's Investors Service downgraded ONGC's local and foreign currency issuer ratings to Baa2 from Baa1. At the same time, Moody's has downgraded ONGC's baseline credit assessment (BCA) to baa2 from baa1; the senior unsecured bonds issued by ONGC to Baa2 from Baa1; the senior unsecured bonds guaranteed by ONGC and issued by ONGC Videsh and ONGC Videsh Vankorneft to Baa2 from Baa1. The outlook on all ratings remains negative.

    Nestle India rose 6.46% to Rs 14431.70. The company said that in view of the lockdown the operations in some of the locations (manufacturing, distribution centres/ warehouses, offices, suppliers) are scaled down or suspended. As the Company is in the manufacture and sale of food and beverage products, the company is in discussion with the authorities to continue operations in the factories/ distribution centres where the operations has been suspended.

    Ashok Leyland fell 3.37% to Rs 34.45. The auto maker on Wednesday (25 March) informed that CARE Ratings revised outlook to negative from stable on the company's long/short term bank facilities worth Rs 3700 crore while reaffirming the rating at 'CARE AA+/ CARE A1+.

    AAVAS Financiers slumped 4.24% to Rs 899.90. The housing financier informed on Wednesday (25 March) informed that all its branches and corporate office will remain closed in compliance with the Government of India's order. Employees supporting the critical business operations & essential customer service will continue to work from home as per the company policy that has been put in place under the business continuity plan, the company said in a statement before market hours on Wednesday.

    The firm added that 100% of its loan portfolio is secured against mortgage. The portfolio is very granular in terms of customer profiles with average ticket size of sub Rs 10 lakh. It said that average loan-to-value (LTV) on the outstanding loan portfolio is less than 50%. It added that more than 95% of the EMI payments happen through electronic mode & banking channels. As of 24 March 2020, the company enjoyed a strong liquidity position (without considering principal repayments) as cash & cash equivalents of Rs 1092 crore and un-availed documented sanctions stood at Rs 1475 crore. The total debt repayment (including interest of Rs 182 crore) over H1 FY21 stood at Rs 431 crore.

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