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As India’s forex reserves cross $600B, liquidity gush to fuel equities

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As India’s forex reserves cross the $600 billion-mark, there are indications that the ample liquidity, both globally and in the domestic space will continue to drive the Indian stock markets.

“The success of these efforts is reflected in the stability and orderliness in market conditions and in the exchange rate in spite of large global spillovers. In the process, strength is imparted to the country’s balance sheet by the accumulation of reserves,” RBI Governor Shaktikanta Das added.

Experts say foreign exchange reserves have topped $600 billion and more than $105 billion this year alone indicating huge liquidity in the system.

The average daily turnover in NSE is about Rs 79,000 crore in May 2021 as against Rs 65,000 crore in 2020 and only Rs 36,000 crore in 2019. Experts said investments by the young set is spiking and the boom in markets is not going to ease off any time soon.

According to Motilal Oswal Financial Services, broader markets witnessed buying interest after the RBI announced a special, Rs 15,000 crore-liquidity window for sectors like travel and tourism, tour operators, hotels, restaurants, aviation and related companies, spa clinics and beauty parlours.

Therefore, stock specific action was seen in these sector stocks, while, liquor stocks like, United Breweries Globus Spirits, United Spirits, IFB Agro Industries, and Radico Khaitan surged between 1 to 8 per cent.

Motilal Oswal Institutional Equities said in a report after consolidating in April’21 (down 0.4% MoM), the Nifty headed north in May’21 (up 6.5% MoM) to close at an all-time high of 15,583.

The Nifty is up 11.5 per cent thus far in CY21. The rally was propelled by strong FII inflows in the second half of the month and steady decline in daily COVID-19 cases in India as well as supported by strength in other Asian stock markets.

The report said FII inflows were back and stood at $0.7 billion. DIIs saw inflows for the third consecutive month at $0.3 billion. Over the last 12 months, midcaps are up 94 per cent v/s a rise of 63 per cent for the Nifty.

With the number of active COVID cases down more than 50 per cent since May 9, to sub-18 lakhs now. As states ease restrictions gradually in June ’21, we expect the demand environment to get better. However, after the recent run-up, the Nifty now trades at rich valuations of 17.9x FY23 EPS. Thus, any misses in the FY22E earnings delivery may act as a dampener, the report said.

Business

Zomato shares decline 9%, market cap falls below 1L cr

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Shares of online food aggregator Zomato declined 9 per cent intraday on Friday.

Analysts are linking the decline with unsupportive valuations. Over the past one-month period, Zomato shares fell nearly 18 per cent.

Listed in July 2021, Zomato shares are, however, up more than 50 per cent from its IPO issue price of Rs 76. On Friday’s closing, it was at Rs 114 per share.

“The costs have escalated due to the tax imposed on the aggregator, along with the fact that the lockdown is also not currently happening, which also appears to be a weakness,” said Ravi Singhal, Vice Chairman at GCL Securities.

With Friday’s losses, the company’s market capitalisation fell below the 1 lakh crore-mark, NSE data showed.

According to Ravi Singh, Vice President and Head of Research, Share India Securities: “The technical setup in Zomato stock is in bearish formation on intraday and daily which may drag the stock up to Rs 112-110 levels in the near term.

“The valuations of the company are also not supporting the growth. Zomato is facing tough competition from Swiggy in many ways, mainly having a thinner Metro restaurant network and density versus Swiggy. We recommend investors to maintain the sell position in the stock.”

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Decline in equities continue for 4th straight sessions

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The 30-scrip Sensitive Index (Sensex) and broader 50-scrip Nifty on the National Stock Exchange (NSE) extended their losses from the previous three consecutive sessions and declined on Friday.

At 10.25 a.m., Sensex traded at 58,593 points, down 0.9 per cent from the previous close of 59,464 points. It opened at 59,039 points.

Nifty traded at 17,599 points, down 0.9 per cent from the previous close of 17,757 points. It opened at 17,613 points.

Bajaj Finserv, Tech Mahindra, Coal India, Adani Ports, Bharti Airtel were some of the top losers, NSE data showed.

Top gainers during the early trade were Hindustan Unilever, Tata Consumers, Bajaj Auto, Hero MotoCorp, and Power Grid Corporation.

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Business

Decline in equities continue for 4th straight sessions

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The 30-scrip Sensitive Index (Sensex) and broader 50-scrip Nifty on the National Stock Exchange (NSE) extended their losses from the previous three consecutive sessions and declined on Friday.

At 10.25 a.m., Sensex traded at 58,593 points, down 0.9 per cent from the previous close of 59,464 points. It opened at 59,039 points.

Nifty traded at 17,599 points, down 0.9 per cent from the previous close of 17,757 points. It opened at 17,613 points.

Bajaj Finserv, Tech Mahindra, Coal India, Adani Ports, Bharti Airtel were some of the top losers, NSE data showed.

Top gainers during the early trade were Hindustan Unilever, Tata Consumers, Bajaj Auto, Hero MotoCorp, and Power Grid Corporation.

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