After opening their day on a flat note, Indian share markets witnessed volatile trading activity throughout the day and ended their session marginally higher. Gains were largely seen in the IT sector and banking sector, while realty stocks and metal stocks ended the day lower.
At the closing bell, the BSE Sensex stood higher by 161 points (up 0.5%) and the NSE Nifty closed higher by 42 points (up 0.4%). The BSE Mid Cap index ended the day down by 0.1%, while the BSE Small Cap index ended the day down by 0.3%.
Asian stock markets finished on a negative note as of the most recent closing prices. The Hang Seng was up 0.2% and the Nikkei was trading down by 0.1%. The Shanghai Composite stood down by 0.9%.
The rupee was trading at 65.4 to the US$ at the time of writing.
From the IT sector, Infosys share price witnessed buying interest today. Gains were seen ahead of the company's announcement of financial results for the fourth quarter ended March 2018.
IDBI Bank share price witnessed selling pressure today as the Reserve Bank of India (RBI) slapped a monetary penalty of Rs 30 million on the bank for non-compliance to the Income Recognition and Asset Classification (IRAC) norms.
In the news from global financial markets, US stocks witnessed selling pressure while Treasuries rose after minutes from the most recent Federal Reserve meeting showed Fed officials leaning toward a slightly faster pace of tightening.
Note that the US central bank raised rates last month and forecasted at least two more hikes for 2018. It also lifted its economic growth projections for this year and 2019.
With the US economy chugging along for many months, the Fed is now gradually easing off the stimulus it provides to the economy by raising interest rates to more normal levels.
How does a US interest rate hike affect Indian investors?
The instant effect is foreign money moving out of India's vaults. This means a slight correction in the share market in India, albeit temporarily.
While this might provide a good buying opportunity in long-term stocks, the main thing to look forward would be capex and earnings trends.
In the end, Indian investors are better off staying informed about the corporate earnings revival than Fed rate hikes.
In the news from the banking sector, the Central Bureau of Investigation (CBI) is probing another loan of Rs 53 billion taken by Mehul Choksi and his companies from a consortium of 31 banks led by ICICI Bank.
The probe is a part of the existing First Information Report (FIR) filed against Choksi and his Gitanjali Group of companies.
The above Rs 53 billion loan amount is separate from the Rs 136 billion Punjab National Bank (PNB) fraud already being probed by the CBI.
The CBI is currently probing about Rs 71 billion against Gitanjali Gems Ltd, Gill India Ltd, Nakshatra Brand Ltd and Asmi Jewellery India Ltd.
Last month, the CBI has also noted that the violation of norms for issuance of Letters of Undertaking (LoUs) to benefit Mehul Choksi had been going on since 2010.
Note that the stock of Gitanjali Gems has nosedived on several occasions since 2013, eroding market capitalization by over 80%. Its promoter's role in aiding Nirav Modi carry out one of the biggest frauds in the banking history has damaged the stock's position and credibility. Reportedly, Gitanjali Gems and its two subsidiaries fraudulently acquired letters of undertaking and letters of credit worth Rs 48.9 billion issued through Punjab National Bank.
Gitanjali Gems, the Fall Guy
It has emerged that Gitanjali Gems' receivables position has been outstanding far longer than that allowed by the RBI. Auditors have pointed out the overdue loans/debentures and overdrawn working capital limits by the company in the latest annual report. In fact, the company has said that it does not even have funds to honor debenture redemption liability of as low as Rs 14.8 m.
We had stuck our necks out, warning investors that Gitanjali Gems' shiny exterior is a sham. Being in a working capital business of importing gold and exporting jewelry, regulatory restrictions on gold imports in FY13 pushed the company in deeper debt. But the company's weak management, integrity, and ethics were completely unacceptable to us. Therefore, despite Gitanjali Gems attracting institutional interest during the gold rally, we had clearly asked investors to steer clear of this value-trap.
Connecting the dots in the aftermath of the fraud undoubtedly confirms that the dubious management is responsible for the company's downfall, something we had seen coming long back. Clearly, management integrity is one aspect that shareholders cannot afford to compromise in their frenzy to ride the bull run.
And here's a note from Profit Hunter:
IT stocks are on a roll today. The top four gainers in the Nifty 50 index are from the IT sector - HCL Tech (+4.10%), TCS(+4.05%), INFY (+3.55%), and Tech M (+3.05%).
The last time we reviewed TCS, it had corrected more than 12% from its lifetime high, as we had expected it to.
But we observed the stock approaching its crucial support level of 2,780. This level which had acted as a strong resistance on the way up was expected to act as a strong support.
As a result, the stock touched a low of 2,781 and reversed up. It is now up nearly 13% from the 2,780 support level. The volumes for the day strongly indicated buying interest.
Will the stock now touch a new life-time high soon? Let's wait and watch...
TCS Soars 4% for the Day
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