Indian share markets witnessed huge losses during the second half of the day and ended their session deep in the red.
In early trade today, the BSE Sensex rose over 250 points, extending gains to the fifth consecutive day fueled by news of an improving economy and de-escalating tensions on the India-China border.
According to a report in The Economic Times, the government heralded the "early green shoots of economic revival" in May and June, pointing to higher electricity and fuel consumption, greater movement of goods, and an increase in financial transactions.
The finance ministry listed as many as 14 separate indicators across manufacturing, services, finance, and agriculture to back this up in a statement entitled 'Increase in Economic Activity-Improvement in Economic Indicators' issued on Tuesday.
Benchmark indices however gave up gains and witnessed selling pressure during closing hours. The BSE Sensex plunged more than 800 points from its day's high.
Stocks in the telecom sector and banking sector were among the hardest hit.
At the closing bell, the BSE Sensex stood lower by 561 points, down 1.6%.
Meanwhile, the NSE Nifty closed down by 166 points.
The BSE Mid Cap index ended the day down by 1.1%, while the BSE Small-Cap index ended down by 1.2%.
The SGX Nifty was trading at 10,295, down by 189 points, at the time of writing.
Asian stock markets ended on a negative note.
As of the most recent closing prices, the Hang Seng was down 0.50% and the Nikkei stood lower by 0.07%.
The rupee was trading at 75.69 against the US$.
Speaking of Indian stock markets, note that the last two and a half months have been a roller coaster ride for Indian indices.
In her latest video, Richa Agarwal, editor of our premium smallcap service Hidden Treasure, shares her thoughts on the implications of the market volatility for the potential returns in the smallcap space.
Moving on, KEI Industries was among the top buzzing stocks today.
Shares of KEI Industries witnessed buying interest after reports stated a recovery in business environment of the company.
As per the reports, the company management's interactions with analysts at Jefferies India indicate better recovery in tier II and smaller cities.
Note that sales at the company have come to a halt in the last ten days of the March quarter due to the lockdowns.
Consequently, the company did not see any revenue growth last quarter. Tracking the Covid-19 disruption to demand and retail network the management even warned of a revenue fall in current fiscal in an earnings call with analysts earlier this month.
However, with the lockdown restrictions lifting and with ports functioning and construction work not restricted abroad, even during lockdowns, the company is fulfilling export orders. KEI saw substantial export sales in May, the management told analysts earlier this month. Cables sales to institutional customers also picked-up from last month.
How these developments help the company in coming days remains to be seen. Meanwhile, we will keep you updated on all the news from this space.
In other news, market participants were tracking stocks from the oil & gas sector today.
Stocks such as Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation, and Hindustan Petroleum Corporation Ltd were in focus today as diesel turned costlier than petrol after 18 hikes in a row.
The state-run oil companies today raised the prices of diesel for the 18th consecutive day. No increase was witnessed in petrol prices. With the current price hike, diesel has become costlier than petrol.
While petrol costs Rs 79.76 per litre, diesel can be bought at Rs 79.88 per litre. The price of diesel has been increased by 48 paise a litre.
Notably, oil marketing companies have been adjusting retail rates in line with costs after an 82-day break from rate revision amidst the COVID-19 pandemic. These companies on June 7 restarted revising prices in line with costs.
Yesterday, fuel prices in Delhi were hiked for the 17th day in a row. The price of petrol was increased by 20 paise a litre while that of diesel by 63 paise a litre.
What impact the above raise in diesel price have on the economy and oil companies remains to be seen. Stay tuned for all the updates from this space.
Moving on to news from the commodity space, domestic gold prices extended gains today, hitting a new record high of Rs 48,333 per 10 gram amid a global rally.
On Multi Commodity Exchange (MCX), August gold futures rose 0.10% to Rs 48,281 per 10 grams during morning hours today.
Tracking gold, silver also posted strong gains.
Gold also witnessed buying interest in global markets and gained around 1%.
Most of the gains for the yellow metal were seen on expectations that global central banks will continue to provide more stimulus to the markets to cushion from the effects of a second wave in many nations.
Worries about a delay in global economic recovery also prompted investors to seek the safe-haven metal.
Note that gold prices have also been lifted by the fear of inflation that will come from the cash governments and central banks are approving around the world as they continue to provide much-needed support to pandemic-hit economies.
Speaking of gold, how lucrative has gold been as a long-term investment in India?
The chart below shows the annual returns on gold over the last 15 years...
Gold Has Been a Shining Long-Term Investment
As you can see, barring just two years - 2013 and 2015, gold has delivered positive returns in 13 of the last 15 years.
Here's what we wrote about this in one of the editions of The 5 Minute WrapUp...
- In fact, gold has delivered double-digit gains in 10 of the last 15 years.
During the entire 15-year period, gold has shot up 555% (compounded annual return of 12.1%).
During the same period, the Sensex surged 511% (compounded annual return of 12.0%). If you include dividends, the Sensex returns would be higher than gold by a couple of percentage points.
One must note that the Sensex returns are not representative of the broader market returns. Moreover, gold was a no-brainer. You didn't have to study financial statements, business models, and forecast future earnings growth to get a double-digit return on your investment.
In one of his videos, Vijay Bhambwani, editor of Fast Profits Daily explains why this year's US presidential elections could be bullish for gold.
As per him, the US presidential cycle may not be as predictable this time as it usually is. But there is good money to be made if you can play this trend correctly.
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