After opening the day in green, share markets in India witnessed volatile trading activity throughout the day and ended the day on a negative note. Sectoral indices traded mixed, with stocks in the energy sector and stocks in the banking sector, leading the losses.
At the closing bell, the BSE Sensex stood lower by 176 points (down 0.5%) and the NSE Nifty closed down by 52 points (down 0.5%). The BSE Mid Cap index ended the day up 0.9%, while the BSE Small Cap index ended the day up 1%.
The rupee was trading at Rs 73.63 against the US$ in the afternoon session. Oil prices were trading at US$ 76.85 at the time of writing.
Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was down by 0.9% and the Shanghai Composite was up by 1%. The Nikkei 225 was up by 1.5%. Meanwhile, European markets too were trading on a mixed note. The FTSE 100 was up by 0.3%. The DAX, was down by 0.4% while the CAC 40 was down by 0.3%
In news from stocks in the financial sector. According to a leading financial daily, the government is considering an outright sale of the beleaguered Infrastructure Leasing & Financial Services Ltd (IL&FS).
According to reports, the government is examining options including an outright sale of IL&FS as it tries to stem defaults at the lender with $12.6 billion of debt.
A plan is to be presented to a bankruptcy court Wednesday by the state-appointed board of the lender includes selling the entire stake to a financially strong investor and ensure business continuity.
The plan finalized by the new board led by Uday Kotak will be put up before the National Company Law Tribunal on Oct. 31. The court had approved the government's move to take over the lender and accepted the plea that the move was crucial to protect the financial markets
Even If IL&FS Group Brought This Correction, this is Right Time to Buy & Sit Tight!
All throughout history, every market correction has a compelling reason behind it.
While Indian markets were at their peak valuations and were vulnerable to corrections anyway, the blame this time is on IL&FS.
The complete collapse of IL&FS group will mean a huge default of Rs 910 billion. This is a big mess.
However, the government has taken over and new board is now in place. This is a bit of silver lining to this problem.
But guess what - there are way more cockroaches then initially thought.
As per IL&FS's annual report, there were group companies in the range of 176-251, however, the new board has clarified that there are more than 340 group entities! That means more pain than anyone initially thought.
As the chart below shows, it is really the IL&FS group companies that are in a painful situation.
In fact, the new board believes the actual liabilities could be understated and has appointed the Serious Investigation Office (SFIO) for forensic audit. This will also help to identify if there was any fraud involved.
In the short-run, this event along with many other triggers have bought a lot of pain to the stock market.
But we at Equitymaster believe, this is the right time to buy the best quality companies for the long-term.
Moving on to news from stocks in the energy sector. State run Bharat Petroleum Corp Ltd (BPCL) share price was in focus today as the company outlined plans to shut down its crude unit.
BPCL said that will shut the crude distillation unit and the secondary units at its Kochi oil refinery that were installed last year for maintenance starting in December.
BPCL will shut the crude unit with 210,000 barrels per day (bpd) of processing capacity along with the secondary units for about three weeks.
The shutdown is routine and done for inspecting the plant.
BPCL last year installed new crude distillation capacity by combining an existing 90,000 bpd unit with 120,000 bpd of new capacity, raising overall distillation output at Kochi by 63% to 310,000 bpd.
The company also installed new secondary units as part of the expansion including a delayed coker, fluid catalytic cracker, vacuum gasoil hydro-treater, diesel hydro-treater, sulphur Recovery Unit, and hydrogen generation unit (HGU). All of those units will be shut during the maintenance.
BPCL share price ended the day down by 3.6%.
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