Market recap for 25 November 2020

▼ Nifty 12,858 (-1.51%)

▼ Sensex 43,828 (-1.56%)

The markets broke their three-day rising streak and witnessed a decisive drop today. Similar trends were observed in other equity markets as key Asian indices turned negative, giving away their morning gains, and European markets are already in the red. Back home, none of the Nifty50 stocks saw a severe knock (the worst being Eicher Motors at -3.7%) but what is noteworthy is that the decline was broad-based as 43 of the Nifty50 stocks ended in the red. One of the few stocks that gained today was energy major ONGC, which rose 5.9%. 

Here are the top stories of the day.

ONGC strengthens on crude oil rally

• Crude oil prices have risen over 25% this month and are at a seven-month high on hopes of a smooth presidential transition in the US, the rapid progress on the vaccine front and the improving demand scenario. 
• Shares of state-owned ONGC are up 5.9% today, supported by the rise in crude oil prices. ONGC is India’s largest crude oil company and contributes nearly 75% to the domestic oil production. Oil India Limited, which is a relatively smaller oil explorer, was also up 2.3% today. 
• Further, exploration service providers also rose as industry dynamics are improving. Alphageo (+19.1%), Aban Offshore (+9.9%) and Jindal Drilling (+6.1%) saw stellar gains.

Insurance players firm up on better outlook

• In an otherwise weak market, shares of insurance players were able to stay in positive territory. Shares of HDFC Life hit an all-time high intraday. In its recent investor interaction, the company management shared optimism about premium growth and margin sustenance near the previous year’s levels. A high single-digit growth in FY21 and near 15% growth in FY22 could be on the cards. The stock pared gains with the fall in the broader market and closed with a gain of 0.1%.
• The insurance business is picking up because the pandemic has increased awareness about insurance, as cited by multiple insurers. 
• Investor interest was seen in the shares of other players too, as SBI Life (+1.3%) and ICICI Lombard (+0.8%) were up today. 

Seven IPOs ready to hit the Street next month

• As per reports, seven companies are planning to come out with IPOs in December. Companies like Kalyan Jewellers, Suryoday SFB, ESAF SFB, Nazara Technologies, RailTel, Burger King and Antony Waste Management are expected to go public and raise funds in the range ₹500 crore to ₹1,750 crore each. 
• So far in 2020, 12 companies have hit the D-Street and delivered returns ranging from -1% (UTI AMC) to 175% (Route Mobile). Gland Pharma, which recently listed on the exchanges, has delivered close to 45% in less than a week. 
• One could expect favourable investor interest in the upcoming IPOs, considering the rates of oversubscription seen in the recent IPOs, markets hitting lifetime-highs and handsome returns delivered by most IPOs in 2020. This, in turn, could trigger some money to flow from the secondary market (stocks) to the primary markets (IPO).

Closing bell

While all the sectoral indices closed positively yesterday, today nearly all of them have closed in negative. That is how markets can surprise traders sometimes, and require nimble-footed traders to adjust their strategies accordingly. The decline in the Nifty50 index today was around 1.5%, which is relatively lower than the overall rise of nearly 10% this month. However, the intraday movement of the Nifty50 today—i.e. gap-up opening followed by a  close below yesterday’s low—suggests weak sentiments. The India volatility index (India VIX) jumped up nearly 10% and gives an early indication of the volatility expected in the days ahead. Tomorrow, the November derivative expiry could be the first among such days. 

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Investment in securities markets are subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by RKSV group. Investors should consult their investment advisor before making any investment decision.