Market recap for 1 February 2021

Nifty50: 14,281 ▲ 646 (+4.7%) 

 Sensex: 48,600 ▲ 2,314 (+5.0%)

The markets opened with a gap-up and were upbeat from the start. However, after the pro-growth Budget speech by the Finance Minister, the Nifty rocketed past 14,000 and never looked back. Among the Nifty50 stocks, 45 traded in the green. 

Among the sectoral indices, the Nifty Bank and Nifty PSU Bank shot up 8.2% and 7.8%, respectively. The Nifty Pharma (-0.5%) was the only index to close in the red. 

Here are the top stories of the day. 

Auto stocks on fast track

• It was an exciting day for auto stocks that got a double boost—the introduction of the scrappage policy in the Budget and upbeat January sales volumes. 
• Industry leader Maruti (+3.1%) recorded a 4.3% YoY rise in sales, mainly driven by 45% growth in UVs. 
• Mahindra and Mahindra (+6.1%) saw solid 50% YoY increase in its farm-equipment sales, however, it saw a slower 4% YoY rise in its passenger vehicle sales. Commercial vehicles also saw an uptick with Ashok Leyland (+9.8%) reporting a 11% bump in sales.

Bad bank news brings cheer to lenders

• The announcement of setting up a ‘bad bank’ came as a welcome surprise in the 2021 Budget. The entity will absorb non-performing assets of banks and sell them to investors for realisation of value. 
• The RBI expects non-performing assets to rise to 13.5% by H1FY22, versus 7.5% during the same period last fiscal. The move came as a welcome relief for the banking industry. Top gainers in the Nifty Bank index (+8.2%) included IndusInd Bank (+15.1%), ICICI Bank (+13.3%), and SBI (+10.9%).

Festive demand boosts Nerolac’s Q3 profits

• Kansai Nerolac posted a strong 76.5% rise in Q3 profit, which stood at ₹204.5 crore. It reported a 19.6% YoY growth in total revenue to ₹1,606 crore. It witnessed strong growth in demand for both decorative and industrial paints during the festive season. 
• The company expects demand traction to continue. However, it also sees an inflationary trend in basic raw material prices going forward. Its stock gained 5.8% today. 

Custom duty on bullion slashed

• In the Budget, the government has announced a reduction in the custom duty on gold and silver from 12.5% to 7.5%. However, a 2.5% agriculture infrastructure and development cess (AIDC) will be levied. 
• Gold and silver prices on MCX fell from the day’s high after the announcement. Gold prices are trading 1.7% down. Silver was up 5.1%, following an 8.6% jump in international silver prices. 

Closing bell

The Budget had three key components. It was pro-growth, with a focus on capital spending. It did not tinker with tax rates. And finally, it envisaged a progressively reducing fiscal deficit. As most apprehensions were put to rest, investors gave it a thumbs-up and pulled off what was the best Budget-day rally in the last 24 years. Today, the overall bullishness in the global markets too augured well for the investor sentiments. The manufacturing PMI numbers that were released today also showed improvement.

So far, most Q3 results have been satisfactory or better than street expectations and the Budget was well-received by the market. The next event to watch out for is the interest rate decision by the RBI, which is expected on Friday. After the volatility seen in the last two weeks or so, one could expect the markets to take a breather as suggested by the 8% dip in the India VIX. 

Good to know

What is time value of money?

The time value of money is the idea that money received in the present is more valuable than the same amount in the future because of its potential earning capacity. It also takes into account inflation that gradually erodes the value of money and its purchasing power.

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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.