Sensex gained 1,028 points while Nifty closed 3.82% up for the day. However, traders should keep the adrenaline rush under check and see this current up move as a small pull-back within the bear market. Instead of getting excited, investors should increase their vigilance and look for opportunities selectively.
If one takes a historical perspective, during the great financial crisis of 2008, when Nifty fell by around 65% from its highs, the market had seen eight bear market rallies in-between and average rally was around 15% and the average period of bounce was 7 days.
For intraday, BPCL, Britannia and RIL closed the day as top gainers on Nifty while IndusInd Bank, Cipla and Eicher Motors were the top laggards for the day.
FMCG: Will it be a flag bearer for next leg of bull run?
Before the virus struck, India's FMCG sector was already a victim of a lack of demand and rural slowdown. But, the current crisis has proven to be a blessing in disguise for them. Amidst the concern of a prolonged lockdown and food shortage, Indian consumers have resorted to bulk buying of food items and essentials, resulting in driving up demand for FMCG goods, especially consumer staples.
From a demand deficit market, the industry has moved to a demand surplus market. This tectonic shift has brought with a unique challenge. Lack of availability of workers at factories and trucks for transportation has created near term disruption for the industry.
Key takeaway: Not even a month ago, FMCG board room executives were sweating over reviving sales. But now, that the sales situation has reversed, maintaining the smooth functioning of operations and meeting the growing demand has become their top priority.
IndusInd Bank: Plenty to ponder upon
A bank that is stuck in a rut is IndusInd Bank. The bank's reported deposits have declined by 10-11% in the ongoing quarter. State governments and few public sector banks did not roll forward the maturing deposits. However, the bank has been able to maintain its average daily Liquidity Coverage Ratio (amount of high-quality liquid assets that are enough to fund cash outflows) at ~112% in March '20.
The bank is now focusing on improving the granularity of its loan book and liabilities. It is also looking to boost its provision coverage ratio beyond 60% in Q4FY20 along with a potential recognition of a few weak assets in the corporate segment.
Key takeaway: IndusInd Bank needs to reduce its reliance on bulk and government deposits in the near term and focus on growing its retail franchise. Promoters have also applied to the RBI to increase their stake to 26%. This should provide much-needed stability to the stock.