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Sensex Ends 363 Points Lower; Auto and Metal Stocks Witness Selling
Wed, 2 Jan Closing | Monish Vora, TM Team

Share markets in India continued to witness selling pressure during closing hours and ended their trading session deep in the red. All sectoral indices ended in the red with stocks in the metal sector and auto sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 363 points (down 1%) and the NSE Nifty closed down by 118 points (down 1.1%). The BSE Mid Cap index ended the day down 1.3%, while the BSE Small Cap index ended the day down 0.7%.

The rupee was trading at 70.03 against the US$.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 2.8% and the Shanghai Composite was down by 1.2%. The Nikkei 225 was down 0.3%.

In the news from the macroeconomic space, Indian manufacturing activity expanded at a slower pace in December. This was seen as growth in new orders and output waned, despite factories cutting their prices.

Going by the numbers, the Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, declined to 53.2 in December, below November's 54.0 reading.

This, however, was above the 50 mark, which separates growth from contraction, for a 17th month. Also, manufacturing activity registered its strongest quarterly performance since late 2012.

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Although new orders and output expanded at a slower rate last month, both remained well into expansion territory for more than a year, supported by weaker inflationary pressures.

December also saw the weakest increase in input costs for nearly three years, giving factories room to cut their prices for the first time since July 2017.

Despite a strong performance in 2018, the survey indicated manufacturing firms were turning cautious. Hiring in December slowed as optimism waned amid uncertainty ahead of a national election scheduled for May.

It would be interesting to see how the manufacturing activity performance pans out in the coming months. Meanwhile, we will keep you updated on all the developments from this space.

In other news from macroeconomic space, as per a leading financial daily, the Goods and Services Tax (GST) Council is slated to meet on January 10 to discuss lowering GST on under-construction flats and houses to 5%.

Along with that, it is also going to consider hiking exemption threshold for small and medium enterprises.

The council, in its previous meeting on December 22, 2018, had rationalised the 28% tax slab and reduced rates on 23 goods and services.

NMDC share price was in focus today after the company said it will consider a share buyback proposal on January 8.

The company in its filing said that the meeting of board of directors of the company will be held on January 8, inter-alia, to consider the proposal for buyback of the fully paid-up equity shares of the company.

Speaking of buybacks, the number of buyback offers in 2017-18 were at an all-time high. Never, in the last two decades, had Indian markets seen fifty-nine companies announcing buyback plans.

But what is truly surprising is that unlike in the past, the buybacks this time seem skewed in favour of short term investors rather than long term ones.

Who Benefits from Such Buybacks?

Here's what Tanushree Banerjee, Co-head of Research at Equitymaster, wrote about it in The 5 Minute WrapUp...

  • Look at the history of buybacks since 2002. Logically promoters should offer to buyback shares at a premium when the stock is undervalued. And this logic held true until recently. The number of buybacks peaked when market valuations were low. And in times of peak valuations (like 2007 and 2011), promoters refrained from doing so.

    But not this time. The trend of rising buybacks in the last two years, resembles the sentiment of a momentum investor. The appetite to buy shares kept rising with the rising markets. And the latest buybacks of stocks like TCS and MOIL, came at a time, when neither the broader index (Sensex) nor the stocks themselves, are undervalued.

At Equitymaster, we believe, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

  • The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

The topic also brings us to ask: Do buy-backs offer an arbitrage opportunity for retail investors? Ankit Shah has answered this question in one of the editions of Equitymaster Insider. You can access the issue here (requires subscription).

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Stock Market Updates

Sensex Ends Marginally Higher; Automobile and Power Stocks Witness Buying (Today's Market)

Aug 16, 2019 Closing

The BSE Sensex ended the day up by 39 points, while the NSE Nifty closed up by 18 points.

PIDILITE INDUSTRIES at All Time High; BSE FMCG Index Up 0.4% (Today's Market)

Aug 16, 2019 03:34 PM

PIDILITE INDUSTRIES share price has hit an all time high at Rs 1,373 (up 1.7%). The BSE FMCG Index is up by 0.4%. Among the top gainers in the BSE FMCG Index today are PIDILITE INDUSTRIES (up 1.7%) and P&G HYGIENE (up 0.2%). The top losers include AVANTI FEEDS (down 0.1%) and COLGATE (down 0.1%).

APL APOLLO TUBES Surges by 6%; BSE CAPITAL GOODS Index Down 0.1% (Today's Market)

Aug 16, 2019 03:32 PM

APL APOLLO TUBES share price has surged by 6% and its current market price is Rs 1,350. The BSE CAPITAL GOODS is down by 0.1%. The top gainers in the BSE CAPITAL GOODS Index are APL APOLLO TUBES (up 6.4%) and SUZLON ENERGY (up 6.7%). The top losers are LAKSHMI MACHINE (down 0.2%) and HONEYWELL AUTOMATION (down 0.4%).

CANARA BANK Surges by 5%; BSE BANKEX Index Up 0.8% (Today's Market)

Aug 16, 2019 03:30 PM

CANARA BANK share price has surged by 5% and its current market price is Rs 237. The BSE BANKEX is up by 0.8%. The top gainers in the BSE BANKEX Index is CANARA BANK (up 5.2%). The top losers is HDFC BANK (down 0.2%).

ECLERX SERVICES Plunges by 5%; BSE IT Index Down 0.8% (Today's Market)

Aug 16, 2019 03:30 PM

ECLERX SERVICES share price has plunged by 5% and its current market price is Rs 519. The BSE IT is down by 0.8%. The top gainers in the BSE IT Index are FIRSTSOURCE SOL. (up 3.5%) and ORACLE FINANCIAL (up 3.2%). The top losers is ECLERX SERVICES (down 5.5%).

DR. LAL PATHLABS LTD Surges by 7%; BSE HEALTHCARE Index Down 0.3% (Today's Market)

Aug 16, 2019 03:22 PM

DR. LAL PATHLABS LTD share price has surged by 7% and its current market price is Rs 1,201. The BSE HEALTHCARE is down by 0.3%. The top gainers in the BSE HEALTHCARE Index are DR. LAL PATHLABS LTD (up 7.1%) and APOLLO HOSPITALS (up 8.1%). The top losers are STRIDES PHARMA SCIENCE (down 0.1%) and SANOFI INDIA (down 0.2%).

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