Sensex Ends 151 Points Lower; Healthcare & Energy Stocks Witness Selling

Mon, 11 Feb Closing

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Indian share markets witnessed selling pressure throughout the day and ended marginally lower. Barring IT sector, all sectoral indices ended on a negative note with stocks in the healthcare sector, energy sector and capital goods sector witnessing maximum selling pressure.

At the closing bell, the BSE Sensex stood lower by 151 points (down 0.4%) and the NSE Nifty closed down by 55 points (down 0.5%). The BSE Mid Cap index and the BSE Small Cap index ended the day down by 1.5%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was down up 0.6% and the Shanghai Composite was up by 1.4%. The Nikkei 225 was down 2%.

The rupee was trading at 71.15 against the US$.

Speaking of the Indian share markets, note that while the Sensex is below its all-time high level of August 2018, it is still above the level it traded a year ago.

And if you increase the time frame to five years, you will realise that the Sensex has gained about 73%, compounding at an annual rate of 11.6% (excluding dividends).

And how has the valuation of the index has moved over the last five years?

The chart below shows how the Sensex price to earnings ratio has moved over the last five years...

The Sensex Is Far from a Bargain Yet

Here's what Ankit Shah wrote about this in today's edition of The 5 Minute WrapUp...

• As you can see, the Sensex price to earnings ratio has mostly been in a rising trend over the last five years, except some intermittent declines.
  
  So, looking at the Sensex valuations, the markets don't appear attractively priced right now. But as I've mentioned time and again, the Sensex tells a very a selective, skewed story of just the 30 largest companies.
  
  It does not reflect the conditions of the broader markets, which have witnessed quite a tumultuous ride. Consequently, the rest of the markets also have more attractive buying opportunities than the Sensex companies.

Moving on, market participants were tracking Eicher motors share price, SpiceJet share price, Motherson Sumi share price, and Care ratings share price as these companies announced their December quarter results later today.

You can also read our recently released Q3FY19 results of other companies here: Reliance Industries, Infosys, TCS, Trident, HDFC bank, Maruti Suzuki, Tata Steel.

From the automobile sector, Tata Motors share price was also in focus today. The scrip of the company witnessed selling pressure in early trade today after tracking a sharp fall in American depository receipts (ADRs) on Friday.

The stock of the company was also in focus as Tata Motors reported the biggest ever quarterly loss by an Indian company at Rs 269.6 billion for the third quarter ended December 31.

Most of the losses were seen on the back of asset impairment in its British arm Jaguar Land Rover (JLR).

The auto major said profit was impacted by an exceptional item of asset impairment in its British arm Jaguar Land Rover (JLR) of Rs 278.4 billion (3.1 billion pounds).

Total revenue from operations, however, rose 4.4% to Rs 775.8 billion as compared to Rs 743.4 billion in the year-ago period.

Speaking of automobiles sector, all the components of BSE Auto index have fallen. Tata Motors have crashed over 60% and Motherson Sumi Systems have plunged over 40% in past one year. While, Bharat Forge, Ashok Leyland and Maruti Suzuki fell over 30% during the same period.

But, one thing we must keep in mind is that not all auto companies will make money over time. And also, you shouldn't stay away from auto stocks altogether.

Even Tanushree Banerjee, Co-head of research at Equitymaster, believes that there are businesses in this sector that you cannot ignore. She is particularly talking about the blue-chip auto stocks.

Here's Tanushree...

• One out of every three household in India is a buyer of their products. They own some of the cult brands in Indian automobile space. They have formidable R&D teams. They have been through several economic cycles over decades. Few have even visited near-bankruptcy in the past and come out successful.
  
  Yet, some of the biggest passenger car, commercial vehicle, and two-wheeler companies in India have seen a huge dent in valuations in recent times.
  
  This could be the opportunity long term investors were waiting for.

In the news from the commodity space, crude oil witnessed selling pressure today. Crude oil prices fell around 1% as US drilling activity picked up and as Russia's biggest oil producer pressured President Vladimir Putin to end the supply cut deal with Middle East-dominated producer club OPEC.

Also, speaking of crude oil, India's state-run fuel marketers suffered their highest inventory loss in at least five years in the December-ended quarter due to a sharp fall in crude oil prices.

As per a leading financial daily, the combined inventory loss incurred by the three listed oil retailers-Indian Oil Corporation Ltd (IOL), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL) - rose to Rs 175 billion in the abovementioned three-month period.

This was seen largely due as brent crude oil prices declined from their peak of US$ 86.3 per barrel to US$ 50.5 per barrel in the quarter ended December due to oversupply concerns amid slow demand growth.

How this pans out ahead remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

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

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