Indian Indices Erase Gains; Auto Stocks Under Pressure

Mon, 18 Mar 12:30 pm

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Share markets in India are presently trading on a flat note. Sectoral indices are trading mixed with stocks in the auto sector and telecom sector witnessing selling pressure while realty stocks, energy stocks and banking stocks are witnessing buying interest.

The BSE Sensex is trading up by 15 points, while the NSE Nifty is trading up by 12 points. The BSE Mid Cap index is trading down by 0.1% and the BSE Small Cap index is trading down by 0.2%.

A lot of people in the market are playing the prediction game ahead of the elections these days.

A common theme is to sit on cash to escape the volatility ahead of the upcoming elections. In case there is an unexpected event, you can then get in post the correction.

But does timing the market work?

Not really, if you see the market performance in the year of the past three national elections (2004,2009 and 2014).

Downside of Timing The Stock Market

Looking at the returns in the above chart, staying out of the market to escape volatility would have been a costly affair every time.

The market gave above average returns in all three of those years.

This does not mean one can expect the same in the future.

But there's one thing for sure. Predicting short-term directions of the market is a futile and many a times a costly affair.

That's why we at Equitymaster, believe in picking safe stocks when they are actually 'safe' i.e. during such times of high pessimism and uncertainty.

Moving on, the rupee is currently trading at Rs 68.64 against the US$.

The rupee rose to its highest in more than 7 months, boosted by strong dollar inflows while broad weakness in the US currency over the previous week aided sentiment.

The domestic currency has gained past 69 mark for the first time since August 10, 2018.

In the news from the engineering space, L&T share price is in focus today as the company is likely to buy 20.4% stake held by Cafe Coffee Day (CCD) founder V.G. Siddhartha, followed by an open offer to buy an additional 31% stake in the company.

L&T has agreed to pay Rs 981 per share to buy the entire stake held by Siddhartha and two of his CCD firms.

An acquirer company is required to make an open offer to gain control of a listed firm only after acquiring 25% stake. However, in this case, L&T is set to use a section of the takeover code stipulated by the markets regulator.

According to market regulator's takeover rules, an acquirer can launch an open offer to gain control of a listed firm only it makes a public announcement to acquire more than 25% stake and voting rights in the listed firm eventually.

Shares of Mindtree are also in focus today as the company announced it will consider share buyback plan on March 20 to fend off attempts by engineering major Larsen & Toubro (L&T) from making a hostile takeover bid.

The announcement of a possible share repurchase has come amid reports of L&T's board giving the green signal to buy stake in Mindtree.

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

Moving on to the news from the automobiles sector, Maruti Suzuki share price is witnessing selling pressure today on reports of production cut due to slower demand.

As per an article in The Economic Times, Maruti is estimated to have cut production by 26.8% to about 126,000 units.

Here's an excerpt from the article:

• A slowing demand in India's passenger vehicle market has prompted the car market leader, Maruti Suzuki India, to cut production by a quarter over March last year.
  
  Slowing demand and uncertainties ahead of the elections pushed the production level this month to its lowest since March 2015.

Shares of India's top selling car maker fell as much as 4.4% on back of the above news. The fall marked their biggest daily percentage loss since January 25, 2019.

Speaking of automobiles sector, 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.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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