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Sensex Finishes Firm; Automobile Stocks Fall on SC Verdict
Wed, 29 Mar Closing

Indian share markets finished the trading day on a positive note. At the closing bell, the BSE Sensex closed higher by 122 points, whereas the NSE Nifty finished higher by 43 points. The S&P BSE Midcap finished up by 0.2% while the S&P BSE Small Cap ended up by 0.3%.

Sectoral indices ended on a mixed note. The consumer durables sector & the banking sector witnessed maximum buying interest while losses were largely seen in realty sector, automobile sector, and healthcare sector.

Bharti Infratel share price rallied 5.4% after a consortium of global private equity firms KKR and Canada Pension Plan Investment Board (CPPIB) bought 10.3% stake in tower infrastructure firm from open market. The consideration from stake sale is Rs 68.1 billion.

Asian equity markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.19% and the Nikkei 225 rose 0.08%. The Shanghai Composite lost 0.36%. European markets are higher today with shares in Germany leading the region. The DAX is up 0.56% while France's CAC 40 is up 0.25% and London's FTSE 100 is up 0.03%.

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Meanwhile, the rupee advanced 9 paise against the dollar to breach the 65 level at 64.95, a fresh 17-month high on increased liquidation of the American currency by exporters and banks. Oil prices were trading at US$ 48.69 at the time of writing.

According to a leading financial daily, the government will borrow Rs 3.72 trillion from the market during April-September period of FY18, which represents 64% of the borrowing target for full financial year. The borrowing target will be slightly higher than other years as the finance ministry and the RBI expects other ministries to start spending from the beginning of the financial year as well as redemption pressure.

In order to finance the fiscal deficit of 3.2% of the GDP for 2017-18, the Budget had pegged gross borrowing at Rs 5.8 lakh crore and net borrowing at Rs 4.25 trillion.

Economic Affairs Secretary Shaktikanta Das has said that generally every year they borrow 60-62% in the first half of the year and this year the borrowing target is slightly higher at 64%. He noted that total redemptions of Rs 1.57 trillion are due next year of which 90% will be redeemed in the first half.

Das further said that the focus in planning the open market borrowing is to extend the maturity profile as well as to undertake it in the most non-disruptive manner.

Meanwhile, according to an article in The Livemint, with an ever-rising supply of debt that offers yields higher than sovereign notes, borrowing by state administrations threatens to overshadow that by the federal government. That complicates matters for Modi, whose promise of fiscal discipline has lured foreigners to local bonds after a four-month hiatus.

High Debt is a Constraint to Growth

High Debt is a Constraint to Growth

India's Debt to GDP ratio has been at elevated levels for the last decade or so. The final number for FY16 is expected to be around 66%. The Indian government spends about 30% of its revenue on interest payments. This doesn't leave any room for the government to spend on productive purposes.

Increased competition from states is also bad news for the sovereign-debt market, which saw benchmark notes in February post their biggest monthly loss since 2013, after policy makers in India signaled an end to the monetary easing cycle.

Moving on to the news from stocks in automobile sector. As per an article in a leading financial daily, Ashok Leyland will invest Rs 4 billion to develop new light commercial vehicles (LCVs) within the next two years and plans to triple its sales in the segment by 2019-20.

Reportedly, automobile sector is set to embrace the shifts from implementation of BS-IV norms as companies are set to expand in different segments. After Ashok Leyland ended its joint venture with Nissan, it is now planning to focus on the LCV space. As part of Ashok Leyland's hedging strategy, its board has approved an investment of Rs 4 billion in its LCV business.

With this expansion in line company expects to introduce new models with right hand drive and left hand drive as it plans to explore overseas markets too.

However, the CV industry has not seen much pre-buying on account of change in emission norms mainly due to low cargo availability and uncertainty over GST. Ashok Leyland has posted stable sales growth in February by 5% to 14067 units in which LCV contributed 2738 units and M&HCV segment contributed 11329 units.

Meanwhile, shares of auto majors came under heavy selling pressure in the afternoon trade after the Supreme Court banned the sale of non-BS IV vehicles from 1 April 2017.

Reacting on the ruling, Hero MotoCorp share price slipped 2.7% as the company holds highest inventory of BS-III vehicles. Similarly, Ashok Leyland share price ended the day down by 2.8%.

In another development, Siemens share price surged 1.2% in today's trade after a consortium of Siemens and Sumitomo Electric Industries has bagged an order from Power Grid Corporation of India to supply a high voltage direct current (HVDC) transmission system. The total size of the order won by the consortium is US$ 520 million, of which the share of Siemens is around Rs 16.82 billion.

Siemens will be supplying two converter stations with two parallel converters, each rated 1000 Megawatts (MW), using its VSC HVDC technology, while Sumitomo Electric will be responsible for XLPE HVDC cables in the DC circuit. The grid connection is scheduled to go into operation in the first half of 2020.

And here's a note from Profit Hunter:

Asian Paints has been most generous to its investors. From the bottom of 2009 to the high of 2016, the stock has generated a return of 1,643%. This is massive.

But after the stock made a high of Rs 1,227 in October 2016, it slipped sharply to a low of Rs 851 In just two months - a 30% decline. This was the largest drawdown for Asian Paints since 2009. The drop also bought the RSI indicator to hit its lowest level of 16.

The stock found support near the 850 level after developing a bullish divergence with the RSI.

It is now up more than 25% from the December 2016 lows. The RSI is also finding support from 50 levels. It seem that the stock is all set to re-test its previous high of Rs 1,227.

Whether the stock will overcome its previous high and continue to be generous to its investors remains to be seen.

But for now, my colleague Rohan Pinto, research analyst, recently met with an ace stock picker whose winners list includes Asian Paints, MRF, and more. You can find the complete interview in today's 5 Minute WrapUp here.

Asian Paints Marching North
Asian Paints Marching North

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Jan 19, 2018 (Close)