Sensex Ends Day in Green; Tata Motors Up 3%

Wed, 9 May Closing

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After opening the day in red, share markets in India witnessed a turnaround and then continued the momentum throughout the day and ended the day in green. Sectoral indices were mixed, with stocks in the IT sector and stocks in the capital goods sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 103 points (up 0.3%) and the NSE Nifty closed up by 24 points (up 0.2%). The BSE Mid Cap index ended the day down 0.6%, while the BSE Small Cap index ended the day down by 0.1%.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was up by 0.5% and the Shanghai Composite was flat. The Nikkei 225 was down by 0.4%. Meanwhile, European markets were trading in green. The FTSE 100 was up by 0.5%, The DAX, was up by 0.1% while the CAC 40 was up by 0.1%.

The rupee was trading at Rs 67.29 against the US$ in the afternoon session. Oil prices were trading at US$ 70.84 at the time of writing.

In news from stocks in the automobiles sector. Tata Motors share price ended the day on an encouraging note today after the company's subsidiary, Jaguar Land Rover (JLR) reported its April sales numbers.

JLR's sales grew by 11.9% in April, compared to the same period last year. The sales stood at 45,180 units in April this year.

The sales of its subsidiary were primarily driven by introduction of new models, including the Range Rover Velar, the Land Rover Discovery and the Jaguar E-PACE. Retail sales for April notched up significant gains year-on-year in China (28.9%), the UK (25.9%), overseas markets (21.3%) and North America (2.5%), nosed down in Europe (-10.2%) amid continuing uncertainty over diesel in the UK and Europe.

While Jaguar retail sales were 13,289 units in April, up 8% from last year, Land Rover sales increased by 13.60% to 31,891.

Tata Motors share price ended the day up 2.8%.

Auto Volumes are a Good Indicator of Economic Growth

Speaking of auto sales, one of the major indicators to determine growth in the India economy, is the volume of vehicles sold.

For the first nine months of FY18 at least, the auto industry has done well to grow in double digits after some lean years.

Vehicle sales grew by 11.3% YoY during this period. The best performing of the lot were commercial vehicles (CVs), volumes of which grew by 15% YoY. Two-wheelers also did well growing by around 12% YoY.

In fact, in a recent conference call, the management of the largest two-wheeler company in the country - Hero Motocorp - said they expect the two-wheeler industry to grow in double digits in FY19 as well.

We're keeping a close eye on auto stocks.

Moving on to news from stocks in the pharma sector. Glenmark Pharma share price was in focus today after the company was issued a show cause notice by the Indian drug regulator.

The Central Drugs Standard Control Organisation( CDSCO) sent a show cause notice to the company regarding a clinical trial done at Jaipur's Malpani Multispeciality Hospital after the regulator found deficiencies in its clinical trial protocols.

The deficiencies include an alleged falsification of patient enrollment data at Malpani Multispecialty Hospital in Jaipur- in connection with phase two trial of company's osteoarthritis pain drug tested on patients.

Glenmark was also pulled up by the Office of Drug Controller General of India (DCGI) for inadequate monitoring of the trial at the site.

Is this the right time to buy pharma stocks?

There was a time when almost every stock in the pharma sector was considered to be a safe stock. You could just pick the top 5-6 companies from this sector and expect to make decent returns over time.

In fact, it was termed as defensive sector. However, in last two years things have changed a lot. There is enormous uncertainty in the industry.

Uncertainty regarding price erosion in the United States as well as hostile US FDA visits, have changed a once defensive sector into a risky sector.

However, we believe this could be point of consolidation in the industry i.e. with stricter norms, lower margins, and pricing pressure, the industry may see many exits and acquisitions. This could lead to relatively fewer but higher quality players.

We believe, if you can pick a niche company with good financials and strong management, this is a good time to consider pharma stocks.

And here's a note from Profit Hunter:

Tata Motors Ltd witnessed buying interest on back of strong April JLR sales. The stock is up 3% with strong volumes.

The last time we reviewed the stock, it was trading near its important zone of 423-431. The zone acted as a support and resistance several times in the past. The stock reacted from this zone and slipped to touch a new 52-week low of 324 in March 2018.

But the stock found a strong support from the channel's support line (green line). It bounced up nearly 12% from this support level. It slipped back to re-test its March 2018 low but reversed after finding support from the 52-week low price. It is now forming a double bottom pattern on the daily chart.

So will the stock rally back to the channel's resistance line, which is placed near the horizontal resistance zone of 423-431? Let's wait and watch.

Tata Motors Rallies on Strong JLR Sales

 

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