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Sensex Opens Flat; Automobile Stocks In Demand
Fri, 12 May 09:30 am

Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Nikkei 225 is down 0.69% while the Hang Seng is up 0.12%. The Shanghai Composite is trading up by 0.39%. Meanwhile, stock markets in US finished on a negative note on weak earnings from US retailers. European markets too finished their previous session in red.

Meanwhile, Indian share markets have opened the day on a flat note. BSE Sensex is trading lower by 2 points and NSE Nifty is trading lower by 4 points. Meanwhile, S&P BSE Mid Cap and S&P BSE Small Cap are trading lower by 0.3% and 0.1% respectively. Gains are largely seen in IT stocks, automobile stocks and power stocks. Pharma stocks, realty stocks and bank stocks witnessed majority of the selling activity in the morning session.

FIIs Not Very Bullish at the Moment

Despite record inflows into mutual funds, it is the foreign investor that drives stock prices. Relative to India's market capitalization, foreigners are less enthused about India compared to some other emerging market countries.

As per an article in the Business Standard, FII flows in 2017 have been impressive at US$ 6.3 billion. But it is only 0.32% of the market cap of the Indian stock market. 1% is considered a sign of a full-fledged bull market.

However, the biggest reason has been the failure of earnings to catch up with valuations. So far, the indices have rallied about 12% this year. If FII flows continue at the current pace and the markets absorb the huge flows, it could result in a bubble. The only way that can be avoided will be due to a pickup in earnings.

The rupee is trading at 64.44 against the US$.

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In news from economic sector, the UN Economic and Social Commission for Asia and the Pacific (ESCAP) in its latest report has said that Indian economy will grow 7.5% next year by virtue of consumption revival and higher infrastructure spending.

Though, India's growth is projected stable at 7.1% for 2017 before surging to 7.5% next year, underpinned by higher private and public consumption and increased infrastructure spending.

The regional development arm of the United Nations, in its report further added that in the medium-term, India will also benefit from recent reforms measures aimed at de-clogging supply side bottlenecks. While, implementation of good and services tax (GST), amendment of a bankruptcy law and opening up of pharmaceuticals, defense and civil aviation sectors will help India in its economic growth.

The report talking about the demonetisation drive taken by government during November-December last calendar, said the impact would be transient on the economy. However, a slower-than-expected recovery would particularly diminish the outlook for cash-intensive sectors and supply chains for agricultural products.

On the trends in the Asia-Pacific region, the UN ESCAP has found growth in the region moderating in recent years compared to its historical trend and a rebound in 2010.

Moving on to news from automobile sector. As per an article in The Financial Express, TVS Motor announced its entry into the Central American region in countries such as Guatemala, Honduras, El Salvador, Costa Rica and Nicaragua. As part of this plan, TVS Motor has entered into an alliance with Guatemala-based MASESA (Mayor Servicios Socieda Anonima) for distribution of two and three-wheelers and develop dealerships.

As per the reports, TVS Motor, through MASESA, will set up 600 dealerships over the next 12 months and expects to sell around 10,000 units a month. It aims to capture 25% market share in the Central America region, which has an annual size of US$250 million. Currently 22% of TVS Motor's total revenue comes from exports.

Like the Gulf region, Central American countries are integrated and hold huge opportunity for TVS. It had recently announced a capital expenditure of Rs 5 billion for capacity expansion at its plants across the country as well as product development.

TVS Motor share price opened the trading day up by 0.2% on the BSE.

In another development, management consultancy Bain & Company and social networking company Facebook have released a report that says almost 70% of Indian automobile sales, or US$40 billion, will be digitally influenced by 2020, compared to US$18 billion today.

The report finds that digital engineering, 3D printing, smart sensors and the Internet of Things (IoT) are poised to disrupt auto R&D, manufacturing, sales, marketing and after-sales services. The report also noted that most Indian automobile OEMs are behind the curve in digital investments, spending 10-11% of their marketing spend on digital mediums in 2016.

Automobile stocks began the day on a firm note with Mahindra Scooters share price and Eicher Motors share price leading the gains.

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Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "Sensex Opens Flat; Automobile Stocks In Demand". Click here!

1 Responses to "Sensex Opens Flat; Automobile Stocks In Demand"

H M Prabhu

May 12, 2017

Glenmark tanked more than 15% today. Could you pls update us with what we should do?
Thanks
Rgds
Prabhu

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Equitymaster requests your view! Post a comment on "Sensex Opens Flat; Automobile Stocks In Demand". Click here!

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Nov 24, 2017 03:37 PM

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