Sensex Trades in the Green; Indian Oil up by 4%

Wed, 30 Aug 01:30 pm

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After opening the day on a positive note, share markets in India have continued the momentum and are trading in green. Sectoral indices are trading on a positive note with stocks in the oil and gas sector and stocks in the metal sector leading the gains.

The BSE Sensex is trading up by 300 points (up 1%), and the NSE Nifty is trading up by 100 points (up 1%). Meanwhile, the BSE Mid Cap index is trading up by 1.5%, while the BSE Small Cap index is trading up by 1.4% The rupee is trading at 64.41to the US$.

In news from stocks in the automobile sector. The country's largest car maker Maruti Suzuki India Ltd laid out plans for the revamp of its retail network. The new showrooms will be called Maruti Suzuki Arena.

The company said according to surveys as much as 75% of customers research online prior to purchasing a vehicle. Maruti Suzuki is upgrading its sales channel to provide a seamless experience to customers.

In recent months, Maruti Suzuki has already announced the launch of NEXA Service focusing on premiumisation of the customer experience.

The Indian auto industry is witnessing a rapid change in consumer preference. And the change is becoming more evident in the case of first-time buyers. Maruti Suzuki is a market leader in the domestic passenger vehicle segment with seven of its models featuring in the top 10 selling brands in July month. The sales data of the company reveals some interesting insights about first-time car buyers.

Changing Preference of First Time Buyers

Historically, first-time buyers preferred small hatchbacks such as the Maruti 800, the Alto, and WagonR. But the new generation of first-time buyers is moving up the ladder to premium cars. It's similar to what has happened in other consumer segments such as mobile phones and consumer electronics.

First-time car buyers are now buying costlier models such as the Swift or the Dzire. First-time car buyers accounted for 31% of Swift sales in FY14. That number jumped to 52% in the June quarter of FY18.

The growing preference for these feature-rich and costlier models as first cars indicates growing premiumization in India's car market. This trend indicates that first-time buyers are getting more aspirational. Interestingly, the age profile of first-time car buyers and higher disposable income are contributing to this phenomenon.

If this trend continues, going forward, one would see compact SUVs becoming the preferred choice for first-time buyers. The trend is already under way. The percentage of such buyers for Brezza for instance stood at 37% in the first quarter of FY18.

Owning a car is a status symbol, but buying a new, larger, smarter vehicle is one step further down the aspirational road. With this, premiumization will be an important growth driver for the auto industry in coming years.

At the time of writing, Maruti Suzuki share price was trading up by 0.5%.

Moving on to news from stocks in the oil and gas sector. Indian Oil (IOC) share price is in focus today after the company announced capital investments to the tune of Rs 320 billion over the next three to four years.

To meet the rising demand for petrochemicals, especially plastics and polymers, largest public sector company will invest Rs 320 billion to ramp up its output by fiscal 2021.

This investment is part of the overall Rs 1.8 trillion capex planned for the next five to seven years. Indian Oil has already executed petchem projects worth Rs 208 billion and is close to commission a Rs 31.5 billion polypropelene plant at its 15-million tonne refinery at Paradip in Odisha.

The new projects include MEG (mono ethylene glycol), PTA (purified terephtalic acid) and petcoke gasification plants at the Paradip refinery and value addition at C-4 and C-5 at Panipat and a polypropylene unit at Barauni Refinery, he added.

The capital expenditure will also be used to expand the company's pipeline network. Currently, the oil and gas major has 13,000 km of the 15,000 km operational pipelines, making it the largest player in the country. The government has set a target of doubling the 15,000 km gas pipeline to 30,000 km by then.

IOC.

IOC is also working on the world's largest refinery in Ratnagiri district of Maharashtra, land acquisition and other related work is underway and an optimal product plan will be worked out shortly.

This refinery is part of government plans to almost double the national refining capacity to 450 million tonne from 230 MT now.

At the time of writing, IOC share price was trading up by 3.8%.

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