Sensex Ends 169 Points Lower; Realty and Auto Stocks Witness Selling

Fri, 25 Jan Closing

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Share markets in India witnessed selling pressure during closing hours and ended their trading session on a negative note. Sectoral indices ended in the red with stocks in the realty sector and auto sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 169 points (down 0.5%) and the NSE Nifty closed down by 69 points (down 0.6%). The BSE Mid Cap index ended the day down 1.2%, while the BSE Small Cap index ended the day down 1.6%.

The rupee was trading at 71.20 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 1.6% and the Shanghai Composite was up by 0.4%. The Nikkei 225 was up 0.9%.

Oil prices began to settle this week, despite persistent worry about the global economy, after reports emerged that Asian government were considering fiscal stimulus measure in anticipation of the slowdown.

From the auto sector, Maruti Suzuki share price was in focus today as the company posted 17.2% year-on-year (YoY) decrease in net profit at Rs 14.8 billion for the quarter ended December. The firm had posted a profit of Rs 17.9 billion in the corresponding quarter last year.

Total revenue of the company increased 0.7% to Rs 196 billion during the quarter over Rs 195 billion in Q3FY18.

The company sold 4,28,643 vehicles during October-December 2018, down 0.6% YoY.

Passenger vehicle industry grew by 4.4% in the first three quarters of the year and declined in the third quarter by 0.8%.

Shares of the company fell around 9% on back of the above news.

Reportedly, Maruti Suzuki helped dealers retail about 90,000 vehicles more than wholesale to keep dealer inventories lean as the festive season sales growth was below expectation.

Earlier the country's largest carmaker was planning to invest over Rs 130-140 billion in new products, technologies and expansion of plant capacity over the next couple of years.

As per an article in The Economic Times, the carmaker is planning these measures to ride out of trouble after posting its lowest growth rate in the past five years in a slowing market.

Here's an excerpt from the article:

• 'One of the big reasons behind slowing growth in 2018 was the lack of major product action from the company. With the aggressive product line-up for the coming 18-24 months, Maruti will again take the lead in driving growth and excitement in the market'.

Speaking of automobiles sector, India's auto sales slowed down in last two months due to weak consumer sentiment because of high interest rate, a spike in fuel price and insurance cost and liquidity crunch.

During H1 of FY18, the sector grew 11% in which CV & tractor segment expanding 34% and 13% while PVs grew by only 7%. On the other hand, higher rural participation has led the 2-wheeler & 3-wheeler segments to grew 36% and 10%.

Also, speaking of blue-chip automobile stocks, 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 is evident in the chart below:

Bluechip Auto Are Stocks Way Off Their Valuation Peaks

Tanushree Banerjee, Co-head of Research at Equitymaster believes, this could be the opportunity long term investors were waiting for.

Various factors such as adverse commodity prices, higher selling expense, adverse foreign exchange variation and higher depreciation expense due to introduction of new models and new engine put pressure on bottomline of the company during the quarter.

Market participants were also tracking L&T share price, DHFL share price, Vakrangee share price as they announce their December quarter results today.

You can also read our analysis of some recently released Q3FY19 results here: Asian Paints, TVS Motor, Havells, Pfizer, ICRA, Bharti Infratel.

Stocks from the graphite electrode (GE) space continued their downtrend seen this week and witnessed selling pressure today. Graphite India share price and HEG share price witnessed a sharp fall this week due to the rising cost of raw material.

Note that needle coke is the main raw material for GE production & is very critical for the growth of GE industry.

HEG in its investor presentation released this month said that due to excess capacity of needle coke in the recent past, some of the needle coke producers have been trying to find a new application for coke in the Lithium Ion batteries.

In the last couple of years, needle coke has been successfully used in this application and a reasonably large part of needle coke is now being used in China in Lithium Ion batteries.

Apart from the above, market participants closely tracked Zee Entertainment share price today. This came as the stock of the company tanked over 30% - it's worst ever fall - on the back of a report that stated a link has emerged between Essel Group and a company being probed for suspect demonetisation deposits.

Meanwhile, other reports stated that Zee Entertainment's promotors' plan to sell stake in the company has gained fresh momentum.

The above development also weighed on Zee Entertainment's subsidiary Dish TV, which was closed down by 12% today.

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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