Sensex Opens Flat; IT and Automobiles Stocks Lag

Mon, 11 Nov 09:30 am

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Asian share markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 1.1% while the Hang Seng is down 2.2%. The Nikkei 225 is trading down by 0.2%. The three major US stock indices posted record closing highs and the S&P 500 registered a fifth straight week of gains on Friday as investors brushed aside worries over the progress of US-China trade talks and as Walt Disney shares rose.

Back home, India share markets opened flat. The BSE Sensex is trading down by 54 points while the NSE Nifty is trading down by 25 points. Both, the BSE Mid Cap index and BSE Small Cap index opened down by 0.1%.

Sectoral indices have opened the day on a mixed note with telecom stocks and consumer durables stocks witnessing buying interest. IT stocks and automobiles stocks are trading in red.

The rupee is currently trading at 71.35 against the US$.

In the news from automobile sector. Lack of demand for passenger vehicles in the country has forced India's largest manufacturer, Maruti Suzuki to cut its production for the 8th consecutive month.

The company's total vehicle production last month stood at 119,337 units against 150,497 in October last year.

The production of passenger vehicles was down 117,383 units from 148,318 in October last year, while Van produced slipped nearly by half from 13,817 in October 2018 to 7,661 last month.

The manufacturing of vehicles in the mini segment came down to 20,985 units last month from 34,295 units in the corresponding month last year.

In the compact segment, the number of units produced last month was 64,079 from 74,167 in the corresponding month last year.

However, in terms of sale, the company did show signs of recovery owing to the festival season demand.

Maruti sold a total of 1,44,277 units (inclusive of OEM sales) during October 2019 in the domestic market recording a 4.5% growth over the same month a year ago.

Maruti Suzuki share price opened the day down by 0.6%.

Note that multiple factors have affected the auto sector of late. The liquidity crisis faced by NBFCs, regulatory changes leading to increased costs, new emission norms...they have all taken their toll.

The industry's sales and production levels have plunged, leading to job losses. In August, all major OEMs consisting of passenger, commercial, two and three-wheeler manufacturers have reported a massive decline in domestic sales.

As per Society of Indian Automobile Manufacturers' (SIAM) August sales figures, the overall sectoral offtake in the domestic market has plunged 23.6% to 1,821,490 units, from 2,382,436 units sold during the corresponding month of the previous year.

On 20 September, the government had reduced corporate tax rates from 30% to 22% to boost consumer demand and increase spending by private companies. The effective tax to be paid by the companies, including surcharge and cess, will be 25.17%.

However, in the euphoria of the government's tax rate cuts, an important announcement went unnoticed.

The road transport and highways ministry has proposed a huge increase in re-registration of vehicles which are more than 15 years old.

The proposed hike will be implemented from July 2020. The policy change is aimed at reducing pollution by scrapping older vehicles on the road.

As per Co-head of Research, Tanushree Banerjee, this might come as a welcome relief for automakers who have seen severe fall in sales over the past 1 year.

Signs of Revival in the Auto Sector

Here's what she wrote about it in one of the editions of The 5 Minute WrapUp...

• The upcoming festive season and the recent policy measures might just be the trigger needed to revive the sector.
  
  A leading auto player makes it to my list of 7 stocks to buy.
  
  I believe, rising disposable incomes and aspirations of India's youth, will be the key trends benefiting this market leader in the long run.

As per Tanushree, these are just some of the trends that will play a big part in the Sensex 1,00,000 journey.

Moving on to the news from the pharma sector. As per an article in a leading financial daily, Glenmark Pharma is recalling close to 2.2 lakh cartons of Estradiol Vaginal inserts in the US market due to faulty delivery system.

The company's US-based arm is recalling the lots of the product used for providing relief from menopause symptom.

According to the latest Enforcement Report by the US Food and Drug Administration (USFDA), Glenmark Pharmaceuticals Inc USA is recalling the product in various strengths which was manufactured at company's Goa manufacturing facility.

The ongoing voluntary class II recall is on account of defective delivery system with complaints for difficulty in pushing the plunger of the applicator.

The recall is nationwide within the United States, the USFDA stated.

As per USFDA, a class II recall is initiated in a situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote.

Similarly, the US-based arm of Aurobindo Pharma is recalling one lot of Ranitidine Tablets (150mg) at the retail level and 37 lots of Ranitidine Capsules (150mg), Ranitidine Capsules (300mg) and Ranitidine Syrup (15mg/mL) at the consumer level due to detection of NDMA (Nitrosodimethylamine) impurity in the finished product.

NDMA, a substance that occurs naturally in certain foods, drinking water, air pollution, and industrial processes, has been classified as a probable human carcinogen as per the International Agency for Research on Cancer (IARC).

To date, Aurobindo Pharma USA, Inc. has not received any reports of adverse events related to this recall, the US health regulator said.

Ranitidine is used to decrease the amount of acid created by the stomach and relieves heartburn associated with acid indigestion and sore stomach.

Glenmark Pharma and Aurobindo Pharma opened down by 0.7% and 0.2% respectively.

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