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Sensex Ends 269 Points Higher; Consumer Durables & Healthcare Stocks Witness Buying
Fri, 28 Dec Closing

Indian share markets traded on a positive note throughout the day and ended on a strong note. Gains were seen in the consumer durables sector, healthcare sector and finance sector, while telecom stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 269 points (up 0.8%) and the NSE Nifty closed higher by 80 points (up 0.7%). The BSE Mid Cap index and the BSE Small Cap index ended the day up by 0.9%.

The rupee was trading at 70.00 against the US$.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was up by 0.1% and the Shanghai Composite was up by 0.4%. The Nikkei 225 was down 0.3%.

In the news from global financial markets, Japan's Nikkei fell today as energy-related shares sunk, leading the index to its first annual loss in seven years.

Energy-related shares weighed on the broader market after oil prices fell steeply overnight on worries about oversupply and an increasingly muddled outlook for global growth.

Earlier this month, Nikkei witnessed selling pressure and hit 9-month low on the back of a sell-off seen in US stock markets as the US Federal Reserve made a dovish stance in its monetary policy.

As expected, the US Federal Reserve raised interest rates. It, however, forecasted fewer rate hikes next year.

It further signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

The central bank said the US economy has been growing at a strong rate and the job market has continued to improve.

The rate hike, the fourth of 2018, lifted the target range for the Fed's benchmark overnight lending rate by a quarter of a percentage point to a range of 2.25% to 2.50%.

The decision to raise borrowing costs again is likely to anger US President Donald Trump, who has repeatedly attacked the central bank's tightening this year as damaging to the economy.

The Fed has been raising rates to reduce the boost that monetary policy gives to the economy, which is growing faster than what central bank policymakers view as a sustainable rate.

The Fed also made a widely expected technical adjustment, raising the rate it pays on banks' excess reserves by just 20 basis points to give it better control over the policy rate and keep it within the targeted range.

In the news from the automobiles sector, Maruti Suzuki share price was in focus today. Reportedly, the auto company is planning to shut its diesel engine assembly plant in Gurgaon.

As per an article in The Economic Times, the Suzuki Motor Corp. unit might either convert the diesel engine line in its Gurgaon plant to produce petrol engines or to add an assembly line for petrol engines at it plans in Manesar.

The company currently assembles a 1.3-litre diesel engine sourced from Fiat in Gurgaon. The Gurgaon plant also makes an 800cc diesel engine, which has been developed in-house and is currently offered on Maruti's Super Carry light truck.

The diesel assembly line in Gurgaon has a capacity of approximately 170,000 engines per annum. Maruti plans to replace the 1.3 litre engines with 1.5 litre engine.

To know more about the company, you can read Maruti Suzuki Q2FY19 Result Analysis and Maruti Suzuki Annual Report on our website.

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.

Bluechip Auto Are Stocks Way Off Their Valuation Peaks


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.

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

Moving on to the news from the banking sector, shares of public sector undertaking (PSU) banks were witnessing buying interest today, trading higher for the third straight day on reports that the central government would release Rs 286.15 billion before the end of this month towards a fresh tranche of funds to recapitalize state-run banks.

Canara bank, Vijaya bank, PNB, and Syndicate bank were up in the range of 2% to 4%.

Earlier this year, the government pumped in Rs 113.4 billion into five PSBs, including PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank to improve their financial health.

However, using recapitalization bonds can only act as a short-term measure to the crisis afflicting Indian public-sector banks today. Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Our big picture editor, Vivek Kaul, talks about moral hazard risk arising out of recapitalization. He writes:

  • "If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly."

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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