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Sensex Ends Flat; Telecom & Energy Stocks Witness Selling
Mon, 31 Dec Closing | Monish Vora, TM Team

Indian share markets traded on a volatile note throughout the day and ended their session on a flat note. Sectoral indices ended on a mixed note with stocks in the metal sector and healthcare sector witnessing buying interest while telecom stocks and energy stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood lower by 8 points and the NSE Nifty closed up by 3 points. The BSE Mid Cap index ended the day up by 0.5% and the BSE Small Cap index ended up by 0.7%.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was up by 1.3% and the Shanghai Composite was up by 0.4%. The Nikkei 225 was down 0.3%.

The rupee was trading at 69.78 against the US$.

From the pharma space, Cadila Healthcare share price was in focus today as the company received final nod from the US health regulator to market Clindamycin Phosphate and Benzoyl Peroxide gel which are used in the treatment of acne.

Cipla share price was also in focus today as, according to a report by the US health regulator, the drug maker is recalling 4,800 bottles of Nevirapine extended release tablets used for the treatment of human immunodeficiency virus (HIV) from the American market.

In the news from the IPO space, the government on Friday said that six public sector undertakings (PSUs) are set to come out with their initial public offer (IPO).

As per the announcement, the six firms to come up with IPOs are - Telecommunication Consultants (India) (TCIL), RailTel Corporation India, National Seed Corporation India (NSC), Tehri Hydro Development Corporation (THDCIL), Water & Power Consultancy Services (India) (WAPCOS) and FCI Aravali Gypsum and Minerals (India) (FAGMIL).

This comes as the Cabinet Committee on Economic Affairs has given approval to list seven CPSE on the stock exchange through IPO. The CCEA in its meeting held on Thursday decided that six PSUs will go in for IPO.

Speaking of IPO's, according to an article in The Economic Times, Indian stock exchanges ranked second globally in terms of IPOs, raising US$ 5.52 billion from 161 offerings till November this year. The US ranked first, raising US$ 60 billion from 261 IPOs.

Here's an excerpt from the article:

  • According to the report, the drop in IPOs could be attributed to reasons such as significant corrections in the stock markets in mid-cap and small-cap stocks.

    Further, the amount of volatility has increased due to uncertainties around global growth compounded by the ongoing US-China trade wars.

    In addition, there are a number of macroeconomic factors which are contributing uncertainties such as liquidity crises among non-bank lenders in India triggered by defaults done by a leading infrastructure finance company IL&FS and currency volatility (depreciation of the rupee), the report added.

With so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Moving on to the news from the automobiles sector, as per the government, India's automobile sector is expected to attract US$ 8-10 billion more in local and foreign investments by 2023.

This comes as the government and the automotive sector also articulated their objectives for the future of the industry through the Automotive Mission Plan 2016-26.

The Ministry said that the plan envisions that by the year 2026, India will be the third in the world after China and USA in engineering, manufacturing and export of vehicles and auto components.

The Year End Review 2018 of the Ministry of Heavy Industries and Public Enterprises, which made the above projections, said the growth of the auto industry in India since the early 1990s is an example of how industrial prowess supported by progressive policies and national economic growth can yield rewards to all stakeholders.

Note that the sector had attracted US$ 16.5 billion in FDI between April 2000 and December 2016.

It would be interesting to see how the above projections turn out. Meanwhile, we will keep you updated on all the developments from this space.

Also, speaking of automobiles sector, the ratings agency ICRA last week said that two-wheeler sales in India will to grow at 8-10% in 2018-19 amid concerns over increasing cost of acquisition disturbing positive demand drivers.

Supported by growing per capita income, improved farm sentiment following near-normal monsoon over the last three financial years, higher minimum support price (MSP) and farm loan waiver in select states, the domestic two-wheeler industry volumes will grow.

Note that, the sector has reported 11.15 year-on-year volume growth in April-October 2019.

This is despite some one-off adverse events during the period, increase in insurance premium across the country, floods in Kerala in August 2018 and regulatory changes in West Bengal mandating two-wheeler sale to only valid licence holders in July 2018.

Further, as per ICRA, the credit profile of two-wheeler makers remains strong, supported by healthy capacity utilisation (77-80 per cent), high profitability and strong balance sheet across most original equipment manufacturers (OEMs).

However, on the flip side, it said concerns which could moderately disturb the positive demand drivers are increasing cost of acquisition of a two-wheeler due to rising raw material prices and hike in insurance premiums, rising interest rates and somewhat unevenly distributed monsoon in FY2019.

Speaking of the growth of the Indian economy, one of the major indicators of this is the volume of vehicles sold.

Auto Volumes are a Good Indicator of Economic Growth

For the first nine months of FY18 at least, the auto industry did well to grow in double digits after some lean years.

Vehicle sales grew by 11.3% YoY during this period. The best performing of the lot were commercial vehicles (CVs), volumes of which grew by 15% YoY. Two-wheelers also did well, growing by around 12% YoY.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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