Sensex Trades Lower Tracking Weak Global Cues; IT & Energy Stocks Under Pressure

Mon, 6 Dec 10:30 am

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Asian share markets are trading mostly lower today with lingering worries over a US rate hike partly offset by potentially positive news on the severity of the Omicron coronavirus variant.

The Hang Seng is down 1.3% while the Shanghai Composite is up 0.4%. The Nikkei is trading lower by 0.6%.

In US stock markets, Wall Street indices fell in choppy trading on Friday, amid uncertainty around the Omicron coronavirus variant and the path of the Federal Reserve's policy tightening weighed.

November's jobs report showed slower-than-expected job creation last month. However, the unemployment rate fell sharply to 4.2%, better than estimates of 4.5%.

The Dow Jones Industrial Average fell 60 points, or 0.2%. The technology-focused Nasdaq Composite dipped 1.9% or 296 points.

Back home, Indian share markets are trading lower tracking weak global cues.

The BSE Sensex is trading down by 242 points. Meanwhile, the NSE Nifty is trading lower by 65 points.

Tata Steel and L&T are among the top gainers today. Maruti Suzuki, on the other hand, is among the top losers today.

Both, the BSE Mid Cap index and the BSE Small Cap index are trading on a flat note.

Barring realty and capital goods sector, all sectoral indices are trading in red with stocks in the IT sector and energy sector witnessing most of the selling.

Shares of Vodafone Idea and La Opala RG hit their 52-week highs today.

The rupee is trading at 75.21 against the US$.

Gold prices are trading up by 0.1% at Rs 47,961 per 10 grams.

Meanwhile, silver prices are trading up by 0.3% at Rs 61,683 per kg.

Gold is steady today as market participants weighed the prospect of a faster ending to pandemic-era asset purchases by the US Federal Reserve after data suggested the labour market was rapidly tightening.

Crude oil prices rose by more than US$1 a barrel after top exporter Saudi Arabia raised prices for its crude sold to Asia and the United States, and as indirect US - Iran talks on reviving a nuclear deal appeared to hit an impasse.

Speaking of stock markets, India's #1 trader Vijay Bhambwani shares his view on NBFC stocks, in his latest video for Fast Profits Daily.

In the video, Vijay discusses what he thinks about investing in NBFC stocks and how you should approach them in the current market situation.

In news from the electric vehicle (EV) space, as per an article in The Economic Times, India's central bank is considering a proposal from the Niti Aayog to categorise loans to purchase EVs under the priority sector lending (PSL) segment.

If the proposal is accepted, it will help the segment get credit at lower interest rates. Currently, these loans are given under the auto retail category, but lenders are wary about financing purchase of EVs as they are unsure about the risks in a segment which is still in a nascent stage.

Niti Aayog chief executive Amitabh Kant confirmed that the government's policy think tank has given the proposal.

It considered the potential of EVs in reducing emission of greenhouse gases and helping India in its fight against climate change, Kant said.

He said that the inclusion of EVs under the PSL would not only reduce cost of finance but also provide finance to more people, thus increasing penetration of EVs in India.

Kant added that the process for inclusion of EVs under PSL requires extensive deliberations and consultations to have a targeted outcome of increased access and reduced cost of finance to this sector.

Reportedly, manufacturers of electric two- and three-wheelers have also made representations to the banking regulator for PSL status.

Under the PSL framework, 40% of lenders' total credit must be compulsorily loaned to specific sectors. These sectors include agriculture, small businesses, export credit, education, housing, social infrastructure and renewable energy.

Note that EV sales more than tripled to 118,000 units in the first half of the current fiscal, even as a shortage of semiconductors forced automakers to cut down on production of vehicles running on fossil fuels.

Experts say that the increase in EV sales are due to both demand and supply-side factors. Outreach by manufacturers, improved charging infrastructure, price parity with conventional vehicles due to federal incentives and falling battery prices are driving sales.

We will keep you updated on the latest developments from this space. Stay tuned.

Speaking of EVs, have a look at the chart below which shows the massive opportunity in the two-wheeler EVs.

Here's what lead Smallcap Analyst at Equitymaster, Richa Agarwal wrote about this in a recent edition of Profit Hunter:

• In the last five years, two-wheeler sales in India were around 2 crore units per year. Now the sector is cyclical and has been in the downturn for some time. So let's consider a moderate 5% growth for the next 10 years.
  
  By 2030, we are looking at 2-wheeler sales of 3 crore units. Even if one third of this is EV sales, that's 1 crore electric 2-wheelers per year.
  
  In the last 2 years, average electric 2-wheeler sales were 1.5 lakh units. From 1.5 lakh to 1 crore, that's a 66x opportunity in 2-wheeler EVs.
  
  This is an annual growth rate of 52% over next 10 years. It's an almost vertical growth opportunity.

As per Richa, this is like a gold rush. But like in any gold rush, the winners will just be a few.

Moving on to news from the banking sector, Federal Bank share price is in focus today.

Federal Bank has sold its loan exposure in Chenani Nashri Tunnelway (CNTL) to an Ares SSG Capital-backed asset reconstruction company at a discount of 25%.

The Kerala-based lender sold the loan after the road asset's owner, IL&FS Transportation Network (ITNL), failed to close a deal it signed almost a year ago with I Square Capital-backed Cube Highway to sell CNTL.

Federal Bank recovered nearly 75 paise on a rupee by selling its Rs 2.1-bn loan to Assets Care & Reconstruction Enterprise (ACRE).

Cube Highways had offered Rs 39 bn, implying a recovery of nearly 82% for lenders. But the long stop date of the agreement lapsed on 30 August this year, which prompted the private bank to consider an out-of-court resolution.

Shares of Federal Bank are currently trading down by 0.5%.

In other news from the banking space, the Reserve Bank of India (RBI) is likely to keep its key interest rate and monetary stance unchanged when it announces the policy on Wednesday, according to a poll of economists and traders. The RBI Monetary Policy Committee is meeting 6-8 December.

Reports state that the central bank could also provide commentary aimed at reining in bond yields and signal that it's moving to normalise monetary conditions to avoid a future price spiral.

Apart from interest rates, the MPC will deliberate on prices, state of the economy and monetary conditions at its three-day meeting with the threat of economic recovery getting impacted due to new curbs on people movement.

How these developments pan out remains to be seen.

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

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