Sensex Trades Lower; Realty & Banking Stocks Drag

Tue, 26 Feb 12:30 pm

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Share markets in India are presently trading on a negative note. Barring automobile sector, all sectoral indices are trading in red with realty stocks, banking stocks and power stocks witnessing maximum selling pressure.

The BSE Sensex is trading down by 243 points (down 0.7%), while the NSE Nifty is trading down by 55 points (down 0.5%). The BSE Mid Cap index is trading down by 0.4% and the BSE Small Cap index is trading down by 0.8%.

Speaking of Indian share markets, there has been a steady rise in direct participation by Indians in stock markets as can be seen in the chart below.

Direct Participation in Stock Markets is Growing Steadily

This increased participation has resulted in not just money flowing into mutual funds, but also in the opening of demat accounts.

In fact, the attractiveness of Indian equities and the fact that investing in demat accounts is now very easy has led to a steady rise in accounts.

What more, this trend is all set to continue, as the Indian stock markets scale new highs in the coming years.

The rupee is trading at Rs 71.10 against the US$.

The domestic currency opened 29 paise lower amid reports of fresh geopolitical tensions between India and Pakistan.

In the news from the finance space, DHFL share price is witnessing selling pressure today on reports that rating agency ICRA downgraded the company's commercial papers (CPs) worth Rs 80 billion to 'A2+' from 'A1+'.

However, the company said that the rating action by ICRA is not merit based and it has not taken cognizance of DHFL's intent to extinguish CPs by the end of March.

As per an article in a leading financial daily, the rating agency said that the rating revision considers the moderation in the company's financial flexibility owing to challenges faced in raising funds from traditional bank lines and debt market instruments.

Here's an excerpt from the article:

• ICRA's uncalled-for action triggers question on the motivation of this rating action, especially when the company is slowly getting back to normalcy and has met each of its obligations on time.
  
  This rating action is not merit based at all, especially at a time, when the company has demonstrated its overall commitments including asset sell down like it did with its stake in Aadhar HFC, reducing CP exposures etc.

Last week, shares of the company witnessed buying interest on stake sale reports. As per an article in The Economic Times, Baring Pvt Equity, Bain Capital, and Hero Fincorp are in talks to buy a stake in the debt-laden housing finance company.

The article also reported that the company's promoters are also looking to sell a 10% stake through various ways, including an open offer.

Earlier this month, the company's Chief Executive Harshil Mehta had resigned. However, the company said in its regulatory filing that Harshil Mehta would continue to be associated with the company and shall hold the designation of Executive President - Retail Business with effect from February 14, 2019.

Besides, the board has recommended appointment of Sunjoy Joshi as an Independent Director and Srinath Sridharan as a Non-Executive Director.

Note that, DHFL is facing questions about its financial health after the IL&FS default pushed up the cost of funds for the mortgage lender and made borrowing difficult.

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

DHFL share price is presently trading down by 3.6%.

Moving on to the news from the automobiles sector, Tata motors share price is witnessing buying interest today as the company is planning to launch a premium hatchback model named Altroz in the middle of 2019.

The production version of the Altroz will be unveiled at the upcoming Geneva Motors Show 2019. The upcoming model will redefine the premium hatchback segment for the industry.

The Altroz will be the first product to be engineered on the new ALFA (Agile Light Flexible Advanced) Architecture.

Tata Motors share price is presently trading up by 2.9%.

Earlier this month, the stock of the company was in focus as Tata Motors reported the biggest ever quarterly loss by an Indian company at Rs 269.6 billion for the third quarter ended December 31.

Most of the losses were seen on the back of asset impairment in its British arm Jaguar Land Rover (JLR).

The auto major said profit was impacted by an exceptional item of asset impairment in its British arm Jaguar Land Rover (JLR) of Rs 278.4 billion (3.1 billion pounds).

Total revenue from operations, however, rose 4.4% to Rs 775.8 billion as compared to Rs 743.4 billion in the year-ago period.

Speaking of automobiles sector, all the components of BSE Auto index have fallen. Tata Motors have crashed over 60% and Motherson Sumi Systems have plunged over 40% in past one year. While, Bharat Forge, Ashok Leyland and Maruti Suzuki fell over 30% during the same period.

But, one thing we must keep in mind is that not all auto companies will make money over time. And also, you shouldn't stay away from auto stocks altogether.

Even Tanushree Banerjee, Co-head of research at Equitymaster, believes that there are businesses in this sector that you cannot ignore. She is particularly talking about the blue-chip auto stocks.

Here's Tanushree...

• 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 could be the opportunity long term investors were waiting for.

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

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