Selling pressure persists

Fri, 7 Jan 01:30 pm

   Previous Close   

   Pre-Open   

   09:30 am   

   11:30 am   

   Closing   

Indian indices continued to witness selling pressure across all counters during the previous two hours of trade. Stocks from the auto, metal and consumer durable space were the biggest losers.

The BSE-Sensex is currently trading down by around 271 points, while the NSE-Nifty is down by about 82 points. Stocks from the midcap and smallcap spaces are also trading weak with the BSE Midcap and BSE Small cap indices down by 1.41% and 1.52% respectively. The rupee is trading at 45.35 to the US dollar.

Automobile stocks are trading weak with Ashok Leyland, M&M and Tata Motors facing substantial selling pressure. However, Hero Honda is trading marginally in the green. Entry-level sedan segment is witnessing a price war. Dzire, leader in the entry sedan segment, is a hot seller for Maruti Suzuki. It accounts for about 8,000-9,000 units monthly. However, the entry of Toyota Etios at a highly competitive price has prompted Maruti to go for a rejig. The company is looking to downsize the Dzire to under 4 metres to fit the car in the small car definition and avail lower excise benefits. This move will give it room to be more price-competitive. At present, the Dzire has a length of 4.16 metres that puts it in the category of a big car, thus attracting excise duty of 22%.

In reducing the size of the Dzire, Maruti seems to be following the industry trend of downsizing vehicle size to avail of lower excise duty. Tata Motors was perhaps the first one to do this when it reduced its Indigo sedan to less than four metres. The Indigo CS looked like a sedan but came around the pricing of an upper compact car. M&M is also believed to be doing the same with the Logan sedan and the multi-utility Xylo.

Stocks of capital goods companies are currently trading weak led by Jyoti Structures, ABB, Punj Lloyd and Thermax. Wind turbine manufacturer Suzlon Energy has been in the news for a few reasons over the past few days. First, there were reports of the company's promoters selling majority of their stake to Gamesa Corporacion Tecnologica, a Spanish company. However, the company's management soon clarified stating that there was no question of the promoters exiting the company. Nevertheless, the market seem to have not taken this seriously as the company's stock had moved up significantly on that day. In other news, the company has won an Rs 8.7 bn order from the Vedanta Group company Hindustan Zinc. This is towards setting up wind farms in four states with a total installed capacity of about 150 megawatts (MW). The scope of this order includes setting up the capacity as well as operating and maintaining the mills.