Sensex Opens Marginally Down; Banking Stocks Drag

Tue, 14 Jan 09:30 am

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Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.7% while the Hang Seng is up 0.1%. The Shanghai Composite is trading down by 0.1%. In overight trade, the Dow Jones Industrial Average index rose 0.3%. The S&P 500 index gained 0.7% and the Nasdaq Composite index was up 1%.

Back home, India share markets opened marginally down. The BSE Sensex is trading down by 65 points while the NSE Nifty is trading down by 6 points. Both, the BSE Mid Cap index and BSE Small Cap index opened up by 0.3%.

Sectoral indices have opened the day on a mixed note with oil & gas stocks and metal stocks witnessing buying interest. Banking stocks and capital goods stocks are trading in the red.

The rupee is currently trading at 70.79 against the US$.

In the news from the economy. Retail inflation soared to a five and a half year high of 7.4% in December 2019, with the shortage of onions driving the surge.

According to information released by the National Statistical Office on Monday, retail inflation based on the Consumer Price Index was only 2.1% in December 2018 and 5.5% in November 2019.

The last time retail inflation was this high was the 7.4% recorded in July 2014, just after Prime Minister Narendra Modi began his first term in office.

The hike in inflation in the 'vegetables' category was at 60.5% last month in comparison to December 2018. Onion prices were above the Rs 100 per kg mark in many major cities last month, due to a 26% fall in production.

Overall, food inflation rose to 14.1% in December as against a negative rate of -2.7% in the same month of the previous year. It was also significantly higher than the 10% recorded in November 2019. Along with vegetables, high prices of pulses, meat and fish also contributed to last month's spike.

The Centre has mandated the Reserve Bank of India to keep inflation in the range of 2-6%.

The RBI, which mainly factors in the CPI based inflation, is scheduled to announce its next bi-monthly monetary policy on February 6.

In its December policy, the central bank, which had been reducing rates, had kept the repo rate unchanged citing inflationary concerns.

Moving on to the news from the automobile sector. Amid low consumer sentiments, weak rural demand and economic slowdown, the Society of Indian Automobile Manufacturers (SIAM) in its latest data report said that the automobile industry recorded its worst-ever sales decline in two decades in 2019, with all vehicle segments reported de-growth last year.

As per the report, overall wholesale of vehicles during the year across categories, including passenger vehicles, two-wheelers and commercial vehicles, fell 13.8% in 2019 at 2,30,73,438 units as against 2,67,58,787 units in 2018.

The previous lowest was recorded in 2007 when overall sales had declined by 1.4%.

Segment wise, total passenger vehicle sales during 2019 declined 12.8% to 29,62,052 units as against with 33,94,790 units a year ago, while two-wheeler sales declined 14.2% last year to 1,85,68,280 units as compared with 2,16,40,033 units in 2018.

Likewise, total commercial vehicles fell 15% to 8,54,759 units as against 10,05,502 units in 2018.

According to SIAM, domestic passenger vehicle sales declined 1.2% to 2,35,786 units in the month of December as compared to 2,38,753 units in the year-ago period.

Besides, domestic car sales were also down 8.4% to 1,42,126 units during December 2019 as against 1,55,159 units in December 2018.

Notably, auto sector is the biggest victim of economic slowdown. However, instead of turning away from the sector investors should start looking out for good investing opportunities now.

The BSE Auto index has entered the greed phase and will stay there for 32 months. There is a big money-making opportunity out there. Watch this video where Apurva Sheth explains it all to you.

Speaking of automobile sector, India's automobile industry is bracing itself for a unique challenge in the first quarter of 2020 when the transition of BS-IV to BS-VI emission norms has to be made at the stroke of midnight on 31 March 2020.

No BS-IV vehicle could be sold from 1 April 2020, which means automakers would have to reduce their inventory on BS-IV models to zero by then.

The exercise is likely to see companies show extra caution in dispatching cars to dealers in the next few months, which may cause a continuation of the decline in wholesale numbers.

However, despite the slowdown in the auto sector, the sales volume of electric vehicles (EVs) are growing at a robust pace.

Sale of Electric Vehicles in India Projected to Go Up 10x in the Next Two Decades

Electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

The recently announced government incentives will give a further boost to EV sales.

The coming one year will be a real test for India's auto companies.

It will also tell us if this slowdown is temporary or if there has been a structural change in the sector.

In our view, companies in the sector adapting their business models to the rapidly changing environment will survive and thrive.

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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