Indian Markets continue losing streak

Wed, 3 Feb 11:30 am

   Previous Close   

   Pre-Open   

   09:30 am   

   01:30 pm   

   Closing   

After opening the day deep in the red, the Indian indices continued the downward trend. Sectoral indices are trading on a discouraging note with stocks from the power, telecom and capital goods sector witnessing maximum selling pressure.

The BSE Sensex is trading down 255 points (down 1%) and the NSE Nifty is trading down 76 points (down 1%). The BSE Mid Cap index is trading down by 1.5% and the BSE Small Cap index is trading down 2.1%. The rupee is trading at 68.19 to the US$.

Automobile stocks are trading on a negative note with Maharashtra Scooters and Escorts leading the losses. As per a leading financial daily, Maruti Suzuki has unveiled the much awaited compact SUV, Vitara Brezza. The company is planning to launch the same before the end of this fiscal. The SUV has been designed and developed in India using Suzuki's global platform and engine.

Maruti Suzuki is banking upon high personalization options in the Vitara Brezza by offering theme based options along with dual-colour scheme and floating roof feel. The SUV is powered by a 200 DDis engine with five-speed manual transmission and meets the offset and side impact crash test that are said to come into India from 2017.

On a separate note, the company had reported a 2.6% YoY decline in its total sales in January at 1,13,606 units. The company said its domestic sales increased marginally by 0.8% YoY during last month while sales of passenger cars declined 1.4% YoY to 87,757 units compared with 89,014 units in the year-ago month. Exports during the month declined 34.6% to 7,223 units as compared with 11,047 units in January 2015. About the domestic performance, the company said that sales would have been higher but for the lesser number of working days in January 2016 that impacted overall production and dispatches.

Maruti Suzuki has said that it is now ramping up its new facilities, products and sales & services outlets. The first car from its new Gujarat plant will roll out next year. The company also said that it is going to double its service network in the next few years.

We believe that the long term prospects for the company remain intact. The company aims to reach sales volume target of 2 million units over the next five years and plans to launch 20 new models during this time. Moreover, the company has also outlined a capex of Rs 35 billion in FY16, which will be towards new product launches, R&D, marketing expenses and maintenance. Presently the stock of the company is trading down by 1.2%.

As per an article in Economic Times, the government has banned duty-free imports of capital goods for power generation and transmission projects under the Export Promotion Capital Goods (EPCG) scheme. The scheme is said to benefit companies like BHEL, Alstom Indian and KEC International.

Under the Foreign Trade Policy, the EPCG scheme allows import of capital goods for preproduction, production and post-production at zero customs duty. However, the government amended this clause on Monday to withdraw the benefit.

These rising imports of capital goods has been a major concern for India in the past (subscription required). The move is likely to provide a boost to domestic manufacturers that had been facing stiff competition from imports.