Sensex Opens Flat; Metal and Realty Stocks Lag

Fri, 7 Feb 09:30 am

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Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.8% while the Hang Seng is down 0.8%. The Nikkei 225 is trading down by 0.2%. US stocks gained for a fourth straight session on Thursday and Wall Street's main indices hit record highs as concerns eased over the economic fallout from the coronavirus outbreak in China.

Back home, India share markets opened on a flat note. The BSE Sensex is trading down by 34 points while the NSE Nifty is trading down by 15 points. The BSE Mid Cap index opened up by 0.1% while BSE Small Cap index opened up by 0.4%.

Sectoral indices have opened the day on a mixed note with consumer durables stocks and power stocks witnessing buying interest. Metal and realty stocks are trading in red.

The rupee is currently trading at 71.26 against the US$.

The rupee on Thursday rose by 6 paise to close at 71.19 against the US dollar after the RBI left the policy rates unchanged but maintained its accommodative stance to boost growth.

Investor sentiments strengthened after the Reserve Bank of India signaled to continue with accommodative stance, while low crude oil prices, weakening of the US dollar and gains in domestic equity market supported the domestic currency.

At the interbank foreign exchange market, the local currency opened on a positive note at 71.22.

During the day, it saw a high of 71.11 and a low of 71.30. The Indian currency finally settled at 71.19, higher by 6 paise against its previous close.

The domestic unit had settled at 71.25 against the American currency on Wednesday.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

Moving on to the news from the automobiles sector. As per the ratings agency ICRA, electric vehicle (EV) penetration is expected to remain under 5% over the next five years, despite the aggressive policy push and drive by automakers.

The agency has blamed this to the higher vehicle cost due to costly imported batteries, weak public charging infrastructure and inadequate government support. It added being a price sensitive market and the resultant low volume, economies of scale are crucial for an OEM to price its EVs competitively.

It highlighted that the government recently sanctioned 2,636 charging stations, under the Fame 2.0 to incentivize investments in the space, which if fructified, will boost EV acceptance over the long-term.

It asserted that government support remains crucial to support EV growth. Assuming subsidy of Rs 1,50,000/vehicle, even just 1% of total domestic passenger vehicle sales in FY20 will need about Rs 4.5 billion in subsidy support and about Rs 13 billion over next three years.

Further it mentioned that at present, EV subsidy priority is towards commercial fleet/taxi operators and less on personal car buyers.

Also, high upfront cost of an EV and the higher ownership cost are expected to favour traditional fuel-fired vehicles in the medium term, even in the commercial taxi segment.

Besides, it can be noted that globally, EV penetration has been enabled by regulatory support and wider availability of charging stations, with the US and China being the best examples, where there is the mandatory zero emission rules, and restricted licensing for new petrol/diesel vehicles, respectively.

However, the recently announced government incentives may give a boost to EV sales.

As per co-head of research Tanushree Banerjee, electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

Despite the slowdown in the auto sector, the sales volume of EVs are growing at a robust pace.

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

How this pans out going forward remains to be seen. Meanwhile, we will keep you updated on the developments from this space.

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

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