Sensex Hits 39,000-Mark for The First Time; Metal & IT Stocks Rally

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Share markets in India are presently trading on a positive note. Barring realty sector, all sectoral indices are trading on a positive note with stocks in the metal sector, IT sector and automobile sector witnessing maximum buying interest.

The BSE Sensex is trading up by 261 points (up 0.7%), while the NSE Nifty is trading up by 69 points (up 0.6%). The BSE Mid Cap index is trading up by 0.9% and the BSE Small Cap index is trading up by 1.3%.

In the news from the aviation space, Jet Airways share price is in focus today as reports state that lenders are proposing a new plan that will fund the debt-laden airline through a rights issue with existing promoters and partners renouncing a portion of their stake.

As per an article in The Economic Times, the banks are proposing that the remaining shareholding of Naresh Goyal and Etihad be transferred to a trust managed by lenders.

Here's an excerpt from the article:

• Under the proposal, which is being discussed internally, the airline will raise Rs 5,135 crore through equity infusion by two new investors. The National Investment and Infrastructure Fund (NIIF) is likely to be one of them. Existing equity holders like Etihad and banks, and possibly Naresh Goyal and his family, will renounce a portion of their rights for the new investors.

As part of the funding plan, two investors will invest Rs 17 billion and Rs 21 billion, respectively. Lenders will put in 8.5 billion and the rest 4.9 billion will come from public shareholders.

Etihad, which is expected to renounce its rights, decided on Sunday that it is no longer interested in increasing its stake in the beleaguered airline. The Tata Group is said to be openly looking at putting in bids for the airline.

Jet's lenders had given Etihad until March 31 to exercise a right of first refusal if a new investor were to come in or rework on their original offer and give a final decision on Jet.

Jet Airways share price is presently trading down by 1.4%.

Speaking of airlines, while looking at the current demand-supply scenario in the aviation industry, it is important to look at how air passenger traffic is growing.

Have a look at the chart below that shows the air passenger growth for the past six months:

Air Passenger Growth is Tapering off

In February, domestic air passenger traffic reported its lowest monthly passenger traffic growth since January 2015. It registered a marginal annual growth of 5.6%.

Similarly, in January, the number of passengers flown by domestic airlines grew at 9.1% YoY, while in December, it increased by 13% YoY. This is way lower than the historical growth rate of 20% between 2014-2018 period.

As per Research Analyst Sarvajeet Bodas, a slowdown in passenger growth is due to several factors. These include frequent flight cancellations due to grounding of fund-starved Jet Airways' aircraft, pilot shortages faced by IndiGo, NOTAMs (notice to airmen) at various airports, and a rise in airfare etc.

In the last 5 years, we saw a surge of middle-class travelling by plane. But when the ticket price goes up, many of them prefer an alternate mode of transportation.

Moving on to the news from the automobile sector, Tata Motors share price is witnessing buying interest today after the company's wholly owned subsidiary Jaguar Land Rover (JLR) said it expects improved financial results for the quarter ended March 2019 (Q4FY19).

As per an article in a leading financial daily, the company continues to execute its product plans and project charge turnaround strategy to deliver 2.5 billion pounds of cash flow improvements by March 2020.

Shares of the company are trading 6% higher on back of the above news.

In another news, Maruti Suzuki is also in focus today. The company reported its highest growth of 4.7% in total sales at 1,862,449 units for FY18-19. In the previous fiscal, the auto company sold a total of 1,779,574 units.

This comprises highest ever domestic sales of 1,753,700 units, up 6.1%, and the export sales were 108,749 units.

However, for the month of March, the company reported 1.6% decline in its total sales at 158,076 units. Sales of passenger cars also declined by 6.9% at 103,030 units in March 2019 as against 110,717 units in the same month year ago.

Maruti Suzuki share price is trading up by 2%.

Speaking of automobiles sector, 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.

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