Sensex Continues to Trade Firm on Strong FPI Inflows

Mon, 3 Apr 11:30 am

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After opening the trading day on a firm note, Indian share markets continue to trade strong in the morning session. Gains are largely seen in consumer durable stocks and capital good stocks. Meanwhile, stocks in information technology sector and realty sector are trading in the red.

The BSE Sensex is trading higher by 164 points and the NSE Nifty is trading higher by 32 points. The BSE Mid Cap index is trading up by 0.6% while the BSE Small Cap index is trading up by 1.1%. The rupee is trading at 64.84 to the US$.

Most Indian automobile makers rallied after reporting March sales figures on 1 April 2017. M&M share price was trading on an optimistic note after it reported 6% rise in total sales to 56,031 units in March as against 52,718 units sold in the same month last year.

In domestic market, sales were up 9% at 53,322 units last month compared to 48,967 units in March 2016. Sale of commercial vehicles rose 31% to 22,908 units in March while the medium and heavy commercial vehicles segment grew 67% in the same period.

Further, sales in both the utility vehicles and passenger vehicles segments slipped 6%. For the entire fiscal, the company's total sales grew by 3% to 5,06,625 units as against 4,94,098 units in 2015-16.

Sentiments also remained optimistic after it was reported that M&M is planning to invest US$ 1 billion into its Korean subsidiary SsangYong Motor Company over the next four years. SsangYong aims to develop electric vehicles (EV) jointly with M&M and launch them in 2019. Besides there is also a plan to enter the US market around the same time.

Notably, the automotive industry continues to face several external challenges, the latest being the ban on sale of BS-III vehicles that has derailed many planned operations. Car makers like Tata Motors and Maruti Suzuki posted tepid sales growth because of an apex court ruling than banned sale of non-BS-IV compliant vehicles.

Two-wheelers feel the biggest BS-III ban pinch

However, as per Society of Indian Automobile Manufacturers' (SIAM) estimates, the inventory of BS-III compliant vehicles stand at 8,23,000 of which a lion's share of 81% belongs to two-wheelers. In this regard, our auto analyst, Kunal Thanvi, has put up a detailed analysis of the impact on the ban on BS-III vehicles on auto stocks in the Premium edition of The 5 Minute Wrapup.

The earnings of two-wheeler manufacturers are likely to be affected by the large discounts on units sold as well as losses arising from the stock that remains unsold.

M&M share price is trading up by 0.4% on the BSE.

Moving on to the economic news. According to an article in The Financial Express, foreign investors bought a net US$8.85 billion in Indian shares and debt last month, as prospects of additional reforms and hopes for an improving economy bolstered sentiments.

Reportedly, net investment by FPIs in the capital markets reached a little over Rs 490 billion in 2016-17. In FY17, FPIs invested a net sum of over Rs 560 billion in equities while they pulled out Rs 70 billion from the debt market.

According to depository data, foreign portfolio investors (FPIs) infused a net sum of Rs 313.3 billion in equities in March and another Rs 256.2 billion in the debt segment, translating into a combined inflow of Rs 569.4 billion (US$8.7 billion).

The FPI flows stood strong even as domestic institutional investors went for profit booking when the markets surged towards new highs. Foreign investors pumped in a record Rs 570 billion in Indian capital markets in March, buoyed by expectations that BJP's victory in assembly polls is a precursor to bolder, reformist policies.

The growth in FPI inflows was seen on the back of the political outcome in March, especially the result in UP, lifted concerns over political stability and ongoing reforms. Most FPIs are now of the view that the ruling party at the Centre is on course to push the reform agenda.

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