Sensex Ends in Red; IT & Realty Stocks Drag

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Indian share markets edged lower in the afternoon session as investors awaited March-quarter earnings results. At the closing bell, the BSE Sensex stood lower by 131 points, while the NSE Nifty finished down 17 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap both finished up by 0.6%. Losses were largely seen in information technology stocks and realty stocks.

RBL Bank share price surged 5.5% after the bank entered the list of India's 10 most valuable banks. RBL Bank stock was trading at new record high of Rs 587.50 on the BSE.

Asian equity markets finished mixed as of the most recent closing prices amid rising worries about geopolitical risks. The Nikkei 225 gained 0.71%, while the Shanghai Composite and the Hang Seng indices declined. They fell 0.52% and 0.02% respectively. European markets are trading lower. The FTSE 100 is higher by 0.07%, while the CAC 40 and DAX are trading lower. They are down 0.42% and 0.14% respectively.

The rupee was trading at Rs 64.44 against the US$ in the afternoon session. Oil prices were trading at US$ 52.63 at the time of writing.

Indian Oil Corporation's share price rose as much as 3.6% to a record high after a report that state-run oil marketing companies were mulling a plan that would allow daily changes in the price of automotive fuels.

In news from economic segment, India's gold import witnessed a fall of about 24% to $23.22 billion in April-February period of the last fiscal, compared to US$30.71 billion in the corresponding period of 2015-16, a development that could ease the worries of rise in current account deficit (CAD).

According to the commerce ministry data, India had witnessed a 43% year on year decline in gold imports in the month of January, 2017, mainly due to demonetization, on subdued demand resulting from cash crunch. India is one of the largest gold importers in the world, and the imports mainly take care of demand from the jeweler industry.

The contraction in the gold imports during April-February helped in narrowing the trade deficit to US$95.2 billion during the 11-month period of 2016-17, as against US$114.3 billion in the same period of the previous fiscal. For the full year 2015-16, CAD stood at US$ 22.1 billion, or 1.1% of GDP, as against US$ 26.8 billion, or 1.3%, in 2014-15.

Meanwhile, developments in three states over the past week have brought the debate on the waiver of farm loans back under the political spotlight. In Uttar Pradesh, the newly-elected Bharatiya Janata Party government under Chief Minister Adityanath recently announced that it would write-off crop loans of up to Rs 1 lakh for about 21.6 million small and marginal farmers.

Meanwhile, Reserve Bank of India Governor Urjit Patel expressed his displeasure at the spate of loan waiver announcements in different states. It would impact credit discipline and incentives for future borrowers to repay. In other words, waivers engender a moral hazard.

However, Vivek Kaul pointed out that if there is a moral hazard for the farmer, there is also one for corporates. And if the RBI governor has pointed out one, he should have pointed out the other as well. Here's a snippet of what he wrote in his Diary titled: Dear Mr Urjit Patel, Have You Ever Heard of Wasim Barelvi?

• "corporate loan write-offs have led to the situation of diminishing bank capital. This has led to the central government having to recapitalise the PSBs over the years. This money is ultimately borrowed by the government and leads to crowding out, higher interest rates and a weaker national balance sheet. All these issues pointed out by Patel in case of farm loan waive-offs apply to corporate write-offs as well."

Moving on to news from automobile stocks. Maruti Suzuki share price finished the trading day on a negative note (down 0.1%) after the company reported 10.29% rise in its production to 153,868 units in March 2017 as compared to 139,516 units in March 2016.

Of total, the company manufactured 38,504 vehicles under mini segment in March 2017, as against 40,783 units manufactured in corresponding month previous year. The company manufactured 72,314 vehicles under Compact segment; 6,948 vehicles under Super Compact and Midsize; 21,843 units under Utility Vehicles segment and 13,789 units under Vans category.

Meanwhile, Tata Motors share price finished up by 1.5% after it was reported that the company's subsidiary -- Jaguar Land Rover (JLR) is reportedly planning to launch 10 new products in India in this fiscal year. The offerings will have a mix of new products, new variants and refreshed models.

Earlier, the company had reported record retail sales of 604,009 vehicles (including sales from our China joint venture) in the FY17, up 16% compared to a year ago, exceeding 600,000 for the first time in the company's history. Retail sales for the Fourth Quarter of FY17 were 179,509 vehicles, up 13% on the same quarter a year ago, and March sales reached 90,838 units, up 21% on March 2016.

However, 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 that banned sale of non-BS-IV compliant vehicle.

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. 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.

Automobile stocks finished the day up by 0.3% on the BSE.

In news from auto ancillary sector, Apollo Tyres has inaugurated its 6th global tyre manufacturing unit and the second one in Hungary, Europe. Located less than 100 km from the capital Budapest, this is the company's first greenfield facility outside India.

The company also recently entered into an agreement with the Andhra Pradesh government for a greenfield manufacturing plant, that will get a host of concessions, including VAT/CST/SGST and power tariff rebate.

The company is expected to invest about Rs 5.25 billion on the plant in the phase one. The company, which has plants in Kerala, Tamil Nadu and Gujarat, and overseas plants added through acquisitions, is seeking to further expand its manufacturing capability.

With South and Western India being a major automotive hub, the new plant will help cater to not just the rapidly growing demand in the local market, but be able to make use of the connectivity to export in the region.

Apollo tyres share price finished the day up by 1.9% on the BSE.

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