Sensex Crashes 2,000 Points; Metal, Banking and Automobile Stocks Bleed

Mon, 4 May Closing

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Indian share markets extended losses as the session progressed, tracking weak global cues after the latest flare up in US-China tensions. US President Donald Trump suggested he could lump new tariffs on China.

Trump and US Secretary of State Mike Pompeo blamed China for creating the new coronavirus in a Chinese laboratory.

Selling pressure was also seen as the Modi government extended the nationwide lockdown till 17 May 2020 during the weekend.

Apart from the extension of the lockdown, weak company results, and weak economic data led to today's sell-off.

Many bluechip stocks including Reliance Industries, Hindustan Unilever, and Tech Mahindra reported weak March quarterly results.

Meanwhile, India's March eight core industries growth came in at a fall of 6.5% as compared to 7.1% on a monthly basis.

April Manufacturing PMI stood at 27.4 against 51.8 on a month-on-month basis, pointing to the sharpest deterioration in business conditions across the sector since data collection began 15 years ago.

At the closing bell, the BSE Sensex stood lower by 2,002 points (down 5.9%) and the NSE Nifty closed down by 566 points (down 5.7%).

The BSE Mid Cap index and the BSE Small Cap index ended the day down by 4.3% and 3.1%, respectively.

Barring healthcare stocks, all sectoral indices ended on a negative note, with stocks in the metal sector, banking sector and finance sector, leading the losses.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 4.2% and the Nikkei stood lower by 2.8%.

Speaking of stock markets in general, here's what Tanushree Banerjee wrote about the coronavirus pandemic and its effects on the global economy in one of the editions of The 5 Minute WrapUp...

• ...pandemics have had profound economic effects. But in the longer term, the economic effects can be positive.
  
  Is the assumption that Coronavirus could lead to such a massive social and economic change too farfetched?
  
  Not at all!
  
  In fact, the outbreak of Coronavirus exposed the underbelly of the fragile global supply chains, over dependent on China.
  
  And therefore, global manufacturers are bound to seek geographic diversification of resources and imports.
  
  That could mean a massive change in the way businesses are run.

Tanushree believes that the ongoing market crash could, in fact, be an inflection point for what she calls the irreversible Rebirth of India megatrends.

For bluechip stocks, she believes the time is ripe to begin buying some of the safest bluechips as there is safety in valuations and the market is offering them at deeper and deeper bargains.

The profits of bluechips (BSE 200 companies) are currently at a decade low as can be seen in the chart below.

A Rebound in Profits Overdue?

HYPERLINK "https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=03/13/2020&story=1&title=03132020-A-Rebound-in-Profits-Overdue&utm_source=TM&utm_medium=website&utm_campaign=MCOM&utm_content=market-commentary" https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=03/13/2020&story=1&title=03132020-A-Rebound-in-Profits-Overdue&utm_source=TM&utm_medium=website&utm_campaign=MCOM&utm_content=market-commentary <>

Tanushree is recommending her subscribers, to buy stocks selectively, a few at a time, by taking partial exposures to begin with.

She has already recommended safe bluechips in the past month and there are several more in her watchlist. You can access them here.

And if you are not a StockSelect subscriber, here's where you sign up.

Moving on, gold prices are currently trading up 0.6% at Rs 45,800.

The rupee is currently trading at 75.71 against the US$.

The domestic currency fell sharply today amid broad weakness in other currencies and a big selloff in domestic equities. Strengthening of the US dollar further weighed on the rupee.

After opening at 75.71 per US$, the rupee fell to 75.81 at day's low. In the previous session, the rupee had closed at 75.10 per dollar.

Asian currencies broadly slipped against the US dollar on growing tensions between the US and China over the origin of the coronavirus.

As the Coronavirus pandemic continues to haunt the global financial markets, the rupee has been hit badly.

In a recent article titled The Sharp Fall in Indian Rupee: 6 Points to Know, we dive deeper and look at the factors behind rupee's depreciation.

In news from the automobile sector, shares of automobile companies witnessed huge selling pressure today as many firms reported nil sales in the month of April after a nationwide lockdown kept factories and showrooms shut.

Tracking auto stocks, auto ancillary stocks also fell. Motherson Sumi crashed over 12% while Bharat Forge tumbled 11%.

Maruti Suzuki had zero sales in the domestic market, in April 2020 as all production facilities were closed in compliance with the government orders.

TVS Motors also posted zero sales in the domestic market for April although the company was able to export 8,134 two-wheelers and 1,506 three-wheelers, following resumption of operations at Chennai Port.

Meanwhile, Mahindra & Mahindra (M&M) sold 733 vehicles in the export market during April 2020.

Bajaj Auto reported zero domestic sales in April. Exports of 2-wheelers fell 80% to 32,009 units while exports of commercial vehicles fell 81% to 5,869 units.

The worsening problem forced three industry bodies of carmakers, auto dealers and auto component makers to make a joint representation to resume operations in all zones irrespective of red, orange and green. Their contention is that it is impossible to start manufacturing with partial reopening.

Stay tuned for more updates from this space.

Moving on, shares of breweries & distillery companies were in focus today after the government allowed the opening of liquor shops with certain condition.

According to the Union Home Ministry notification, the liquor shops will be allowed to open in all the three zones. Liquor stores will not be allowed in containment zones across the country.

Only standalone shops will be allowed to sell liquor, malls or liquor shops in shopping complexes will remain closed.

Shares of G.M. Breweries, Associated Alcohols & Breweries, Radico Khaitan, Globus Spirits, United Breweries and United Spirits witnessed buying interest today and ended up in the range of 4-16%.

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

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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