Sensex Slips Over 150 Points; Healthcare & IT Stocks Under Pressure

Tue, 4 Jun 12:30 pm

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Share markets in India are presently trading on a negative note. Sectoral indices are trading mixed with stocks in the IT sector, healthcare sector and oil & gas sector witnessing maximum selling pressure, while power stocks and metal stocks are trading in green.

The BSE Sensex is trading down by 154 points (down 0.4%), while the NSE Nifty is trading down by 58 points (down 0.5%). The BSE Mid Cap index and the BSE Small Cap index are trading on a flat note.

The rupee is trading at Rs 69.25 against the US$.

In the news from the automobiles sector, Mahindra & Mahindra's (M&M) subsidiary - Mahindra Susten, has entered into a partnership with Mitsui & company, of Japan to jointly develop and operate distributed solar power generation projects in India.

Mahindra Susten will continue to hold 51% stake in Marvel Solren, with Mitsui holding the balance equity. Reportedly, Marvel currently operates four distributed solar projects in India with a combined capacity of 16MW.

In other news, M&M sold 19.2 million equity shares to Canada-based institutional investor Caisse de depôt et placement du Quebec (CDPQ) on Monday at Rs 648 per share.

As per an article in The Economic Times, the proceeds of the sale are to be used by the company for its 'operational requirements'.

The shares belonged to M&M benefit trust which is a part of the promoter group and held 103.6 million shares of the company which it had accrued as the outcome of various mergers and schemes of amalgamation.

Here's an excerpt from the article:

• Since the Benefit Trust holds M&M shares for the benefit of its shareholders, it has decided to monetise part of the holding by divesting to a long-term, high-quality investor.

Post the transaction, the trust still holds 84.4 million shares of the company, representing 6.8% of the equity capital of the company.

The company had earlier raised its investment forecast for the next three years by 20% to Rs 180 billion.

M&M share price is presently trading up by 0.3%.

Speaking of automobile stocks, 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.

Moving on to the news from the banking sector, shares of public sector banks (PSBs) are witnessing buying interest today after reports emerged that the government may infuse around Rs 400 billion into state-run lenders in 2019-20 as it looks to strengthen their balance sheets to enable them to step up lending.

Reports state that a plan is being firmed up to help banks expand credit offtake further. This capital will be used to support credit growth and help some weaker banks maintain regulatory norms.

Bank of Baroda share price, PNB share price, and Canara Bank share price were up in the range of 2-3% on back of the above news.

Buying was also seen as bond yields fell ahead of Reserve Bank of India (RBI's) monetary policy decision.

Speaking of RBI's policy, in 2016, the RBI adopted an inflation target of 4% (+/-2%) for next five years under the monetary policy framework.

However, it is evident from the chart below that since August last year, inflation has stayed below RBI's target of 4%.

Actual Inflation has Stayed Below the RBI's Target

Here's what Sarvajeet wrote about it in one of the editions of The 5 Minute WrapUp...

• In December, CPI-based retail inflation declined to an 18-month low of 2.2%.
  
  Currently, the RBI's policy stance was 'calibrated tightening'.
  
  But with the recent inflation data, the MPC may change its monetary stance to 'neutral', even if it does not cut the repo rate.

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

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