Sensex Opens Flat; Realty and Automobile Stocks Lose

Tue, 2 Jul 09:30 am

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Asian share markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.1% while the Hang Seng is up 1.2%. The Nikkei 225 is trading up by 0.1%. US stocks climbed but finished off earlier highs, led by gains in technology stocks on optimism for progress in US-China trade talks and signs of a likely reprieve for Chinese telecom company Huawei.

Back home, India share markets opened the day on a flat note. The BSE Sensex is trading up by 21 points while the NSE Nifty is trading up by 8 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.2% and 0.1% respectively.

Sectoral indices have opened the day on a mixed note with automobile stocks and realty stocks leading the losers. Oil & gas stocks and power stocks have opened the day in green.

The rupee is currently trading at 69 against the US$.

In the news from the economy. According to data released by the Ministry of Commerce and Industry, the growth of eight core sectors in India improved to 5.1% in May, helped by rise in output in steel and electricity.

The eight core sector industries, coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity expanded by 4.1% in May last year.

During April-May, the cumulative growth of these industries, which accounts for almost 41% of the weight of items included in the Index of Industrial Production (IIP), was 5.7% compared to 4.4% during the same period last year.

Meanwhile, the growth rate for the index of eight core industries for April 2019 has been revised upward to 6.3% from 2.6% due to upward revisions in output of coal, crude oil, steel, cement and electricity, the data showed.

Sector wise, steel industry registered a double-digit growth of 19.9% in the month of May 2019 as compared to last year.

Electricity sector posted a year-on-year growth of 7.2% during last month, which was the highest in last six months, i.e. since November 2018.

Cement and Coal sectors reported moderate growth of 2.8% and 1.8%, respectively. The production of natural gas remained unchanged in the month of May 2019.

However, the production of crude oil, refinery products and fertilizers sectors declined by (-) 6.9%, (-) 1.5% and (-) 1% respectively in the month of May 2019 over May 2018.

Notably, India's slowing economy has emerged as a key concern for the new government. Goods and services tax (GST) collections dipped below Rs 1 trillion in June while manufacturing turned soft in May, highlighting the challenges that confront finance minister Nirmala Sitharaman as she readies to present her first budget on Friday.

Will the upcoming budget change the course of Indian economy? We will wait and watch.

However, amid these macroeconomic uncertainties, co-head of research, Tanushree talks about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times...

You can read more on these 3 opportunities here: Defence boom, Infrastructure sector reforms and Electric Vehicle Disruption.

Moving on to the news from the automobiles sector. Tata Motors reported 14% decline in total sales at 49,073 units in June.

The company had sold a total of 56,773 units in the same month last year.

Passenger vehicle (PV) sales in domestic market dropped by 27% to 13,351 units as compared with 18,213 units in June 2018 on weaker customer sentiments due to liquidity crunch.

On the commercial vehicles (CV) front, domestic sales were at 35,722 units as against 38,560 units in the same month last year, down 7%.

Exports (CV and PV) in June 2019 stood at 2,702 units, lower by 48% over June 2018, due to drop in retails in Bangladesh, Nepal and the Middle East markets.

The slowing down of the economy is hurting overall customer sentiments and causing an impact on demand for fresh vehicles, the reports noted.

Meanwhile, Hero MotoCorp reported 12.5% decline in total sales at 6,16,526 units in June.

The company had sold 7,04,562 units in the same month last year.

Notably, the Indian auto sector is in the middle of a storm.

Passenger sales fell 20.5% in May 2019 compared to May 2018. This follows a 17.1% year on year decline in April as well.

Never Ending Woes For The Automobile Sector

The decline in May is the worst seen since 2001.

Multiple factors have affected the auto sector of late.

The liquidity crisis faced by NBFCs, regulatory changes leading to increased costs, new emission norms... they have all taken their toll.

Also, this sector is ripe for disruption with electric vehicles and ride sharing applications.

Maruti, India's largest car maker announced it would stop making diesel cars from April next year.

The coming one year will be a real test for India's auto companies.

It will also tell us if this slowdown is temporary or if there has been a structural change in the sector.

Only the ones adapting their business models to the rapidly changing environment will survive and thrive.

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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