Sensex Opens Lower; Consumer Durables Stocks Fall

Tue, 9 Jul 09:30 am

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Asian share markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.5% while the Hang Seng is down 0.8%. The Nikkei 225 is trading up by 0.2%. US stocks fell on Monday as Apple shares dropped following a broker downgrade and investors continued to weigh chances of an aggressive interest rate cut by the Federal Reserve later this month.

Back home, India share markets opened the day on a negative note. The BSE Sensex is trading down by 239 points while the NSE Nifty is trading down by 45 points. Both, the BSE Mid Cap index and BSE Small Cap index opened down by 0.1%.

Barring oil & gas stocks, all sectoral indices have opened the day in red with consumer durables stocks and realty stocks leading the losers.

The rupee is currently trading at 68.64 against the US$.

The rupee on July 8 declined by 24 paise to close at 68.66 against the US dollar, cutting short its three-day winning run, due to a massive selloff in equities and weakening expectations of a rate cut by the US Federal Reserve in near future.

Foreign institutional investors pulled out Rs 4 billion on July 8, hitting the rupee sentiment.

Emerging market currencies took a hit after the US job data fueled expectations that the Federal Reserve will not cut interest rates quickly in near future. The US dollar traded strong against its rivals, and Asian currencies.

Investors sentiment was subdued on concerns that increased surcharge on super-rich could affect foreign funds investing in India, which could lead to flight of foreign funds from the domestic markets, reports noted.

The rupee opened lower at 68.49 from the last close of 68.42 at the inter-bank foreign exchange market.

The local unit lost further ground to touch a session low of 68.76 before closing at 68.66, marking a fall of 24 paise over its previous close. The rupee on on July 5 settled 8 paise higher at 68.42 against the dollar.

Rupee follows the path of emerging-market currencies, as markets start to rethink the extent and speed of rate cuts by the Federal Reserve. Regional stocks also traded weaker on Monday as budget blues continued.

While the markets gave a thumbs-down to the Budget, Tanushree Banerjee's Rebirth of India call remains intact.

She explains how investors could continue to make the most of the irreversible trends and India's US$ 5 trillion potential.

Moving on to the news from the automobiles sector. Automobile stocks fell yesterday with Nifty Auto down as much as 2.9%.

The beleaguered sector was unimpressed with the conspicuous absence of measures in the budget to alleviate its stress.

Maruti Suzuki and Hero Motocorp were the top losers, dropping 4% each and hitting their 2-year and 4-year lows, respectively.

Maruti's June auto sales declined for the 5th consecutive month, and Hero Motocorp witnessed a drop of 12.5% yoy in sales in June 2019.

The past months have been difficult for the sector owing to weak demand and liquidity issues. The sector expected some sops from the Union Budget on Friday. The budget did address liquidity concerns in the system but failed to impress the industry with specific measures.

Auto manufacturers are now hoping for a normal monsoon and expect revival in sales as the liquidity crunch gets addressed.

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.

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