Sensex Opens Flat; Energy and Automobiles Stocks Drag

Tue, 23 Jul 09:30 am

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Asian share markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.9% while the Hang Seng is up 0.2%. The Shanghai Composite is trading up by 0.2%. The S&P 500 climbed towards a record high on Monday, supported by expectations of lower interest rates, while investors awaited quarterly earnings from marquee companies Facebook, Alphabet and Amazon later this week.

Back home, India share markets opened the day on a flat note with a negative bias. The BSE Sensex is trading down by 61 points while the NSE Nifty is trading down by 6 points. Both, the BSE Mid Cap index and BSE Small Cap index opened down by 0.1%.

Sectoral indices have opened the day on a mixed note with oil & gas stocks and automobiles stocks witnessing maximum selling pressure. IT stocks and consumer durables stocks have opened the day in green.

The rupee is currently trading at 69.02 against the US$.

The rupee depreciated by 12 paise to close at 68.92 against the US dollar on Monday tracking heavy losses in the domestic equity market and a spike in crude oil prices following Iran's seizure of a British tanker.

Reportedly, a stronger US dollar against major currencies overseas also weighed on the rupee sentiment.

Besides, market participants are not very hopeful about large-scale easing by the Reserve Bank, following RBI Governor Shaktikanta Das's statement, wherein he said a change in monetary policy stance effectively equates to an additional 25-bps rate cut, the reports noted.

At the interbank foreign exchange (forex) market, the domestic currency opened lower at 68.95 per dollar, and further lost ground to touch the day's low of 69.06. The rupee finally settled at 68.92, down 12 paise over its previous close.

The rupee had settled at 68.80 against the US dollar on Friday.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

Moving on to the news from the automobiles sector. TVS Motor Company reported a 3% decline in net profit at Rs 1.42 billion for the first quarter ended June 30. It had posted a net profit of Rs 1.46 billion in the year-ago period.

The company's total income grew 7.2% to Rs 44.7 billion during the quarter ended June 30, as against Rs 41.7 billion during the same quarter last year.

The company performed better and its sales saw a decline of just 1% despite a 9.7% drop in the two-wheeler industry sales in the first quarter, the company stated.

While scooter sales grew by 2.3%, motorcycle sales saw growth of 7.7%, moped sales declined by 21%. The drop in moped sales is on account of the weak sentiments in the rural market, delay in monsoon, and a cost increase due to higher insurance premium imposed last year, the reports noted.

Further, the company said that, it will continue to focus on cost reduction through value engineering, alternate sourcing, and reduction of import content. It will be fully into BS-VI production during the last quarter of the current financial year.

The company's earnings before interest, tax, depreciation and amortisation (Ebitda) has posted a 10.8% rise during the quarter at Rs 3.6 billion compared to Rs 3.2 billion for the same quarter last year.

The Ebitda margin for the quarter increased to 8% compared to 7.7% during the same quarter last year.

TVS Motor Co share price opened the day down by 1.6%.

Speaking of automobiles stocks,  BSE Auto index is down 35% since the start of this year.

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.

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.

There is one thing I know for sure, dear reader. 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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