Auto shifts markets into lower gear

Mon, 26 Jul Closing

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Markets continued to go downhill during the closing hours of trade, thus ending the day significantly in the negative. The BSE Sensex lost around 110 points (down 0.6%) whereas NSE Nifty shed in the region of 30 points (down 0.6%). Fall in BSE Midcap and Small cap indices was even greater, with both the indices losing in the region of around 1% each. Two stocks declined for every one that gained ground on the Sensex today.

Among global indices, while Asian indices closed mostly in the green today, mixed trend is being observed in Europe currently. The rupee was trading at Rs 47 to the dollar at the time of writing.

India specific concerns outweighed the positive global sentiment in the markets today. Last week's stress tests for the European banking system came in much better than expected and this boosted most Asian indices today. However, investors in the Indian markets had a few other news items to ponder over as well and this eventually tilted the scales in favour of bears. Weakness in a few index heavyweights, auto stocks in particular, weighed heavy on the markets today. In fact, stock of Maruti Suzuki, India's largest passenger car manufacturer was taken to the cleaners today, with the stock losing nearly 13% in one trading session alone. Hero Honda was not far behind, losing around 7% of its value at the start of the day. Together, these two stocks accounted for more than 40% of the Sensex losses today. Furthermore, things do not look good on the interest rate front also as the central bank looks all set to hike interest rates when it meets up for a policy review meeting shortly. Suddenly, few dark clouds seem to have formed on the horizon.

Bharat Forge, the auto ancillaries major was also amongst the few companies that announced their quarterly results today. The company put up a much improved performance as compared to same quarter last year. On a standalone basis, revenues rose by 76% as both domestic sales as well as exports logged in good growth rates. Its operating profits more than doubles as it managed to achieve a strong margin expansion. Net profits went up by more than 60 times as it reaped the benefits of greater operating as well as financial leverage. The fact that extraordinary losses were lower also helped matters. Its overseas subsidiaries also did well as its consolidated topline went up by 66% YoY and net profits came in the positive as opposed to a loss during same quarter last year. The quarter has been quite encouraging for the company with growth coming in from all geographies across automotive and non automotive business. The stock however closed lower by around 2% today.

FMCG major Dabur was another company that announced its first quarter results today. Consolidated net profits for the company were higher by 21% YoY and this came about on the back of a similar topline growth. As per a daily, the growth was driven by strong volume growth across categories like hair oils, skin care, health supplements and home care. What more, the company's international business registered a topline growth of 29% YoY led by Nigeria, Egypt and North Africa. The company's board has also recommended issuance of one bonus share against each share held. The stock though closed lower by around 4% today, seemingly on the back of general selling pressure.