Sensex Ends 51 Points Higher; Auto and Banking Stocks Witness Buying

Fri, 26 Jul Closing

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Indian share markets witnessed buying interest during closing hours today and ended their volatile day marginally higher.

Gains were seen in the auto sector and banking sector.

At the closing bell, the BSE Sensex stood higher by 51 points (up 0.1%) and the NSE Nifty closed higher by 32 points (up 0.3%).

The BSE Mid Cap index ended up by 0.5%, while the BSE Small Cap index ended the day up by 0.2%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng stood down by 0.69% and the Nikkei was trading down by 0.45%, while the Shanghai Composite was trading up by 0.24%.

European markets were trading on a positive note. The FTSE 100 was up by 0.48%. The DAX was trading up by 0.39%, while the CAC 40 was up by 0.51%.

The rupee was trading at 68.95 to the US$ at the time of writing.

Market participants were tracking Bajaj Auto share price, JSW Steel share price, and Force Motors share price as these companies announced their June quarter (Q1FY20) results today.

You can read our recently released Q1FY20 results: Zee Entertainment, SKF India, Torrent Pharma, Monsanto India, TVS Motors, Jyothy Labs, DCM Shriram, United Spirits.

In the news from automobile sector, Maruti Suzuki share price was in focus today as the company reported a 27.3% year-on-year (YoY) drop in net profit at Rs 14.3 billion for the June quarter on weak volumes and higher depreciation expenses.

Net sales for the quarter fell 14.1% to Rs 187.3 billion on a yearly basis.

The company sold a total of 4,02,594 vehicles during the quarter, down 17.9%.

Sales in the domestic market stood at 3,74,481 units, down 19.3% YoY. Exports stood at Rs 28,113 units.

The company's margins for the quarter came in at 10.4%.

Employee benefit expense increased by 12.27% to Rs 8.5 billion. Depreciation and amortisation expense jumped to Rs 9.1 billion from Rs 7.2 billion during the same period.

The company said that higher sales promotion expenses, depreciation and low capacity utilisation weighed on the numbers. Lower advertisement expenses, cost reduction efforts, favourable exchange movement and favourable commodity prices, were helpful.

Speaking of the auto sector, note that the past months have been difficult for the auto 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.

Moving on to the news from the banking sector, Punjab National Bank share price was in focus today as the lender posted a profit of Rs 10.18 billion in June quarter, compared to a loss of Rs 9.4 billion in the year-ago period and loss of Rs 47.4 billion in the previous quarter.

The impressive performance here was driven by a sharp fall in provisions, although asset quality deteriorated further.

Net interest income tumbled 11.7% to Rs 41.4 billion compared to the previous year with tepid loan growth of 1.55% YoY.

Provisions at the end of June quarter stood at Rs 20.2 billion, falling significantly by 80% compared to the previous quarter and 65% compared to Q1FY18.

Provision coverage ratio improved marginally to 74.63% in Q1FY20, from 74.5% in Q4FY19.

But asset quality weakened further sequentially. Gross non-performing assets (NPA) as a percentage of gross advances in Q1 increased 99bps to 16.49% and net NPA as a percentage of net advances rose 61bps to 7.17% compared to March quarter.

PNB reported fresh slippages for June quarter at Rs 47.1 billion, which were lower compared to Rs 67.1 billion posted in the previous quarter. Hence, annualised fresh slippage ratio declined to 4.47% against 5.86% on sequential basis.

Other income (non-interest income) grew by 6% YoY to Rs 20.7 billion, but operating profit fell 17% to Rs 34.8 billion in quarter ended June 2019.

Sunil Mehta, MD & CEO of the bank, commented that the bank expects to bring gross NPAs below 12% by the end of the year and FY20 will be a year of profitability for the bank.

He further added that the bank is not looking at distress sale of non-core assets and will go in for sale of non-core assets when market conditions are right.

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

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