Sensex Ends 196 Points Lower; Auto and Telecom Stocks Witness Huge Selling

Mon, 29 Jul Closing

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India share markets continued to witness selling pressure during closing hours and ended their day in the red.

At the closing bell, the BSE Sensex stood lower by 196 points (down 0.5%) and the NSE Nifty closed down by 92 points (down 0.8%).

The BSE Mid Cap index ended the day down 0.7%, while the BSE Small Cap index ended the day down 1%.

Sectoral indices ended on a negative note with stocks in the auto sector, telecom sector, and metal sector witnessing most of the selling pressure.

The rupee was trading at 68.83 against the US$.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.03% and the Shanghai Composite was down by 0.12%. The Nikkei 225 was down 0.19%.

European markets were trading on a mixed note. The FTSE 100 was up by 1.05%. The DAX was trading down by 0.18%, while the CAC 40 was down by 0.23%.

Speaking of share markets in general, there's been a heavy sell-off in the Indian stock markets following the Union Budget 2019.

The biggest sellers in the ongoing correction are foreign investors.

Why are foreign investors dumping Indian stocks?

Ankit Shah answers this question in one of the latest editions of The 5 Minute WrapUp. Here's an excerpt of what he wrote...

• One of the main reasons is the higher tax burden on the super-rich in the form of additional surcharge.
  
  All individuals and association of persons (AOPs) come under the purvey of this additional surcharge.
  
  Why does this bother foreign investors?
  
  Here's the thing - several foreign portfolio investors (FPIs) are structured as AOPs, limited liability partnerships and trusts.
  
  As such, if they earn over Rs 2 crore a year, they will be subjected to the higher tax surcharge.

Due to the above development, FPIs have been on a selling spree in the latest month. Have a look at the chart below that shows the net monthly flows of foreign investors in the Indian stock markets:

Foreign Investors Turn Net Sellers After Five Months of Buying

Till around mid-July, foreign investors sold off equities worth Rs 71 billion.

It's certainly not a small amount. But one must also see the sell-off in the larger context - foreign investors have been net buyers of Indian equities in 2019.

Since the start of the year, their net investment in Indian equities is worth Rs 719 billion. They have been net buyers in five out of seven months.

So, the ongoing sell-off should not be seen as foreign investors exiting India for good. They will come back when the valuations get more attractive to compensate for the higher tax burden.

So, look out for the stocks that will rise fast when the tide of the market turns up.

Market participants were tracking Castrol India share price, DLF share price, and Tata Sponge share price as these companies announced their June quarter (Q1FY20) results today.

You can read our recently released Q1FY20 results here: Force Motors, Maruti Suzuki, Vedanta, Tata Motors.

Moving on to the news from the macroeconomic space, as per a leading financial daily, the Government of India may look at listing of Life Insurance Corporation (LIC). The move is part of the Modi Government's next big-bang reforms.

Reports stated that talks on listing of LIC are at an early stage and an IPO may be planned going forward.

As per the news, the government was looking at two different views on the listing of LIC: A public listing will make it transparent and better run while at the same time it will also turn the insurer bottomline-focused and make it hard to bring down life insurance premiums.

LIC holds two-thirds share of India's life insurance market in India.

ICICI Prudential Life Insurance, SBI Insurance, General Insurance Corporation of India and HDFC Life Insurance are some of the companies from the insurance space that have already got listed on the bourses.

How this development pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

In the news from the pharma space, Alembic Pharma share price was in focus today as the company posted a 36.7% year-on-year (YoY) rise in its consolidated net profit for the quarter ended June.

The above performance was driven by robust sales in the US markets.

Net sales were up 10% at Rs 9.4 billion during the quarter.

Pranav Amin, Managing Director of the company said that it was a good quarter for the company backed by exceptional growth in the US market.

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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