Markets slump into the red

Fri, 1 Aug Closing

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Marking the biggest single-day fall since last a month, the Indian benchmark indices have slumped into the red, closing the day on a poor note. The equity benchmark indices widened losses especially in the post afternoon session particularly on account of weak global cues. All the sectoral indices have closed on a pessimistic note with consumer durables and oil and gas witnessing maximum selling pressures for the day. Both the BSE Mid Cap and the BSE Small Cap indices too lost steam and were down by 0.8% and 0.9% respectively. The BSE-Sensex closed lower by 414 points. The NSE-Nifty too was seen down by 119 points.

On the global front, the Asian indices have closed the day on a negative note. The European indices too have witnessed a poor performance. The rupee was trading at Rs 61.17 to the US dollar at the time of writing.

Barring few stocks such as TVS Motor Company, Maruti Suzuki and Maharashtra Scooters, automobile stocks today have closed the day on a weak note. Stocks like Escorts and Mahindra & Mahindra (M&M) have underperformed and lead the pack of losers. According to a leading daily, Tata Motors is set to launch a passenger car this month, the first new offering in four years. Now this is an important step in a bid to gain the lost market share and recoup losses in the domestic business. Economic slowdown had impacted the domestic business of the company. Tata Motors has reported losses in four of the last eight quarters and the new vehicle launch is the key towards revamp of the company's domestic strategy. While the company dominates the trucks and buses segment, the passenger cars have failed to make a cut. The industry data reveals that Tata's domestic car sales fell 39% YoY as at the end of March 31, 2014 and its market share also dropped to 4.2% at the end of June 2014 from 10.2% two years ago. With trucks and buses sales declining, the company has shifted focus to cars to combat the domestic business headwinds. The stock closed down today by 1.5%.

As per a leading financial daily, with the drop in losses on the sale of diesel to all-time low of Rs 1.33 per litre, the likelihood of deregulation of diesel sooner has increased. As per the official statements, the difference between the cost of diesel production and the retail selling price has narrowed to Rs 1.33 per litre from Rs 2.49 last month. Thanks to the softening of international oil rates and continuation of monthly price increases by the new government, the rates have observed a fall. It is said that the monthly increases had trimmed losses to less than Rs 3 per litre in May last year before a fall in rupee value led to losses on diesel sale widening to Rs 14.50 per litre in September 2013. With monthly increases, the rupee has strengthened too. And the losses have been diminishing since March 2014, especially post the new government came into power.