Sensex Opens Lower; Metal and Automobile Stocks Top Losers

Fri, 2 Aug 09:30 am

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Asian share markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 2.4% while the Hang Seng is down 2.3%. The Shanghai Composite is trading down by 1.8%. Wall Street fell again on Thursday, abruptly reversing early gains after US President Donald Trump put concerns about the US-China trade war back in the spotlight, tweeting that he would impose an additional 10% tariff on US$300 billion in Chinese imports.

Back home, India share markets opened the day on a negative note. The BSE Sensex is trading down by 294 points while the NSE Nifty is trading down by 88 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 metal stocks and automobiles stocks witnessing maximum selling pressure. Telecom stocks and FMCG stocks have opened the day in green.

The rupee is currently trading at 69.25 against the US$.

In the news from the economy. India's manufacturing activity strengthened in the month of July, on the back of quicker upturn in factory orders.

As per the survey report, the Nikkei India Manufacturing Purchasing Managers' Index (PMI) surged to 52.5 in July from 52.1 in June.

As per the survey report, consumer goods producers led the upturn in July for the third month in a row, although there was also a stronger improvement in business conditions at intermediate goods makers.

The capital goods sub-sector dipped into contraction, with lower sales causing reductions in output & quantities of purchases.

Besides, new export orders also continued to rise, but a slowdown in growth was noted. Besides, external sales rose to the least extent since April 2018 as factories took a hit from subdued global trade flows. Hiring continued in July and additional inputs were purchased.

On the price front, input costs increased slightly in July as higher prices for steel, chemicals, cotton and freight were partly offset by lower charges for base oil, copper and plastics.

The overall rate of inflation was at a three-month low and well below its long-run average. Output charges rose marginally in July, following reductions in each of the two previous months.

Moving on to the news from the automobiles sector. Eicher Motors' motorcycle division has reported 22% fall in sales at 54,185 units in July 2019 as compared to 69,063 motorcycles sold in July 2018.

During July 2019, export of number of motorcycles increased by 143% to 5,003 units from 2,062 units in July 2018.

The company's sales of vehicles with engine capacity up to 350 cc decreased by 29% at 45,041 units in July 2019 against 63,713 units in the same period year ago.

However, the sales of its vehicles with engine capacity exceeding 350 cc increased by 71% at 9,144 units as against 5,350 units in July last year.

Meanwhile, Atul Auto has reported sale of 3,272 units for the month of July 2019, a fall of 15.12%, as compared to 3,855 units sold in July 2018.

Total Sales from April to July 2019 stood at 13,786 units.

Eicher Motors' share price and Atul Auto share price opened the day down by 2.2% and 2.5% respectively.

Note that, automobile sales have fallen every month for almost a year now, except for October when the numbers were flat. In June nine out of India's 11 main passenger vehicle makers reported a double-digit decline in sales.

Reports state that many dealers who have recently entered the auto industry are finding it difficult to manage their repayment obligations. Banking industry experts estimate the total outstanding loans to automobile dealers to be in the range of Rs 700-800 billion.

However, it is interesting to note that despite the slowdown in the auto sector, the sales volume of electric vehicles (EVs) are growing at a robust pace.

Have a look at the chart below:

Electric Vehicle Sales on a High Growth Trajectory!

Electric-2 wheelers sales volume registered 130% YoY growth in FY19. 4-wheeler EVs grew by 200% YoY.

Similarly, electric three-wheelers reported the highest sales volume of 630,000 units. It is important to note that the electric three-wheeler industry has been growing without government support.

The base is quite low compared to the internal combustion engine (ICE) vehicle sales. However, you cannot ignore the growing momentum in EV sales.

The recently announced government incentives will give a further boost to EV sales. 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.

Richa Agarwal, editor of Hidden Treasure, believes that the companies which will adapt their business models to the rapidly changing environment will survive and thrive.

In fact, she has picked out 4 Rebound Stocks to profit from the market crash.

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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