Sensex Ends 663 Points Lower; Auto and Telecom Stocks Witness Huge Selling

Tue, 13 Aug Closing

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

At the closing bell, the BSE Sensex stood lower by 663 points (down 1.7%) and the NSE Nifty closed down by 187 points (down 1.7%).

The BSE Mid Cap index ended the day down 2.25%, while the BSE Small Cap index ended the day down 1.35%.

Note that the decline in small-cap segment has been sharper since the Union Budget, with the BSE Smallcap index hitting its lowest level since February 2017.

But Richa Agarwal says this fall currently offers the best bargains to the market.

In the below video, she talks about picking right stocks to benefit from the upcoming rebound.

You can know more about small caps here: One Stock Crorepati, Best Stock to Buy, Falling Smallcap Stocks Smallcap Stocks Under Modi 2.0, and Crorepati stocks.

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

The rupee was trading at 71.25 against the US$.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 2.10% and the Shanghai Composite was down by 0.63%. The Nikkei 225 was down 1.11%.

European markets were also trading on a negative note. The FTSE 100 was down by 0.53%. The DAX was trading down by 0.97%, while the CAC 40 was down by 0.60%.

Speaking of stock markets in general, the market is typically focused on the most recent star performers.

You will often find the likes of HUL or HDFC Bank being the market darlings for never having a disappointing quarter.

But it is rare to find companies that thrive through most of their survival period.

Tanushree Banerjee shares few of her thoughts on this. Here's an excerpt of what she wrote in today's edition of The 5 Minute WrapUp...

• It is rare to find companies that survive for decades. It's even rarer to find ones that thrive through most of their survival period.
  
  So, if you do not wish to pay steep valuations for the market darlings, you need to look for the companies with history and consistency on their side.
  
  And they shouldn't be too conspicuous to the market either.
  
  I am talking of companies like Hawkins and City Union Bank. They have a track record of paying dividends for decades.
  
  The dividends such companies pay are especially helpful at a time when globally interest rates are headed lower.

And, as seen in the chart below, 'risk-free returns' from debt seem to have gone missing.

Inflation Adjusted Risk Free Returns Are Negligible Globally

Moving on, market participants were tracking Bajaj Steel share price, Coal India share price, and Sun Pharma share price as these companies announced their June quarter (Q1FY20) results today.

You can also read our recently released Q1FY20 results of some other companies here: Tata Steel, Cummins India, Sonata Software, HCL Technologies, Siemens, Ultratech Cement, HPCL, Cipla, Page Industries.

In the news from the automobile sector, declining for the ninth consecutive month, domestic passenger vehicle (PV) sales dropped 30.98% to 2,00,790 units in July from 2,90,931 units in the same period a year ago.

According to data released by the Society of Indian Automobile Manufacturers (SIAM), domestic car sales were down 35.95% at 1,22,956 units as against 1,91,979 units in July 2018.

Motorcycle sales declined 18.88% last month to 9,33,996 units for the month as against 11,51,324 units in the year-ago period.

Note that auto sales have been witnessing decline lately and the decline seen in May was the worst seen since 2001.

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.

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 Suzuki 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.

In the news from the commodity space, crude oil was witnessing selling pressure today. Losses were seen as sluggish demand forecasts countered expectations that major producers would prop up oil prices by limiting crude oil output.

Last week, Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said that it plans to keep its crude oil exports below 7 million barrels per day in August and September to help drain global oil inventories.

Kuwait on Monday also reiterated its commitment to OPEC+ supply curbs after Oil Minister Khaled al-Fadhel said Kuwait had cut its own output by more than required by the accord.

OPEC and its allies, known as OPEC+, have agreed to cut 1.2 million barrels per day (bpd) since January 1.

But booming US shale oil production continues to chip away at efforts to limit the global supply overhang, weighing on prices.

The US Energy Information Administration (EIA) forecast in a report said that US oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September, to a record 8.77 million bpd.

Note that crude oil has been witnessing volatility lately amid weekly declines in US inventories and rising geopolitical tensions between Iran and other countries.

Meanwhile, volatility was also seen on the back of ongoing geopolitical tensions in the Middle East.

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

Speaking of crude oil, in the video below, Vijay Bhambwani explains how trading in crude oil is an evergreen strategy. As per him, trading in crude oil offers excellent opportunities in nearly all market conditions due to its unique standing within the world's economic and political systems.

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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