Sensex Ends 353 Points Higher; Metal and Telecom Stocks Witness Buying

Wed, 14 Aug Closing

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After opening the day marginally higher, Indian share markets witnessed buying interest throughout the day and ended their trading session on a strong note.

Most of the buying interest was seen amid gains in Asian stocks after US President Donald Trump delayed tariffs on some Chinese imports, bringing some relief to global markets rattled by a trade conflict.

On the sectoral front, gains were seen in the metal sector and telecom sector.

At the closing bell, the BSE Sensex stood higher by 353 points (up 1%) and the NSE Nifty closed higher by 104 points (up 1%).

The BSE Mid Cap index ended up by 0.9%, while the BSE Small Cap index ended the day up by 0.4%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 0.1% and the Nikkei was trading up by 1%, while the Shanghai Composite was trading up by 0.4%.

European markets were trading on a negative note. The FTSE 100 was down by 0.6%. The DAX was trading lower by 1.1%, while the CAC 40 was down by 0.9%.

The rupee was trading at 71.29 to the US$ at the time of writing.

Market participants were tracking GMR Infra share price, HEG share price, and Indiabulls Real Estate share price as these companies announced their June quarter (Q1FY20) results today.

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

In the news from the global markets, crash in Argentine Peso, reported increase in bad loans in the Chinese banking system, inverting German yield curve, non-ending protests in Hong Kong, and recent devaluation of Yuan by China has triggered a fresh round of sell-off in equities and emerging market currencies.

Also, increasing chances of continuing the US-China trade war till US Presidential elections in 2020 and indication by the Reserve Bank of Australia about the possibility of reducing rates to sub-zero levels point to worrying global scenario.

In the news from the automobile sector, Maruti Suzuki Chairman R C Bhargava said that the Modi government is finally looking to step in and take some action to help the beleaguered auto sector.

As per the news, he said he believes that despite several prior requests and demands of the sector having fallen on deaf years, the industry can now look forward to an intervention. And it is likely to come from the highest echelons of the government.

He added that the Prime Minister has become aware and taken cognizance of the things that are happening and the Finance Minister has also become fully aware of the crisis, and she knows it affects the economy, the budget, tax revenues and everything.

As per him, the auto industry should expect government intervention and the government also has to become aware of all the factors that have happened, like the states imposing (higher) road tax, insurance, banks doing something.

Note that 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.

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.

In our view, companies in the sector adapting their business models to the rapidly changing environment will survive and thrive.

Moving on to the news from the commodities space, gold prices were steady today but were sharply off their recent record highs. Prices jumped 1% to US$ 1,512.5 an ounce as investors piled into safe haven assets like bullion, bonds and yen over global growth concerns and a prolonged US-China trade war.

Note that on Tuesday, US President Donald Trump backed off his September 1 deadline for 10% tariffs on the remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods in the hopes of blunting their impact on US holiday sales.

Also, strong safe-haven demand amid political tensions in Hong Kong and a weak Indian Rupee, which dropped to test 71.39 in futures, supported the bullion rally.

Silver prices in India surged Rs 2,000 to an all-time high mark of Rs 45,000 per kg. Silver rose to a three-year high on Tuesday, crossing Rs 44,000 per kg in Mumbai's spot market.

Speaking of silver, Vijay Bhambwani, editor of Weekly Cash Alerts, believes that silver is becoming an attractive commodity to own. In the video below, he goes on to explain about why silver will even beat gold in returns and what form of silver should one buy.

You can also find more such Weekly Cash Alerts updates from Vijay here: Gold is Rising, Trading Gold, Gold: Buy or Sell?, India's No. 1 Trader, Hedge in Volatile Financial Markets.

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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