Sensex Ends 793 Points Higher; Banking and Realty Stocks Witness Buying

Mon, 26 Aug Closing

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Indian share markets ended their trading session on a strong note fueled by the possibility of resumption in trade talks between the US and China as well a slew of measures announced by Finance Minister Nirmala Sitharaman to boost economic growth.

Gains were largely seen in the finance sector, banking sector and realty sector, while metal stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 793 points (up 2.2%) and the NSE Nifty closed higher by 229 points (up 2.1%). The BSE Mid Cap index ended the day up 1.6% and the BSE Small Cap index ended the day up by 1.7%.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 1.9% and the Shanghai Composite stood lower by 1.2%. The Nikkei 225 was down 2.2%.

The rupee was trading at 71.94 against the US$.

Adani Ports and SEZ share price witnessed buying interest today after the company announced that the proposed share buyback offer will open on September 6, 2019.

Shares of the company climbed around 6% to Rs 370.85, on back of the above news.

The company in its press release said that the buyback of equity shares will open on September 6 and will close on September 20.

Earlier in June, the company had announced its plan to buy back up to 39.2 million equity shares, representing 1.9% stake, at Rs 500 per share, each payable in cash for an amount aggregating up to Rs 19.6 billion on a proportionate basis, through the tender offer route.

The company said it has received final comments on the draft letter of offer dated June 13, 2019 from the markets regulator in relation to the buy-back on August 23, 2019.

Speaking of buybacks, as per Rahul Shah, co-head of Research at Equitymaster, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

• The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

The topic also brings us to ask: Do buy-backs offer an arbitrage opportunity for retail investors? Ankit Shah has answered this question in one of the editions of Equitymaster Insider. You can access the issue here (requires subscription).

Moving on to news from the automobile sector, Eicher Motors share price was in focus today. Stock of the company hit a 44-month low of Rs 15,197, down 1% in intraday trade today amid concerns of weak demand outlook.

In the past three trading days, the share price of Eicher Motors has lost 5% after the company said regulator rectifier, a component mandatory for all BS-VI compliant products, will not cause any discernible change in the overall price of the relevant motorcycles.

The company made clarification on news report published in a leading financial daily that Royal Enfield's BS-VI roll-out plans ride on outcome of IP case and the company might face hurdles if it fails to resolve a patent infringement dispute with Flash Electronics in a US court.

In a regulatory filing, the company said, "depending on the business requirements, the company works with several vendors for the development and supply of parts and components and the Regulator Rectifier Units are no exception".

The company also added that the cost of this component constitutes a negligible proportion of the overall cost of a motorcycle and any change in source of this component will not cause any discernible change in the overall price of the relevant motorcycles.

Meanwhile, Tata Motors has deferred a planned fund raise of up to US$ 1.5 billion in foreign currency loans after failing to garner enough interest from potential lenders.

Reportedly, the funds were to be raised by a Singapore-based entity of Tata Motors to refinance existing loans of the company as well as its wholly owned unit, UK-based Jaguar Land Rover (JLR).

Tata Motors' problems have been compounded by the weakening performance of JLR. JLR was first downgraded by Moody's in July 2018 after sales in China suddenly dropped in June.

Tata Motors share price ended the day down by 0.8%.

Speaking of the Indian auto industry, note that the sluggish market environment prevalent in the first quarter has continued in the beginning of the second quarter as well as its impact are visible in the despatch volumes.

The sector has been battling many negative forces - slowing economic activity, rising car prices (led by stricter emission norms and insurance costs), shortage of financing options because of the NBFC crisis, and weak rural sentiment. All these factors have dampened demand.

Have a look at the chart below:

April to July Auto Sales Are Down in the Dumps

It seems unlikely that the upcoming festival season will work wonders in terms of bolstering growth...unless the government steps in to help the industry.

In the below video, Tanushree Banerjee talks about what helped the auto stocks back in 2002, become 7, 15 and 24 baggers in a decade.

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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