Sensex Ends Marginally Lower; Realty and Banking Stocks Witness Selling

Thu, 5 Sep Closing

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Share markets in India continued to trade in the red during closing hours and ended their trading session marginally lower.

Sectoral indices ended on a mixed note with stocks in the realty sector, banking sector and finance sector witnessing most of the selling pressure, while oil & gas stocks, automobile stocks and metal stocks witnessed buying interest.

At the closing bell, the BSE Sensex stood lower by 80 points while the NSE Nifty closed up by 3 points. The BSE Mid Cap index ended the day up by 0.1%, while the BSE Small Cap index ended the day up by 0.7%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was down 0.1% and the Shanghai Composite was up 1%. The Nikkei 225 stood higher by 2.1%.

The rupee was trading at 71.92 against the US$.

Aditya Birla Capital (ABCL) share price was in focus today after the company informed bourses that its board has approved raising Rs 21 billion through a preferential share allotment to certain marquee investors and the promoter or promoter group entities.

The equity capital will be raised at Rs 100 per share, which is at a 10.6% premium to the ABCL closing price of Rs 90.40 as of September 4.

In the news from the commodity space, crude oil witnessed selling pressure today. Losses were seen after an industry report showed US crude stockpiles rose last week.

Data from the American Petroleum Institute (API) showed US crude stocks rose last week, while gasoline inventories decreased, and distillate stocks drew.

Crude inventories rose by 4,01,000 barrels in the week ended August 30 to 429.1 million. This compares with analysts' expectations for a decrease of 2.5 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 2,38,000 barrels, while refinery crude runs fell by 306,000 barrels per day.

Losses, however, were limited after the US confirmed that talks with China to reach a trade agreement would be held in the coming weeks. The news gave hope that a dispute that has roiled global economies will be resolved.

The gains add to a surge in prices on Wednesday that had been driven by a survey showing activity in China's services sector expanded at the fastest pace in three months in August, as new orders rose in the world's second-biggest consumer of oil.

It remains to be seen how these developments affect crude oil prices in the coming weeks. Meanwhile, we will keep you updated on all the news from this space.

Note that crude oil prices have fallen about a fifth from 2019 highs hit in April, partly because of worries that the trade war is hurting the global economy and could dent oil demand.

Also, India's imports of crude oil have stalled in recent months, with both coal and liquefied natural gas (LNG) also soft.

This fall could be attributed to Indian refiners adjusting to the loss of cargoes from Iran after the United States did not extend waivers to buyers of Iranian crude oil beyond the beginning of May.

To know more about crude oil and the recent developments in this space, you can read Vijay Bhambwani's article here: Message of the Markets - What is Crude Oil Indicating?

Moving on, as per a leading financial daily, Uday Kotak said that his bank was ready to lend money to the auto sector, with a caveat that it could be recovered.

He has said that the banking industry has started depending on credit scores of each consumer, leading to pressure on credit availability.

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.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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