Defensives not in favour today

Tue, 5 Nov Closing

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The Indian markets traded well below the dotted line throughout the day. The BSE-Sensex closed lower by about 265 points or 1.3%, while the NSE-Nifty ended lower by about 65 points or 1%. Barring stocks from the realty and power spaces, losses were seen across the board with FMCG, pharmaceuticals and information technology stocks leading the pack. Mid and smallcap stocks closed the day on a firm note with the BSE Mid Cap and BSE Small Cap indices ending higher by 0.9% and 0.5% respectively.

Asian indices ended the day on a mixed note, with China and Japan closing higher by about 0.4% and 0.2% respectively, while Hong Kong closed higher by about 0.7%. The rupee was trading at Rs 61.66 to the dollar at the time of writing.

Stocks of automobile companies ended the day on a weak note with Maruti Suzuki, Mahindra and Mahindra and Bajaj Auto leading the pack of losers. Commercial vehicles manufacturer Ashok Leyland reported a 18% YoY decline in sales of medium and heavy commercial vehicles (M&HCV) units during the month of October 2013. As for the light commercial vehicle volumes, the same declined by about 11% during the month. In the year till date, the total volumes are lower by 21% YoY as compared to the corresponding period last year. The stock of Ashok Leyland has declined by over one-third in the year till date on the back of overall weakness in the auto industry, especially the commercial vehicle segment. Having said that, the stock price has increased by over 55% over the past two months. While there does not seem to have been a drastic improvement in the company's financial performance in the past few quarters, the stock's outperformance is seemingly on the back of the it being price quite attractively in terms of valuations. Not to mention the expectation of the auto sector's numbers to improve from here on, given the long stretch of declining volumes on a consecutive basis. The stock of Ashok Leyland ended the day with gains of about 2%.

Telecom stocks ended the day on a weak note with Reliance Communications, Idea Cellular and Bharti Airtel leading the losses. The telecom service provider, Bharti AIrtel is all set to acquire Warid Group's Congo operations and strengthen its foothold in Africa. This is the second-in-line acquisition post the acquisition of Warid's Uganda operations early this year. With around 2.6 mn customers, this latest acquisition is expected to make Airtel the largest mobile operator in Congo-Brazzaville belt. Currently, Bharti Airtel is the second largest operator in the country with over 1.6 m customers and Warid is the third largest with around 1 m customers. Combining the strengths of Airtel and WSarid, this deal is expected to benefit customers in the form of affordable tariffs, superior 2G or 3G network, affordable voice and data services and superior customer care. Moreover, this will also enable Bharti Airtel to strengthen its market position and build a world-class network for the overseas customers. The share closed down by 1.6%.