Auto stocks least favoured today

Fri, 22 Nov Closing

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The Indian market lost their sheen towards the end after starting the day on a firm note. The BSE-Sensex closed lower by about 11 points or 0.1%, while the NSE-Nifty ended higher by about 6 points or 0.1%. Stocks from the engineering, oil & gas and consumer durables spaces were amongst the top performers today, while those from the automobile and realty sectors were amongst the least favoured. Midcaps ended the day with marginal losses (BSE Mid Cap index down by about 0.1%), while smallcaps ended higher, with the BSE Small Cap index closing with gains of about 0.1%.

Asian markets ended the day on a mixed note with China down by about 0.4%, while Hong Kong and Japan ended with gains of 0.5% and 0.1% respectively. The rupee was trading at Rs 62.94 to the dollar at the time of writing.

Stocks from the oil and gas space ended the day on a firm note with Cairn India, ONGC and GAIL leading the pack of gainers. As per a leading business daily, ONGC today raised concerns regarding the magnitude of the subsidy burden. The company hinted the possibility of burgeoning subsidy bill that would hamper its performance. The subsidy burden for the current fiscal is expected to be around Rs 1,400 bn from Rs 800 bn as pegged earlier. Moreover, theunder-recovery situation will ensure the subsidy bill continues to add to the pain. The overall under-recoveries for oil marketing companies are expected to increase on account of weak Rupee and rising crude price. The oil and gas major is anxious about the government passing this burden on the upstream oil exploration companies. For the 1HFY14, the subsidy burden for ONGC stood at Rs 234 bn. The subsidy burden continues to drag bottom-line of ONGC and there is further concern regarding the ageing fields. While the increase in gas prices is a positive, the lack of clarity on subsidy burden may limit the benefits for ONGC.

Stocks of automobile companies ended the day on a weak note with Bajaj Auto, Tata Motors and Maruti Suzuki leading the pack of losers. It has been reported that conglomerate Mahindra and Mahindra has forayed into the fresh fruit segment under the brand 'Saboro'. The company plans to make this brand's products available at about 200 outlets across India over the next three years. It has invested a sum of Rs 200 m into this venture - wherein it plans to sell fresh produces like apples, grapes, bananas and other imported fruits - so far. The brand's products will be available at selected organized retail outlets in key metros. The company has been present in this agribusiness for about three years now, wherein operations started by exporting grapes. It is also reported that M&M has looking to invest in pack houses, ripening chambers and cold stores across the value chain. Given the booming food and agri business in India, this move would seem like a good strategy. However, given that it would be a different ball game as compared to its other businesses, the success of this venture will be gauged a few years down the line.