Sensex Opens in Green; Bharti Airtel and Vodafone Idea Rally

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Asian share markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.3% while the Hang Seng is up 0.4%. The Nikkei 225 is trading up by 1.1%. Wall Street's major indices ended Friday's shorter session lower as US-China discord over Hong Kong fueled investor anxiety about trade talks and retail stocks dipped as in-store Black Friday sales appeared to draw smaller crowds.

Back home, India share markets opened on a positive note. The BSE Sensex is trading up by 100 points while the NSE Nifty is trading up by 25 points. The BSE Mid Cap index and BSE Small Cap index opened down by 0.3% and 0.1% respectively.

Sectoral indices have opened the day on a mixed note with telecom and IT stocks witnessing buying interest. Power and automobiles stocks are trading in red.

The rupee is currently trading at 71.77 against the US$.

Bharti Airtel share price and Vodafone Idea share price rallied 8% and 18% respectively in the opening session after it was reported that the companies are going to hike its tariffs. This news comes just weeks after Bharti Airtel and Vodafone posted historic losses on account of provisioning for the adjusted gross revenue (AGR) pending dues and spectrum charges.

Automobile stocks opened on a mixed note with Piramal Enterprises and Indoco Remedies leading the gainers. The reprieve from the festive season for the domestic automobile industry is proving to be very short-lived.

Maruti Suzuki India, which had posted a 2.3% increase in sales in October breaking a series of seven straight months of decline, fell again in November posting a 3.3% drop in its passenger vehicle sales over the last year.

The company dispatched 139,133 units to its dealerships across the country last month against 143,890 units in October last year. In absolute terms this was Maruti's highest sales in any month this fiscal.

The last time it had posted higher sales than this was in March 2019 when it had sent 145,031 units to its dealers.

Even then, the decline is largely because of the high base of last year in November when the festival of Diwali had fallen during the month. This year both major festivals, Dussehra and Diwali, were in October.

The decline in Maruti's sales just when it looked like the worst was over in October, adds to the narrative of a deepening slowdown in the overall Indian economy.

On Friday, the government released its GDP growth figures for the second quarter of this fiscal (July-September 2019) which showed growth has slowed down to a 26-quarter low of 4.5%.

As the November figures show, the fear is that the third quarter maybe even worse. Note that, India's automobile industry is bracing itself for a unique challenge in the first quarter of 2020 when the transition of BS-IV to BS-VI emission norms has to be made at the stroke of midnight on 31 March 2020.

No BS-IV vehicle could be sold from 1 April 2020, which means automakers would have to reduce their inventory on BS-IV models to zero by then.

The exercise is likely to see companies show extra caution in dispatching cars to dealers in the next few months, which may cause a continuation of the decline in wholesale numbers.

However, despite the slowdown in the auto sector, the sales volume of electric vehicles (EVs) are growing at a robust pace.

Sale of Electric Vehicles in India Projected to Go Up 10x in the Next Two Decades

Electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

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 another news. Foreign investors remained net buyers in the Indian capital market for the third straight month in November, putting in Rs 228.7 billion on net basis during the month.

Reportedly, expectations of a trade deal between the US and China, and more relief measures as well as disinvestment drive by the government among other factors helped keep FPIs stuck on the capital markets.

A net sum of Rs 252.3 billion was flowed into equities by FPIs in November.

However, they pulled out Rs 23.6 billion from the debt segment, translating into a total net investment of Rs 228.7 billion by FPIs in November.

FPIs had invested a net sum of Rs 160.4 billion in October and Rs 65.6 billion in September.

If you remember, after the Union Budget in July, foreign investors began selling. They pulled out a ton of money from Indian equities.

The tax on the super-rich was the culprit. They were uncertain as to how it would impact them. The overall weakness in the economy only made matters worse.

But the months after have been a different ballgame altogether.

Foreign money once again made its way into Indian equities. For one, the tax on the super-rich was not applicable on domestic and foreign investors. The Finance Minister clarified this.

More importantly, they responded positively to the cut in corporate tax rates. The new rates now, makes India globally competitive. This strengthens the case for investing in India.

Essentially, there is no clear indicator that the slowdown is structural. So far, it appears cyclical.

Hence, when the cycle turns, the stock markets will move up too.

Volatile markets and some recent economic numbers have confused investors.

In this video, Tanushree Banerjee decodes a few economic myths and reveals three big trends of Rebirth of India.

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