Metal, engg least preferred today

Tue, 23 Dec Closing

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After starting the day on a firm note, the Indian markets lost favour as selling activity intensified post noon; sentiment continued to remain subdued thereafter. The BSE-Sensex closed lower by about 195 points or 0.7%, while the NSE-Nifty closed lower by about 57 points or 0.7%. Losses were seen in stocks across the board with those from the metal and capital goods space being the least favoured. Mid and smallcaps ended the day on a weak note as well with their respective indices closing lower by about 0.3% and 0.6% respectively.

Stock markets in other parts of Asia ended the day on a weak note, while sentiments in Europe were mixed at the time of writing. The rupee was trading at Rs 63.45 to the dollar at the time of writing.

Stocks of auto ancillary companies ended the day on a weak note with NRB Bearings, Amara Raja Batteries and Exide Industries leading the pack of losers. Battery maker Exide Industries ended the day on a weak today, with the stock closing lower by over 2%. The year so far has been a mixed one for the company. While revenue growth remained firm with 1HFY15 revenues up by 20%, profits grew at a slower pace of 12% YoY. Key issue for the company has been the higher input costs - which form about two thirds of the revenues. However, with prices of key raw material declining by as much as 7% in recent times (from a quarter ago), the situation is expected to improve for the company. Over the longer term, the company has been losing market share to its competition with the latter growing faster and also being more profitable. While Exide has launched new products to take on competition, both in the organized as well as unorganized space, the fact that it has been losing market share may make the company take up a bit more aggressive approach in terms of pricing. What will be the company's game plan going forward remains to be seen.

Stocks of auto companies ended the day on a weak note with Ashok Leyland, Tata Motors and TVS Motors leading being the top underperformers. The stock of Bajaj Auto ended the day on a firm note with the stock being the top gainer amongst stocks forming part of the Sensex. Gains in the stock were largely due to the company announcing its aggressive plans to target sales volumes of 220,000 units a month to gain back its market share over the next one year to levels of about 24%. Given the slew of launches being made by the industry on the whole, this will definitely be a challenging task. While Bajaj has been reportedly working towards strengthening its reach over the past few months, it all boils down how well its new products will be accepted in the market. Further, there is also news of the company bagging an order from the Sri Lankan government for 125,000 units of the Discover 125M motorcycles. The company plans to execute this over the next three to four months. Bajaj Auto ended the day higher by about 2.2%.