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Waning demand expected to hit breakneck rally in India's auto stocks

Waning demand expected to hit breakneck rally in India's auto stocks

by | Aug 19, 2024 | Share Market


Over the past 12 months, the NSE Nifty Auto Index has jumped 66 per cent compared with a 26 per cent rise in the broader benchmark. Photo: Bloomberg

3 min read Last Updated : Aug 19 2024 | 8:53 AM IST

By Alex Gabriel Simon

A sizzling rally in India’s auto shares is reversing as a build up of unsold vehicles and growing discounts by carmakers pressure profit margins.


India’s NSE Nifty Auto Index is down 4.1 per cent in August, more than double the decline in the Nifty 50 Index. Bellwether Maruti Suzuki India Ltd. has slid 6 per cent so far in the month, on track for its worst monthly performance since December 2022. 

Passenger vehicle inventories have surged to historic highs of up to 72 days, the Federation of Automobile Dealers Association said last month. Waiting period for some models, once as long as 12 months a year ago, have nearly vanished, according to MRG Capital. Increased competition among carmakers has also led to price cuts. These factors have raised concerns about whether local carmakers can sustain the robust sales seen after the pandemic.  

Charts


“After such a run up there is risk that these companies will see correction,” said Manu Rishi Guptha, a portfolio manager at MRG Capital.


Over the past 12 months, the NSE Nifty Auto Index has jumped 66 per cent compared with a 26 per cent rise in the broader benchmark. 


The slowdown has prompted some carmakers to offer incentives to maintain market share. Last month, Maruti Suzuki said it raised discount offerings amid “less than ideal market conditions.” Earlier this month, Mahindra & Mahindra executives described industry demand and environment as “tepid”.    

Charts


There are still some relatively safer pockets of the auto market. “We are currently more inclined toward two-wheelers over four-wheelers,” said Deepika Mundra, an analyst at M&G Investments. Two-wheeled motor vehicles are better placed to gain from the transition to electric vehicles due to higher market penetration, she added.


Still, the highly anticipated listing of Hyundai Motor Co.’s India unit could create an additional overhang in the sector as investors gain another option, Mundra said. The South Korean firm is set to raise a record amount of money in the country in what could be the India’s largest initial public offering to date. 


The market’s next test will be during the festival season starting late next month, a high season for auto sales. Last year’s 42-day season saw record vehicle sales, with nearly 550,000 cars being sold in the period. That’s was about 10 per cent higher than the year prior. 


Still, expectations are not high for a major turnaround. Demand for entry level cars is seeing little uptick and carmakers are dumping more stock ahead of the season, said Amit Hiranandani, an analyst at Smifs Ltd.


“Dealer confidence suggests that the upcoming festival season sales may be flat or lower compared to last year,” he added.

First Published: Aug 19 2024 | 8:53 AM IST



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Stock Market LIVE: Nifty, Sensex may open higher; GIFT Nifty up 72 pts; Hang Seng up 1.8%

Stock Market LIVE: Nifty, Sensex may open higher; GIFT Nifty up 72 pts; Hang Seng up 1.8%

by | Aug 19, 2024 | Share Market



Stock Market LIVE on Monday, August 19, 2024: The benchmark indices, Sensex and Nifty, are poised for a positive opening on Monday, buoyed by positive global cues. The GIFT Nifty futures also indicated a positive start, quoting 72 points higher than Nifty50 futures at 24,670 levels.


Asia-Pacific markets broadly traded in green on Monday morning. China’s Shanghai Composite was up 0.07 per cent, Hong Kong’s Hang Seng rose 1.88 per cent, and the Asia Dow traded up 0.21 per cent. However, Japan’s Nikkei traded lower by 0.35 per cent, South Korea’s Kospi dropped 0.44 per cent, and Australia’s S&P/ASX 200 dipped by 0.07 per cent.


In the US markets overnight, the S&P 500 advanced 0.20 per cent. The Dow Jones Industrial Average rose 0.24 per cent, while the Nasdaq Composite increased by 0.21 per cent.


Traders in Asia are eyeing key central bank releases this week, including the Bank of Korea’s rate decision, inflation data from Japan and Singapore, the Reserve Bank of Australia’s August meeting outcome, and China’s one-year and five-year loan prime rates.


Stocks to Watch Today


Piramal Enterprises: The promoters of Piramal Enterprises announced that on August 16, 2024, an entity within the Promoter Group purchased 616,615 equity shares of Piramal Enterprises Ltd., representing 0.27 per cent of the company’s paid-up capital, on the National Stock Exchange of India Limited (NSE). As a result of this purchase, the Promoter Group’s shareholding in PEL has increased from 46.03 per cent to 46.30 per cent.


Adani Enterprises: Billionaire Gautam Adani-led Adani Enterprises has informed the exchanges that the Management Committee of the Company, at its meeting held on August 16, 2024, has approved and adopted the draft prospectus for the public issuance of non-convertible debentures with a face value of Rs 1,000 each, amounting to up to Rs 400 crores, with an option to retain oversubscription of up to Rs 400 crores, aggregating up to Rs 800 crores.


Vedanta: The Company has received an order from the Office of the Commissioner of Central Excise & CGST Commissionerate, confirming a penalty of Rs 99,36,210, along with a tax demand and applicable interest. The issue pertains to the reversal of Input Tax Credit for inputs/input services used for effecting exempted and non-GST supplies during FY 2019-20 and 2020-21.



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Stock Market news: Jackson Hole, DII flows in focus; GIFT Nifty at 24,700

Stock Market news: Jackson Hole, DII flows in focus; GIFT Nifty at 24,700

by | Aug 19, 2024 | Share Market



Trading guide for Monday, August 19, 2024: Benchmark equity indices are likely to start the week on an upbeat note following the strong rally last Friday.

At 07:00 AM, GIFT Nifty futures quoted around 24,710 levels – hinting at a likely gap-up of over 100 points on the NSE Nifty 50 index today.


Apart from range breakout; steady domestic inflows into the stock market and lack of negative surprises on the corporate earnings front is aiding the positive mood on Dalal Street.


In the week ahead, the market will keenly watch the US Federal Reserve chair speech in Jackson Hole Symposium and FOMC minutes; an ease in economic slowdown may influence the chair to add more light on rates trajectory, said Vinod Nair, Head of Research at Geojit Financial Services in a note.


Global cues


The US stocks ended higher on Friday as investors played down a recession risk on stronger than expected retail sales data. Dow Jones, the S&P 500 and NASDAQ edged 0.2 per cent higher.


The US 10-year bond yield languished around 3.90 per cent. International Gold futures surged to 2,540 levels; while, WTI Crude Oil futures hovered around $75 per barrel.


In Asia this morning, Nikkei was down 0.3 per cent; Kospi and Taiwan quoted on a flat note.


Trading strategies in Nifty, Bank Nifty for Monday August 19, 2024 by market experts: 


Rajesh Bhosale, Equity Technical Analyst, Angel One


On Friday, Nifty closed above the recent congestion zone, and a range breakout is visible on the hourly charts. Additionally, Nifty has closed above the 20-Day EMA, which previously acted as resistance. With these technical indicators, it seems there’s more fuel for Nifty on the upside.


In the upcoming sessions, we may see levels of 24,700 and 24,850 being tested, which could serve as immediate hurdles. If global markets remain supportive, we might even retest the 25,000 levels and beyond.


Conversely, the bullish gap left today around 24,200 is critical; the observations above hold as long as it is defended. However, if breached, the market may head back toward the lower levels of 24,000 and 23,900. Traders are advised to monitor these levels and consider a buy-on-dip approach.


Om Mehra, Technical Analyst, SAMCO Securities


The Nifty overcame the 24,500 barrier and is currently maintaining above the 20 DMA. Nifty is also holding above the 50 per cent Fibonacci retracement level as well.  The daily RSI has rebounded from the lower levels and now stands at 55. Any pullback towards the 24,450 zone could be a buying opportunity for a short-term move towards the 24,700 level.


The Bank Nifty has formed a bullish candle, overcoming the hurdle at 50,400. However, Bank Nifty remains within the 38.2 per cent Fibonacci retracement level range at 49,700 and the 50 per cent level at 50,600. A double bottom pattern has formed on the daily time frame, suggesting that crossing 50,750 could lead to a move towards the 51,200 – 51,500 zone in the coming sessions.


Dhupesh Dhameja, Technical Analyst, SAMCO Securities


A tall bullish candlestick formed on the daily chart, as the Nifty closed above its previous week’s high, signalling renewed bullish momentum. Notably, the index also closed above the 10 and 20-Day Exponential Moving Averages (DEMA), with the RSI (14) moving above 50, indicating strengthening positive momentum.


The market outlook has turned bullish as the index closed above key short-term averages. This decisive move could prompt sellers to square off positions, potentially driving the index to fill the upside gap between 24,500 and 24,700. As long as the index remains above 24,350, a buy-on-dips strategy may be favourable.


The Bank Nifty has seen formation of a strong bullish candlestick formed on the daily chart, while the weekly chart revealed a tweezer bottom pattern, indicating potential for further gains. The index is currently hovering around the 100-day Exponential Moving Average (DEMA) and closed above the 10-day DEMA, though it remains below the 20-day EMA, indicating pressure from both directions. A buy-on-dips strategy could be effective as long as the index holds above the 49,700 level.


Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates


Technically, on a daily chart, the Nifty crossed the 21-Day Exponential Moving Average (DEMA) around 24,365 and formed a significant green candle, showing strength. As long as the index remains above 24,350, the bullish momentum is expected to continue. On the upside, gap resistance is placed near 24,690 and 24,960 levels.


The Bank Nifty has formed a green candle on the daily chart, indicating strength. However, the index may encounter resistance near 50,805, where the 21-DEMA is positioned. A sustained move above 50,810 could drive the index toward the 51,200-51,500 range.


Rupak De, Senior Technical Analyst, LKP Securities


In the near term, the Nifty may continue consolidating within the 24,300 – 24,550 range. Only a decisive move above 24,550 could trigger a directional up move in the index. A buy-on-dips strategy may be more effective unless Nifty decisively falls below 24,300.


Fund flow activity – Here’s an update on the latest FII, DII trading activity


On Friday, foreign institutional investors (FIIs) net bought stocks to the tune of Rs 766.52 crore; thus far in August, FIIs have net sold shares worth Rs 28,976.91 crore in the cash segment. On the other hand, domestic institutional investors (DIIs) net bought shares worth Rs 2,606.18 crore on August 16; taking their monthly buy tally to Rs 34,060.09 crore.


In the derivatives segment, FIIs net bought 34,806 contracts of index futures for a consideration of Rs 2,323.23 crore on August 16. FIIs were net buyers of 21,723 contracts of Nifty futures and 13,096 contracts of Bank Nifty futures.


Pursuant to which, FIIs long-short ratio in index futures jumped to 1:1 – this ratio implies that foreign investors now hold 1 long position in index futures for every single bet on the short side of trade. The FIIs longs in index futures stood at 50.38 per cent.


Stocks in F&O ban period


Biocon, Bandhan Bank, India Cement, PNB and SAIL among 17 stocks placed under the futures & options ban period for Monday, August 19. Aarti Industries, Aditya Birla Fashion Retail, Chambal Fertilisers, GNFC, Granules India, IndiaMart Intermesh, LIC Housing Finance, Manappuram Finance, NMDC, Piramal Enterprises, RBL Bank and Sun Tv were the other stocks.


Primary market update


Three new IPOs to open for subscription on Monday – Interarch Building Products Rs 600.29 crore share sale opens in the price range of Rs 850 – Rs 900 per share. 


Two new SME IPOs – Brace Port Logistics Rs 24.41 crore and Forcas Studio Rs 37.44 crore IPO will be available on the NSE SME platform.


Solve Plastic Products and Broach Lifecare Hospital SME IPOs to close today. The former was subscribed up to 34.2 times, and the latter up to 159.1 times as of Friday.



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Diversify mutual funds portfolio away from recent high performers

Diversify mutual funds portfolio away from recent high performers

by | Aug 18, 2024 | Share Market


5 min read Last Updated : Aug 18 2024 | 10:14 PM IST


The stock market has witnessed considerable volatility over the past fortnight. From 81,867 on August 1, the Sensex fell to 78,593 on August 6, before recovering to 80,436 by August 16. While investors have weathered the recent bout, they should be prepared for similar episodes in the future.

 


Hit by global cues

 


A rapid appreciation of the yen in early August triggered a global sell-off. “Investors borrowed yen at Japan’s low interest rates and invested in higher-yielding assets abroad. However, as concerns that the Bank of Japan may tighten stance emerged, the yen began to strengthen. This led to an unwinding of some carry trades, causing sharp corrections,” says Manuj Jain, associate director, co-head product strategy, WhiteOak Capital Mutual Fund.

 

Further contributing to instability was the assassination of the Hamas chief in Iran. “Weak employment numbers from the US sparked concerns that the world’s largest economy could be heading for a recession,” says Nishit Master, portfolio manager at Axis Securities Portfolio Management Service.

 


The Indian market is susceptible. “Having not experienced a significant correction since March 2023, it is more sensitive to negative news due to high valuations,” says Neelesh Surana, chief investment officer (CIO), Mirae Asset Investment Managers (India).

 


Held up by retail flows

 


Negative news from abroad (global growth concerns, wars, etc.) could affect the market in the near future. Year-to-date, foreign portfolio investors are net buyers of Indian equities to the tune of Rs 16,123 crore. But they are prone to sell Indian equities in 


large quantities.

 


Expensive valuations in certain market segments are a cause for concern. The Nifty 50 is trading at a forward price-to-earnings (P/E) ratio of 20.6, in line with its 10-year average. However, the Nifty Mid-Cap 150 is trading at a premium (31.3 currently against the long-term average of 18.5), as is the Nifty Smallcap 250 (22 versus 18.1).

 


Clouding the outlook is slowing earnings growth. According to a recent Business Standard report, the combined net profit of 2,909 companies which have so far declared their first-quarter results for fiscal year 2024-25, is up a meagre 4.4 per cent year-on-year, the slowest in six quarters.

 


“In some narrow segments of the market, stock prices are factoring in high earnings in the coming years. Any disappointment may dampen investor sentiment,” says Jain.

 


On the positive side, India’s macroeconomic fundamentals are sound and retail flows remain stable. “During the June quarter, retail direct flows, including systematic investment plans (SIPs), was at an all-time high of about $19 billion (about Rs 1.59 trillion). While volatility may persist, strong retail investment could provide stability,” says Surana.

 


The latest data from the US on jobless claims and retail sales has reignited hopes that the US may not fall into 


a recession.

 


MF investors: Displaying recency bias

 


During bull markets, investors fall prey to recency bias and invest heavily in sector, thematic, and momentum-based schemes. This one is no exception. “Investors tend to select funds based on latest performance with little attention to risk and volatility. Feeding into these funds are large inflows coming via SIP flows, mostly channelled via platforms and ‘do it yourself’ investors,” says Kavitha Menon, Sebi registered investment advisor and ARIA board member.  

 


Fund houses have launched a large number of new fund offers (NFOs) belonging to sector and thematic categories, such as infrastructure, auto and manufacturing, which have captured most of the inflows. Jain informs that over the past 12 months (as of July 31, 2024) 38 per cent of total active equity mutual fund net flows were directed into sectoral/thematic funds 


while another 12 per cent went into small cap funds.

 


Review and rebalance

 


Investors must review their portfolios. “If their allocation to certain segments have become high due to strong returns over the past three-four years, they should rebalance their portfolios and bring them in line with their long-term asset allocation,” says George Thomas, equity fund manager, Quantum Asset Management Company (AMC). He suggests having a healthy mix of large, mid, and small-cap allocation.

 


Do not expect the high returns from certain sector and thematic strategies to continue. Emphasising that winners rotate, Jain suggests directing fresh investments into parts of the market that are still available at relatively reasonable valuations, but have underperformed recently despite yielding reasonable earnings growth in the past few years.

 


Direct equity investors: Chasing momentum

 


Many new investors are chasing stocks displaying high momentum. Others are underestimating the risks that high valuations, especially in small and midcap stocks, pose.

 


“Overexposure to these volatile segments, driven by short-term gains, can lead to significant losses during corrections. Many also try to time the market, buying speculative stocks without understanding their intrinsic value or long-term potential,” warns 


Tarun Birani, founder, TBNG Capital Advisors.

 


Adds Vikram Kasat, head advisory, PL-Capital, Prabhudas Lilladher: “Driven by FOMO (fear of missing out), investors buy at unreasonable valuations, causing low-quality stocks to become overpriced.”

 


Investors need to return to first principles. “Thoroughly research any company before investing. Evaluate management quality, business strength, and valuation,” says Master. 

 


He adds that investors must adopt a long-term approach and invest in high-quality companies available at reasonable valuations.    

First Published: Aug 18 2024 | 10:14 PM IST



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KRN Heat to float initial share sale in Sep, collects Rs 9.54 cr in pre-IPO

KRN Heat to float initial share sale in Sep, collects Rs 9.54 cr in pre-IPO

by | Aug 18, 2024 | Share Market


On Saturday, the company announced raising Rs 9.54 crore by a pre-IPO (initial public offering) placement round.

2 min read Last Updated : Aug 18 2024 | 12:15 PM IST


KRN Heat Exchanger and Refrigeration Ltd is likely to come out with its initial share sale next month, and funds will be used for expansion plans, market sources said on Sunday.


On Saturday, the company announced raising Rs 9.54 crore by a pre-IPO (initial public offering) placement round.


The Rajasthan-based company manufactures fin and tube-type heat exchangers for the heat ventilation air-conditioning and refrigeration industry.


The company’s entire manufacturing operations are undertaken at its consolidated manufacturing facility comprising two industrial plots located in the RIICO Industrial Area, Neemrana, Rajasthan.


KRN Heat Exchanger’s initial paper was filed in January 2024, comprising entirely a fresh issue of 1.93 crore equity shares with no OFS component.


Later, the company filed the papers in late March with a revised issue size.


Going by the draft papers filed in March, the company’s proposed IPO involved a fresh issue of size of 1.6 crore equity shares.


Market sources told PTI that the company is expected to float its IPO in September.


Funds will be used for investment in wholly-owned subsidiary KRN HVAC Products for setting up a new manufacturing facility at Neemrana, Alwar, in Rajasthan.


The company has long-standing relations with Daikin Air Conditioning India Private Ltd, Schnieder Electric IT Business India Private Ltd, Kirloskar Chillers Private Ltd, Blue Star Ltd and Climaventa Climate Technologies Private Ltd.


In a public announcement on Saturday, KRN Heat Exchanger and Refrigeration has undertaken pre-IPO placement of 4.77 lakh equity shares at Rs 200 apiece, aggregating the transaction size to Rs 9.54 crore.


Most of these funds have been collected by allocating shares to individual investors.


This has been undertaken following the approval by the board and shareholders in their respective meetings on August 3 and August 6.


Holani Consultants is the sole book-running lead manager to the company’s maiden public issue.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Aug 18 2024 | 12:15 PM IST



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India's holding of American securities hits high of 1.9 bn in June

India's holding of American securities hits high of $241.9 bn in June

by | Aug 18, 2024 | Share Market


India was at the 12th place owning American government securities | Representational

2 min read Last Updated : Aug 18 2024 | 11:51 AM IST


India’s holding of US government securities touched a high of $241.9 billion in June as the country continued to increase its exposure for the third straight month.


Japan was the top holder with securities worth over $1.11 trillion followed by China at the second spot with a holding valued at $780.2 billion in June, according to the latest data released by the US Treasury Department.


At the third place was the United Kingdom with an exposure of $741.5 billion ahead of Luxembourg at the fourth position with a holding to the tune of $384.2 billion.


Among the countries and jurisdictions, India was at the 12th place owning American government securities worth $241.9 billion in June, higher than $237.8 billion value recorded in May.


As per the data, India’s holding is the highest in the last one year and it was at $237.8 billion in May 2024. In April this year, it touched $233.5 billion declining from $240.6 billion in March.


In June last year, the exposure was at $235.4 billion.


Other countries/ jurisdictions among the top 10 holders were Canada at the fifth spot with a holding of $374.8 billion, followed by Cayman Islands ($319.4 billion), Belgium ($318 billion), Ireland ($308 billion), France ($307.2 billion) and Switzerland ($287.1 billion).


At the 11th position was Taiwan with an exposure of $265.9 billion.


The global economy is witnessing uncertain times amid high inflation, geopolitical tensions and other challenges. There is an uneven growth pattern and in the June quarter, the real GDP in the United States expanded at an annual rate of 2.8 per cent, higher than 1.4 per cent seen in the first three months of 2024.


In its World Economic Outlook Update issued in July, the International Monetary Fund (IMF) said the global economy is in a sticky spot and projected a growth of 3.2 per cent for this year.

First Published: Aug 18 2024 | 11:51 AM IST



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