Equity markets continue to trade with healthy gains

Indian equity markets continued to trade with healthy gains in late afternoon session with Sensex and Nifty garnering gains of over two percent each. Capital Goods, PSU and Industrials counters were on the priority list of the buyers. The sentiment remained largely positive with Prime Minister Narendra Modi's announcement of Rs 20 lakh crore stimulus package was the need of the hour as it will pave the way for post pandemic recovery and unleash the next wave of economic growth. Traders paid no heed towards India's industrial output, measured in Index of Industrial Production (IIP), contracted by 16.7% in March 2020 mainly on account of poor show by mining, manufacturing and electricity sector due to the nationwide lockdown. The IIP had grown by 2.7% in March 2019. The IIP in the last fiscal contracted by 0.7% from 3.8% expansion in the 2018-19. The government had imposed lockdown to contain Covid-19 from March 25, 2020. Sector wise, auto sector were trading in green despite India Ratings (Ind-Ra) latest report stating that auto component industry is likely to register a second consecutive year of a double-digit degrowth in the current financial year (FY21) mainly on account of disruption in operations due to coronavirus (Covid-19) outbreak and the subsequent lockdown.

On the global front, European markets were trading lower amid fears investors and markets are out of touch with reality over the length of time it will take economies to bounce back from the coronavirus pandemic.

The BSE Sensex is currently trading at 32036.04, up by 664.92 points or 2.12% after trading in a range of 31901.92 and 32845.48. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 1.60%, while Small cap index was up by 1.76%.

The top gaining sectoral indices on the BSE were Capital Goods up by 4.84%, PSU up by 3.80%, Industrials up by 3.76%, Bankex up by 3.60% and Auto was up by 3.22%, while Healthcare down by 0.59% was the only losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 6.01%, Ultratech Cement up by 5.65%, Mahindra & Mahindra up by 5.34%, Axis Bank up by 4.80% and SBI up by 4.77%. On the flip side, Nestle down by 4.45%, Sun Pharma down by 2.08%, TCS down by 0.15% and Hindustan Unilever down by 0.14% were the top losers.

Meanwhile, India Ratings (Ind-Ra) in its latest report has said that auto component industry is likely to register a second consecutive year of a double-digit degrowth in the current financial year (FY21) mainly on account of disruption in operations due to coronavirus (Covid-19) outbreak and the subsequent lockdown. It noted that the counter measures are likely to lead to lower income levels, weaker consumer sentiments, production disruptions, decreased industrial output as well as lesser movement of vehicles, resulting in a decline in global automobile demand and therefore, lower revenue and profitability for auto ancillaries in FY21.

Ind-Ra expects that the auto ancillaries industry on an average could record at least 100bp EBITDA margin decline in FY21 and the profitability decline for export focused auto ancillaries could be steeper as exports earn higher margins. It said the lower commodity prices could aid the profitability for the sector, though only to a limited extent, due to pass-through agreements with OEMs and OEMs' higher bargaining power. Also, it said some benefit may accrue to companies with overseas manufacturing units, as certain economies have announced support measures to meet part of the fixed costs during the shutdown period. It added that a depreciated rupee rate could partly offset the decline in sales volumes; however, the benefit is not expected to be significant.

However, the report stated that the revenue and profitability of auto ancillaries focused on domestic markets are likely to fare better due to higher content per vehicle on the back of evolving regulatory norms including BS-VI applicable from April 1, 2020. It said entities with a large reliance on overseas markets are expected to face a higher demand risk as the key markets of the US and Europe have been the most impacted by the virus, which could lead to uncertain business conditions.

The CNX Nifty is currently trading at 9399.75, up by 203.20 points or 2.21% after trading in a range of 9351.10 and 9584.50. There were 44 stocks advancing against 6 stocks declining on the index.

The top gainers on Nifty were Larsen & Toubro up by 5.99%, Ultratech Cement up by 5.69%, Axis Bank up by 5.44%, Mahindra & Mahindra up by 5.39% and Zee Entertainment up by 5.39%. On the flip side, Nestle down by 4.41%, Sun Pharma down by 2.16%, TCS down by 0.29%, Hindustan Unilever down by 0.20% and Bharti Airtel down by 0.09% were the top losers.

European markets were trading lower, UK’s FTSE 100 decreased 69.42 points or 1.16% to 5,925.35, France’s CAC decreased 88.26 points or 1.97% to 4,384.24 and Germany’s DAX was down by 203.57 points or 1.88% to 10,615.93.