Second wave dents auto, FMCG sales

Nifty50: 15,737 ▲+102 (+0.6%)
Sensex: 52,300 ▲ +358 (+0.6%)

The markets opened with a gap up and continued to inch higher, supported by broad-based buying. The market breadth was positive, with 34 of the Nifty50 stocks closing in the green. 

All sectoral indices, except Nifty Auto (-0.1%), closed higher today. Nifty Media (+4.6%) and Nifty Realty (+3.3%) were top gainers for the day. 

Here are the top stories of the day.

Lockdowns hurt FMCG sales

• Sales of fast-moving consumer goods (FMCG) declined by 32% month-on-month in May due to regional lockdowns, as per a survey conducted by a retail intelligence platform. This comes on the back of a 16% month-on-month drop in FMCG sales in April. 
• Among the key categories, personal care and beverages saw a drop of 52% and 33% in May, respectively. Despite the subdued performance, the Nifty FMCG index rose by over 6% since May. 

ION Exchange bags large orders

• Shares of Ion Exchange rallied by 7% on today after it bagged two orders for water treatment plants worth ₹1,000 crore. The stock has been on an upward trajectory over the last two days, rising up by 28%. 
• This comes after the company reported strong results on Tuesday. The company’s consolidated net profits more than doubled on a year-on-year basis to ₹70.5 crore driven by a 26% surge in operating income.  

Auto sales slide in May

• As per the Federation of Auto Dealers’ Associations (FADA) retail auto sales were down nearly 55% in May as compared to April. All auto segments, including passenger vehicles and two-wheelers, fell by over 50%. The drop in sales is due to most regions being under lockdown in May. 
• However, the industry body also mentioned that in the first nine days of June, auto sales have been better than expected due to pent-up demand. Further, expectations of normal monsoon could lift rural demand. Meanwhile, the Nifty Auto index fell 0.1% today but is up about 9% so far this fiscal. 

MMTC to restructure debt

• The board of state-owned MMTC has approved its debt restructuring scheme, under which proceeds from the divestment of Neelachal Ispat Nigam Limited (NINL) will be used for settlement of dues.
• Under this scheme, various banks have deferred the principal and interest payments up to March 2022. The final settlement shall be made from the divestment proceeds of NINL. The company said that State Bank of India is the lead banker. Shares of MMTC rose 2.3% today and have gained over 40% so far in FY21.

Closing bell

In contrast to the weakness seen in the markets yesterday, today the bulls were in charge. However, the movement in the indices was confined within yesterday’s trading range. Thus, it doesn’t provide any particular directional cue. A clear trend will emerge when either yesterday’s high or low are breached. Tomorrow, the Index of Industrial production (IIP) numbers for April will be announced. This time around, the numbers – which are shown on YoY basis – won’t provide much information as in April last year the country was under total lockdown. At present, the markets are more concerned about the US retail inflation (to be released today) because that will give clues on how the Fed will act on the interest rates.

Good to know

What are trading volumes?

Trading volume refers to the amount of a security traded over a specified period. It shows the overall activity in a security and can indicate a trend. An increase in volume usually precedes an emerging trend and a drop in volume usually precedes an ending trend. Interesting trends are created when the price hits new highs or lows while the volume drops. This price-volume divergence could point to a trend reversal.

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Investment in securities markets is subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by RKSV group. Investors should consult their investment advisor before making any investment decision.