Market recap for 1 December 2020

Nifty50 ▲ 13,109 (+1.08%)       Sensex ▲ 44,655 (+1.15%)

Better-than-expected GDP numbers, record foreign flows and positive global cues helped the Indian markets rise today. Among the sectoral indices, the Nifty Realty index rose 3.3% as improving demand led to gains in key real estate stocks such as DLF (+4.2%), Prestige (+8.2%) and Oberoi Realty (+3.6%). Meanwhile, the Nifty FMCG index (-0.04%) ended nearly flat.

Top gainers (Nifty50)

Top losers (Nifty50)

Here are the top stories for the day.

November auto volumes a mixed bag

• Market leader Maruti reported a 2% year-on-year decline in its November domestic passenger vehicles sales. The fall mainly resulted from a 5% drop in the compact car segments (which include cars such as Alto, WagonR, and Swift). Lower sales to dealers could help to correct excess inventory, especially in this post-festive period. Shares of Maruti were up 0.8% for the day. 
• For M&M, domestic passenger vehicles sales (mainly utility vehicles) growth was robust at 24% compared to November 2019. Similarly, its domestic tractor sales grew rapidly by 55%. The festive season, coupled with strong rural demand, augured well for M&M products. Its shares rose 2.0% for the day. Domestic tractor sales for Escorts also grew by a strong 31%. Shares of Escorts witnessed profit booking and were down (-2.0%) for the day. 
• Among the commercial vehicles (CV), the medium and heavy trucks are seeing a turnaround in demand as the economy shows signs of recovery. Domestic CV sales of Ashok Leyland grew by 4% over last November. Its M&HCV segment saw a robust 23% increase in sales. The growth rates would have been significantly higher, were it not for the 90% year-on-year decline in bus sales (since schools are shut). Nevertheless, Ashok Leyland shares were up (+0.6%) today. Similarly, Volvo-Eicher’s domestic CV sales grew by 5% and its shares ended flat today. 
• Bajaj Auto reported a 7% growth in sales over last November. The Pune-based automaker’s shares picked up by 2.1% today. 

Vodafone-Idea hikes tariffs

• The tariff hike by telcos was in the offing. The management of Bharti Airtel has been quite vocal about it citing that current tariffs are unsustainable. 
• Vodafone-Idea has hiked tariff of two of its postpaid plans by ₹50. As per reports, the company lost nearly 15 crore users in the past nine quarters and runs the risk of losing another 5-7 crore subscribers in next one year. Hence, a tariff hike seemed quite natural to arrest the decline in revenue. However, in case the competition delays tariff hikes, Vodafone-Idea could lose more subscribers. That’s quite a catch-22 situation. 
• Meanwhile, the shares of Vodafone Idea (+2.5%) and Bharti Airtel (+3.5%) for the day. 

PMI eases to lowest in three months

• Although manufacturing activity continues to expand gradually, the rate of expansion fell to its lowest in the last three months. For November, the manufacturing Purchasing Manager’s Index eased to 56.3 versus 58.9 in October, which was the highest in the past decade. 
• Similar buoyancy was also observed in key sectoral indices such as Nifty Commodities (+11.5%), Nifty Auto index (+14.6%) for November 2020.

Burger King IPO opens on 2 December

Issue dates: 2-4 December
Price band: ₹59-60 per share
Lot size: 250 shares

Closing bell

Despite the recession, the markets surged today. Stark as that sounds, consider the situation from the market’s lens. Among others, traders love to see two things a) the direction of the current trend and b) what lies ahead. Although Q2 GDP numbers were negative, the growth trend is pointing upwards, i.e. -7.5% compared to -23.9% in Q1. Second, to visualize what lies ahead, a trader must make a guesstimate based on the news flow and management commentaries about various companies and sectors. Liquidity flow just quickens the entire process. 

Good to know

What is a recession?

A recession is a macroeconomic term that refers to a significant decline in general economic activity. Typically, two consecutive quarters of decline puts an economy into recession.

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Investment in securities markets are 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.