Chips down for carmakers?

Nifty50: 17,234  ▲ +157 (+0.9%)
Sensex: 57,852 ▲ +514 (+0.9%)

After a brief halt yesterday, buying interest was back with the benchmark indices closing at new lifetime highs. Of the Nifty50 stocks, 36 closed in the green, indicating broad-based buying. 

Top gainers among the Nifty sectoral indices included IT (+1.6%) and FMCG (+1.6%), while PSU Bank (-0.4%) and Auto (-0.2%) closed the weakest today.

Here are the top stories of the day.

M&M hit by chip shortage

The utility vehicle maker has announced no-production-days of about a week in the month of September on account of supply shortage of semiconductors. This is estimated to result in a contraction of 20-25% in the production volumes of its automotive division. 

The company maintains that the semiconductor shortage will not affect production of tractors, trucks, buses and three-wheelers. Industry leader, Maruti has also announced an expected drop in production due to semiconductor shortage. Shares of M&M were down 1.9% and the stock was the top loser in the Nifty50 pack. Meanwhile, the Nifty Auto index was down 0.2% today. 

Kitex surges on capex approval

Shares of the Kerala-based garments and fabrics firm were locked in their 10% upper circuit after the government of Telangana approved the company’s capex plans. The company plans to invest ₹1,000 crore in the state as part of its expansion plan. 

As per the company, it will be able to reduce its operating costs by leveraging the state’s subsidies, access to raw materials and labour. The investment will be made over a span of two years, and will be used to double its production capacity to 8.6 lakh units of infant-garments per day. The stock has gained over 43% so far in Q2. 

Ahluwalia Contracts gains on large order

The construction company has secured a new order worth ₹229 crores for the construction of an affordable housing project in Kolkata. The order has been granted by West Bengal Housing Infrastructure Development Corporation.

Ahluwalia Contracts closed Q1FY22 with revenue from operations of ₹580 crore and profit of ₹34 crore. The stock gained 6.4% intraday, before closing 2.2% higher than yesterday’s closing. 

Closing bell

The markets resumed their broader uptrend today. Most of the key sectoral indices were up, suggesting all-round support to the market rally. The Nifty Midcap 100 index too is rising in-sync with Nifty50 and is at its lifetime high. However, the Smallcap 100 index still lags and is below its life-time high. This leaves the door open for a catch-up rally, as is seen generally where indices confirm each other. Meanwhile, the US’ jobs-related data is due today. It could give an indication of the strength of economic recovery and how soon the Fed could start cutting back its stimulus.  

Good to know

What is a bull and bear trap?

A bull trap takes place when a stock rises and breaks the resistance level but then quickly reserves in the opposite direction. This means the bulls have failed to support the rally which could be due to lack of momentum. Similarly, a bear trap happens when a stock falls below the support level but then moves up. Identifying these traps is extremely important for traders not only to minimize losses but also to stay with the trend. 

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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.