Demonitisation of high-value currency notes by India Government, repo rate cut by Reserve Bank of India, US Presidential election results, unimpressive corporate results etc dampened the sentiments on the bourses
The demonetisation has made an impact on the bourses and the resultant drop in auto sales has affected the stocks of tyre companies. The BSE Sensex during the period of October 7,2016 to December 8,2016 fell 5%, and there was a corresponding fall in the stocks of most tyre companies on the bourses.
After having a negative return in September, the sentiment of the share market was further damped on the growing tension between India and Pakistan. The market mood did not revive even after the Reserve bank of India cut the much-awaited repo rate by 0.25 bps in its fourth bi-monthly policy review.
The bourses’ worries were escalated further when the US Federal hinted that it will increase interest rate in December, which is expected to affect the US economic condition and other macroeconomic factors.
Finally, the month ended on a flat note, having a rise of 0.23% to settle at 27,930.21. On the institutional side, foreign institutional investors sold Rs 43.06 billion worth of equities during the month while domestic mutual fund houses bought Rs 81.06 billion in October 2016.
Turbulent session
The month of November brought two unexpected major developments that shook the Indian share markets to its core and wiped out all gains made this year. The bourses witnessed turbulent session following US Presidential election results and the demonetisation of Rs500 and Rs1,000 denomination currencies by India Governmnet. The unexpected results of the US elections hit the bourses so badly that foreign institutional investors sold more than Rs36 billion in the debt market– the biggest outflow since May this year.
Another blow hit the market as Indian Prime minister Narendra Modi demonetised Rs500 and Rs1,000 denomination notes with a view to curbing black money. A sudden increase in banking system post-demonetisation and the RBI’s decision to hike Cash Reserve Ratio to 100% for incremental deposits between September 16 and November 11 impacted the market negatively.
The demonetisation decision is also expected to hit the GDP growth and corporate earnings badly in the next few quarters. At the end of the month, the Sensex had a negative return of 4.57% and settled at 26,652.81. On the institutional side, foreign institutional investors sold Rs 182.44 billion worth of equities during the month while domestic mutual fund houses bought Rs 136.10 billion in November 2016.
Apollo plunges 13%
Apollo Tyres’ stocks fell 13% during the period of October 7,2016 to December 8,2016 following the trends on the bourses. The company’s announcement of setting up a tyre plant in Andhra Pradesh and opening of a new Global R&D Centre in Chennai did not help the company’s stocks to move up.
The company signed a MoU with the Andhra Pradesh Government to build a tyre manufacturing plant to produce scooter, motorcycle and pick-up tyres, with an investment of Rs5.25 billion. The Kanwars-led company also opened its second Global R& D Centre in Chennai for new product development for entire Asia Pacific, Middle East and African regions.
However, coupled with share markets’ dampened mood on demonetisation and the US elections result, the company’s earnings for the second quarter ended on September further pulled down the Apollo Tyres’ stock movements. Apollo Tyres’ consolidated net profit for the second quarter fell 7% to Rs2.60 billion as against Rs2.80 billion in the same quarter of last fiscal. The company’s total income from operations rose 1.28% to Rs 33.12 billion during the quarter under review as against Rs 32.70 billion in the same quarter last fiscal.
Mixed fortunes for MRF
MRF’ stocks fell over 3% thanks to major volatilities during the period. The company’ stocks saw periodical up-and-down movement in the period. From the start of the period to October 26, MRF’s stocks steadily fell on the bourses, which plunged sharp on October 27 on the company’s negative quarter results.
The Chennai- based company’s consolidated net profit fell 14% to Rs3.85 billion for the second quarter ended September 30. It had reported a consolidated net profit of Rs4.50 billion in the same period of last year. MRF also reported a fall of 1.04% to Rs36.15 billion in sales during the quarter against Rs36.53 billion in the corresponding quarter last fiscal.
MRF’s stocks surged between October 27 and November 10, 2016, but fell till November 21. After that, the company’s stocks increased till the end of the period, but could not manage to be in the positive zone.
BKT suffers steady fall
Balkrishna Industries’ stocks fell steadily on the bourses throughout the period, however at the end of the period, the company’s stocks saw a sharp surge that helped them to report a 7% growth in the period. The off-the-road tyre-major’s stocks saw a big correction on November 29.
Stocks of JK Tyre fell over 20% in the period. The company’s stocks fell steadily till November 20 and then picked up afterwards. However, the gain could not manage to offset the initial loss. Meanwhile, JK Tyre reported a consolidated net profit of Rs1.10 billion in the July-September 2016 quarter compared to a net profit of Rs1.16 billion in the same period of last fiscal.
Two-wheeler major TVS Srichakra’s stocks fell 9.27% in the period, while stocks of Ceat and Goodyear India decreased by 7.74% and 13.65% respectively in the period.