Sector Analysis

Auto Sector

The auto sector showed no signs of improvement in the month of November. Apart from facing the economic slowdown, it is adjusting its production lines to become BS-VI compliat by April next year.But as opposed to the overall downgrad trend adopted by auto stocks throught the year, am uptrend is observed for the past four months largely because of the increase asales in the festive season combined in the launch of new models.

Tata motors is the only stock in the industry that witnesseda positve growth in 2019 JLR a wholly owned subsidiary of tata motors reported a deteriotion of sales in the Chinese auto market. But with consistent growth stocks in the last five months have boosted investor’s confidence through preferential issue, the stake of Tata Sons int he tata motors has increased to 43.08 percent from 34.69 percent. These factors contributed to the utrend of company shares. Mahindra and Mahindra is the worst performer for the year 2019 although the sales of passenger vehicles revived due to festive season it couldn’t beat the low sales throught the year. While Tata has a susbsidary arm JLR which is a big factor in its growth of stocks one things that is common in both Tata has a subsidiary arm JLR which is a big factor in its growth of stocks one thing that is common in both Tata, the highest gamer and Mahindra, the highest loser is deterlorating commercial vehicle sale, which is caused not only by decreasing factory outut but also due to increased axle limit and increased efficiency of vehicualr movent due to GST implementation.

Banking Sector

The month of December was a mixture of ups and downs for bank stocks. While some banks like Federal Bank, RBL Bank led by ICICI Bank is a clear leader in this group with an impressive growth of 8.51% thogh the situation improved after the 10th of the month, the initial downfall suffered by stocks in the first week nullified the overall growth. Yes Bank shares were on a falling spree after the announcement of the name of the investors which was unable to boost the confidence of the investors. With the majority of the investors being noninstitutional, analyst of the pinion that is difficult to get RBI nod for stock sale.

The stock is slowly recovering due to a variety of factors such as the news of European investors willing to buy stakes in the lender. Also, recently it had come out of futures ban which will further boost rally. ICICI Bank is acting like an overweight stock in this segment . Among the factors that analysts say are working in favour of the bank is its improving assest quality, progress in loan growth, net interest margin (NIM) and insurance premium growth are the key value drivers for ICICI Bank.

IT Sector

The Great Indian IT industry deserves a big chunk of its revenue from exports with rupees on downfall. IT services are the biggest gainers in terms of revenue and this is a big propelling factor for the stocks. With the US and China nearing to the trade deal an atmosphere of optimism is created that the initial US-China trade pact will allay one of the major risks to global economic growth. All the major IT giants have performed well in the month of December with NIIT tech being the highest gainer. The recent buy back of shares propel the stock price to new highs.

The primary objective of a share buy back program is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better price to earnings(P/E) multiple. With good amount of free cash available buyback of shares is used to serve a dual purpose first rewarding the share holders and second utilization of available cash flow.

— Avichal Agrawal

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