Home / Markets / Stock Markets /  Indian markets likely to be volatile; auto and financial stocks in focus

MUMBAI: Indian stock markets are likely to be volatile on Monday following global cues. Trends in SGX Nifty suggest a negative opening of benchmark indices. On Friday, the BSE Sensex ended at 37,606.89, down 129.18 points or 0.34% and the Nifty closed at 11,073.45, down 28.70 points or 0.26%

Asian share markets turned mixed on Monday as US lawmakers struggled to hammer out a new stimulus plan amid a global surge in new coronavirus cases, though a squeeze on crowded short positions gave the dollar a rare bounce.

Sentiment was helped by a survey showing China's factory activity expanded at the fastest pace in nearly a decade in July, with the Caixin/Markit PMI at 52.8.

Japan's Nikkei added 2.1% amid a pullback in the yen, while South Korea shares were flat.

Shares of auto companies will be in focus today. According to industry experts, automobile sales in India will likely stay in the slow lane for some time despite a rise in sales in July, given the uncertainties over demand. Maruti Suzuki India Ltd, the country’s top carmaker, posted a 1.8% year-on-year (y-o-y) rise in local sales to 100,000 units in July. This was driven by a 49% jump in sales of entry-level cars such as Alto and S-Presso, and 26% in utility vehicles such as Vitara Brezza and Ertiga.

In the June quarter, the 13-persistency ratio, which measures how long a policyholder retains insurance, declined by an average of close to 10 percentage points from a year ago, the executives of insurance companies said according to a Mint a report. The decline means many customers did not renew policies after paying the first year’s premium.

Market participants will eye the Reserve Bank of India’s Monetary Policy Committee meeting on 6 August. Policymakers may keep rates unchanged due to rising uncertainty over the inflation outlook, shows a Mint survey of bankers and economists. However, there is a possibility of a 25 basis point cut in reverse repo as the MPC looks to push banks to pass on the rate cut instead of keeping money at the reverse repo window.

Bandhan Bank shares will be in focus. To bring bring down promoter shareholding to meet RBI norms, the bank's promoter entity Bandhan Financial Holdings Ltd, will be selling shares worth 10,500 crore through block trades on the stock exchanges, according to deal terms seen by Mint.

Meanwhile, investors were nervous at the lack of a new stimulus package in the US with White House Chief of Staff Mark Meadows not optimistic on reaching agreement soon on a deal.

The uncertainty saw benchmark 10-year Treasury yields hit their lowest since March at 0.52% last week and were currently just a fraction higher at 0.55%.

The 10-year real rate has broken below -1% for the first time amid a marked flattening of the yield curve as investors wager on yet more accommodation from the Federal Reserve.

That took a heavy toll on the US dollar which suffered its worst monthly drubbing in a decade in July, though it was attempting a rally on Monday as bears took profits on crowded short positions.

The dollar was last at $1.1758 per euro, with the single currency having gained 4.8% in July to stretch as far as $1.1908. Against a basket of currencies, the dollar stood at 93.566 having touched its lowest since May 2018 on Friday at 92.538.

The dollar regained a little ground on the yen to 106.01 after hitting a 4.5 month low last week at 104.17. The decline in the dollar combined with super-low real bond yields has been a boon for gold, which boasted its biggest monthly gain since February 2016.

The metal made a fresh peak early Monday at $1,984 an ounce and seemed on track to take out $2,000 soon.

Oil prices eased on concerns about oversupply as OPEC and its allies, together known as OPEC+, are due to pull back from production cuts in August while an increase in covid-19 cases worldwide raised fears of slower pick-up in fuel demand. Brent crude futures dipped 7 cents in early trade to $43.45 a barrel, while U.S. crude CLc1 eased 8 cents to $40.19.

(Reuters contributed to the story)

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