NITI Aayog#39;s aggressive EV push drags auto stocks

On a volatile day for Indian markets, Nifty took support at its 50-day exponential moving average (EMA) before staging a rebound but still failed to close above 11,700 on a closing basis on June 24.

Weak global cues, geopolitical concerns, rise in crude oil prices were some of the factors that weighed on the market sentiment. The final tally – Sensex was down 71 points to 39,122 while Nifty closed 24 points lower at 11,699.

It looks like traders have preferred to remain on sidelines amid high valuations ahead of the Budget. NITI Aayog’s 2-week deadline to draw EV roadmap also dampened sentiment.

“Markets are in a dilly-dallying mood at least till the Union Budget next week that can be a decision maker for the bourses. Nifty Auto index has faced a tough year by slipping almost 14 percent since January 2019 and on June 24 again it fell by over 1 percent intraday as Niti Aayog gave the companies a 2-week deadline to come up with a plan to switch to electric vehicles,” Umesh Mehta, Head of Research, Samco Securities told Moneycontrol.

“With declining auto sales, lack of supply chain for EVs, no charging infrastructure and transition to BS-VI efficient standards, the auto companies are facing a tough time juggling between weak revenues, dented margins and re-investment required to build 2 and 3 wheelers to match with the latest norms,” he said.

S&P BSE Oil & Gas index fell 1.5 percent, followed by the S&P BSE Metal index that was down 1.4 percent, and the S&P BSE Energy index, which was down 1.2 percent. The S&P BSE Auto index fell 0.32 percent.

The S&P BSE Power index, along with the S&P BSE Capital Goods index and FMCG index saw buying on a day when benchmark indices closed in the red.

Nifty formed a bearish candle on the daily charts for the second session in a row. Now, a break below 11,600 could lead to further selling in the index, suggest experts.

“Participants are closely eyeing developments on the global front, however, signals are still indecisive and that may cause further consolidation. Nifty has crucial support at 11,600 and its breakdown could trigger further fall,” Jayant Manglik, President – Retail Distribution, Religare Broking Ltd told Moneycontrol.

“We advise keeping positions on both sides in such scenario and waiting for a decisive break for the next directional move,” he said.

The big news came from the Mint Street as Reserve Bank of India’s (RBI) Deputy Governor Viral Acharya quit six months ahead the scheduled end of his term to return to New York University Stern School of Business (NYU Stern) as CV Starr Professor of Economics.

Stocks in news

Emami shares ended 6.5 percent lower on June 24 to hit a five-year low after a media report indicated that promoters sold stake via block deal route. A CNBC-TV18 report said about 8.3 percent equity of Emami exchanged hands in early trade via block deal route.

Auto stocks came under pressure on June 24 after the government think-tank NITI Aayog gave the industry a deadline of two weeks to come up with a plan to switch to electric vehicles. Bajaj Auto ended at Rs 2,810.00, down Rs 63.15, or 2.20 percent while Hero Motocorp closed at Rs 2,572.10, down Rs 33.40, or 1.28 percent.

Alembic Pharmaceuticals shares ended with gains of over 8 percent after the company received approval from the US health regulator for a drug that treats pain in cataract surgery.

Max India shares rallied 4 percent after Radiant Life Care completed its acquisition of a stake in Max Healthcare.

Global updates:

European stocks are trading mixed as investors continue to monitor geopolitical tensions between the US and Iran, which is stoking fears of a military confrontation in the Middle East. The pan-European Stoxx 600 is trading around the flatline in the morning.

Stocks in the Asia Pacific ended mixed on June 24. Shanghai Composite was up 0.21 percent to 3,008.15, while the Shenzhen component was largely flat at 9,212.12 and the Shenzhen composite fractionally lower at 1,576.09.

Hang Seng index was about 0.1 percent higher. Japan’s Nikkei finished its trading day 0.13 percent higher at 21,285.99, while the Topix index gained 0.12 percent to close at 1,547.74. Kospi closed largely unchanged at 2,126.33.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.