Tit - Bits

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Domestic bourses ended with heavy losses on Thursday, in view of weaknes in the global markets and also due to increasing number of Covid - 19 cases. 

The S&P BSE Sensex nosedived 708.68 points or 2.07% to close at 33,538, while the Nifty50 tumbled 214.15 points or 2.12% end the day at 9,902.

The BSE Mid-Cap index also fell by 1.41% and the BSE Small-Cap index lost 1.04%. On the BSE, 1,018 shares rose and 1,533 shares fell, while 154 share remained unchanged mirroring the weakness in the broader market. 

Meanwhile, the Organisation for Economic Co-operation and Development (OECD) has kept India's growth at -3.7% for the ongoing fiscal and warned that growth could further slump to -7.3% in the case of a second COVID-19 outbreak. 

In another significant development the US Federal Reserve held interest rates at near zero on Wednesday, after a two-day Federal Open Market Committee meeting. Most policymakers expect historically low interest rates to continue through 2022. The central bank also set a floor for its asset purchases, pledging to buy at least $80 billion in Treasury and $40 billion worth of mortgage-backed securities, every month. The US central bank predicted that US economy could contract by 6.5% in 2020 before expanding by 5% in 2021.

In view of the prevailing circumstances, I will suggest two short calls:

#Sell TVS Motor Company Ltd at around Rs.332/333, for short term targets of Rs.325/307. SL: Rs.339. 

In the Automobile sector,  the registration of vehicles fell across Indiaby 88.9% on year-on-year in May due to the COVID-19 sponsored Lockdowns continued across large parts of the country, the Federation of Automobile Dealers Associations (FADA) said.
On a year-on-year (YoY) basis, all vehicle categories registered unprecedented de-growth: registration in the two-wheeler fell by 88.8%, three-wheeler by 96.34%, commercial vehicles by 96.63%, passenger vehicles by 86.97% and tractors by 75.58%, respectively. The situation is like to deteriorate father due to a hit in the discretion spending of the consumers.

Financials:TVS Motor Company reported around 43.3% fall in its consolidated net profit to ₹81.85 crore in Q4FY20. It’s total revenue was also down by 20.5%, YoY to ₹3,481.42 crore during the same period. The fall was sharp considering that the coronavirus lockdown period was just for one week in the relevant period -- the motorcycle giant saw a steep drop of 62.01% in its March sales.
Therefore,  we can imagine the condition of its finances when India is reeling under Covid - 19, Lockdown. If the Lockdowns extends beyond June,  2020, the share price could go below Rs.300/297, mark, as it could further dent the margins, as costs are not falling in line with sales. The company had to incur costs arising out of: salaries, materials and advertisements, even though the demand remained weak.

#Sell the shares of BHEL (Rs.2, FV) at the CMP of Rs.30, for short term targets of Rs.27/24. SL: Rs.33  With power sector demand still struggling, and its factories and staffs remaining idle for months, following Covid - 19 Lockdowns across India, in the short term, I expect negativity to continue as regards to its share price. 

It is pertinent to mention here that the scrip of Bharat Heavy Electricals Ltd (BHEL) surged as high as 36% in just a couple of days, last month, after the company invited expression of interest (EOI) from foreign companies to use its currently idle factories, in an attempt to encourage PM Narendra Modi’s ‘Make in India’ program. However, there are two factors here:

• It is very dicey to bet on this parameter when the whole world is under the grip of Covid - 19, with number of cases increasing everyday in India; accompanied by the threat of an outbreak of Covid - 19, part II and
• Hereto, the Unscrupulous, Jumlabazz and Showman, Narendra Modi's "Make in India", campaign has been a flop show.