Fast & Furious Auto Sales in May | RBI to extend the breather on rate hikes? | Top 5 high dividend yield stocks in 2023
As we reflect on the performance of India’s auto sector in May 2023, we are reminded that the automotive industry is a complex, interconnected web of various segments. Each has its own unique set of dynamics and drivers, contributing to the ebb and flow of the industry. The month of May witnessed the PV segment reflecting an increase in wholesale volume, a rise in two-wheeler sales, and pre-booking of electric vehicles.
Key Highlights from May
Passenger vehicle:?The passenger vehicle (PV) industry showed sluggish retail volumes but recorded a significant 13-15% YoY increase in wholesale volumes. Maruti Suzuki, Mahindra & Mahindra, and Hyundai Motor reported growth in sales, with Maruti Suzuki’s dispatches rising 10% YoY.
Two-wheeler segment:?The two-wheelers segment witnessed robust volume growth of 10% YoY, a surge mainly driven by the pre-buying of electric models and increased demand during the wedding season. Companies like Hero MotoCorp, Eicher Motors, and TVS Motor reported growth in sales, with Hero MotoCorp’s dispatches to dealerships surpassing analysts’ expectations with a 7% rise.
Commercial vehicle:?On the flip side, the commercial vehicle (CV) segment experienced a mid-to-high single-digit YoY decline in volumes. This downward trend was primarily due to the pre-buying activity preceding the transition to BSVI Phase II in March 2023. Despite this, some companies like Eicher Motors saw growth, with its commercial vehicle arm’s sales rising by 11.6% YoY.
The domestic tractor industry observed a low single-digit decline in volumes, but the upbeat sales figures from Escorts Kubota Ltd. present an encouraging picture.
A sector attractive to investors
The mixed bag of performances notwithstanding, the auto sector seems increasingly attractive for investors, particularly Foreign Portfolio Investors (FPIs). In recent times, the auto sector has witnessed a significant upsurge in FPI investments.
The weight of the automobile sector in the equity portfolio of FPIs touched a multi-month high of 6.18% in May. According to data from the National Securities Depository Limited (NSDL), the auto sector accounted for 21% of the total FPI inflow of $5.4 billion since the start of the year.
Several factors contribute to this investment attractiveness. The Indian government’s emphasis on infrastructure, ease of access to vehicle loans, a surge in new launches, and a focus on electric vehicles have all combined to make the auto sector a hotbed for investment.
Moreover, the auto sector accounts for a significant 7.1% of India’s GDP and 8% of its exports. This underpins the strategic importance of the sector to the national economy and the investment landscape. Despite having a high base, industry experts project the sector will continue to grow at a rate of 5-6%.
Which auto stocks have a promising outlook ahead? Click here to know.
Up your finance quotient: What else needs your attention?
1) Top 5 high dividend yield stocks
Dividend-paying stocks are important for investors seeking a regular income stream from their investments. When a company generates profits, it may choose to distribute a portion of those profits to its shareholders in the form of dividends.
Here's why dividend-paying stocks are significant:
In this video, we dive into 5 fundamentally strong stocks that have a high dividend yield ratio and a payout of up to 80%.
2) Types of Earnings Per Share (EPS) calculations and How to use them?
Earnings per share (EPS) is a way to measure how profitable a company is on a per-share basis. It helps investors make smarter investment choices. To calculate EPS, you divide the company's net income by the total number of shares. To find EPS, you need to look at the income statement for net income and the balance sheet or annual report for the number of shares. Here's the formula to calculate EPS = Net income / Number of outstanding shares
However, there are many types of EPS
To understand all of these and the formula of each, read here .
3) The steep rise in FASTag collections
Did you know that more than 6.4 crore FASTags have been issued till Jan 2023??And these numbers have only been increasing at a fast pace.
Here are some startling numbers that you should know:?
To get more such quick takes on brands, stocks and economy, follow us?here .
Question in Focus
Will RBI retain its pause on rate hikes? 5 key factors in support of India’s growth story
As retail inflation continues to ease and the GDP numbers show a strong recovery, the Reserve Bank of India's monetary policy committee is expected to keep the benchmark repo rate unchanged at 6.50% in its meeting on June 8, says a poll of economists done by CNBC-TV18.
April’s consumer price-based inflation dropped to an 18-month low of 4.7%. May’s inflation numbers will be released on June 12 and RBI governor Shaktikanta Das expects it to trend lower.
The government has mandated the RBI to ensure CPI inflation at 4%.?
A Goldman Sachs report stated, “The RBI will likely keep the repo rate unchanged in the June 8 policy meeting at 6.5%, as we forecast April-June 2023 headline inflation to be around 50bps (100bps=1 percentage point) below the RBI’s forecast from the April meeting.”
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Let’s look at some of the key factors that might contribute to another pause in rate hikes:
India's economy grew by 6.1% in the fourth quarter of fiscal year 2022-23, bringing the annual growth rate to 7.2%. This was higher than the 4.5% growth rate in the previous quarter. Not just that, India's manufacturing activity, measured by the Purchasing Managers Index (PMI), reached a 31-month high in May, according to the data released by the S&P Global Market Intelligence.
The services sector grew at a faster pace in the latest quarter, led by growth in the construction, trade, hotels, and transport sectors. This, along with higher investment, supported overall economic growth. However, private final consumption expenditure grew at a slower pace.
Y-o-Y growth in various segments in FY23:
2) Withdrawal of Rs 2000 notes
Moreover, RBI’s decision to withdraw the Rs 2,000 denomination banknote from circulation is expected to improve liquidity in the banking system and bring down short-term interest rates.?
The value of these notes in circulation is about 3.6 trillion rupees ($44.02 billion), but not all of this will be deposited in banks. In May, India's banking system liquidity surplus averaged above 600 billion rupees.
3) Fiscal deficit eases
The Centre achieved its fiscal deficit target of 6.4% for the fiscal year 2022-23, thanks to strong tax receipts and lower payments. The actual fiscal deficit for the year was Rs 17.33 lakh crore, slightly below the revised estimate of Rs 17.55 lakh crore.
In terms of numbers, total receipts for fiscal 2023 were Rs 24.56 lakh crore, while overall expenditure amounted to Rs 41.89 lakh crore.
Additionally, the data revealed that the government's capital expenditure for FY23 surpassed the revised target of Rs 7.28 lakh crore by Rs 8,551 crore.
4) Record high GST collections
India's gross GST revenue collection for May reached Rs 1,57,090 crore, showing a 12% increase compared to the previous year, according to the Ministry of Finance.
In April, India achieved a record-high GST collection of Rs 1.87 lakh crore.
For the 14th consecutive month, monthly GST revenue has exceeded Rs 1.4 lakh crore. The gross revenue has surpassed the 1 crore mark.
5) US-debt ceiling law
US President Joe Biden signed a law on Saturday that raised the country's debt limit, preventing the government from defaulting on its debt.?
This was the end of a long and stressful process that had caused Indian and the global financial markets to worry and had made people who rely on government payments to make plans in case the government couldn't pay its bills.?
The debt ceiling is a limit on how much money the US government is allowed to borrow. When the debt ceiling is reached, the government can no longer borrow money to pay its bills.
Since 2022, India has hiked repo rates by 250 basis points. However, the US has hiked it by 500, and Canada and UK both by 425 points each.?
If we look back at the recent policy decisions by various economies, as many as 95 have retained the status quo, and 43 have increased it.?
It is not all pretty?
Even as economic development tends to rise, what remains worrisome is the rising unemployment rate.?
The number of unemployed people in India increased in April, reaching 8.11% from 7.8% in March, the highest level in four months. This is because more people are looking for work than there are jobs available.
As inflation eases, the unemployment rate is also expected to go down. This is because the two are inversely related. This means that when inflation rises, unemployment drops. And when inflation drops, unemployment tends to rise.
It will be interesting to see the impact that the pause in rate hikes will have on the unemployment rate.?
Week Ahead for Markets: What to expect?
1) RBI MPC Meeting: June 6 to June 8, the decision on a rate hike on June 8
2) Oil Prices: Oil prices gained over 2% on June 2 after the US Congress passed a debt ceiling deal that averted a government default. All eyes are now on a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies over the weekend.
3) FII and DII inflows: Foreign institutional investors (FIIs) bought Rs 6,519.7 crore in the cash segment,?mainly led by MSCI rebalance on May 31.
4) Monsoon progress: With arrival of monsoon expected early this week, rural and agri-related stocks will be in focus.
5) Domestic Economic Data Points: S&P Global Composite PMI and S&P Global Services PMI data for the month of May, will be released on June 5. Investors will be keenly monitoring whether this momentum continues in May.
6) Global Economic Data Points: