Result season keeps the market busy; Macro data, Brent prices, and Currency movement are in focus
Benchmark indices fell after four-week gains on selling pressure in index pivotals. Some profit booking was observed which consequently dragged down the key indices. The global stock market continued to move upward. The Fed raised the interest rates by 25 bps to 5.25 to 5.50 pct. The Federal Reserve’s statement kept the door open for future rate hikes but prioritized data-driven decisions. The European Central Bank announced a new rate increase of a quarter percentage point, bringing its primary rate to 3.75 pct. Japan’s central bank held its benchmark policy rate at -0.1 pct. Bank of Japan announced an adjustment in its stance on its yield curve control policy. This is the first time 10-year JGB yields have hit this level since September 2014.
For the week, the Nifty ended down by 0.5 pct to 19,646 levels. The Nifty Midcap 100 and Nifty Small Cap 100 index gained 1.5 pct and 0.6 pct. On the institutional activity front, FIIs were net sellers of Rs 30.74 bn, and DIIs were net buyers of Rs 52.33 bn.
Crude oil prices have recorded their fifth consecutive weekly gain, marking the longest streak of such gains in over a year. For the week, Brent prices closed at USD 84.99 a bbl, up 4.9 pct from the previous week close of USD 81 a bbl. Gold fell 0.4 pct to USD 1,960 an oz in response to robust U.S. economic data.
Stocks/Sector in Spotlight
- ITC board of directors has given preliminary approval to the demerger of the hotel industry. ITC’s hotels division generates approximately 5 pct of total revenue and EBIT over the last decade, but more than 20 pct of capex in the past. For the FY23, the EBIT margin for the hotel business was a decade high of 21 pct. ITC Hotels had a revenue of Rs 25,850 mn and an EBITDA of Rs 8,320 mn for the FY23. According to the arrangement, the company will own nearly 40 pct of the new entity, with the remaining 60 pct held by the company’s shareholders in proportion to their shareholding.
- SRF Ltd reported a 41 pct drop in net profit for the June quarter to Rs 3,593 mn, down from Rs 6,320 mn the previous fiscal. Its revenue fell 14.3 percent year on year to Rs 33,384 mn in April-June from Rs 38,940 mn. Q1FY24 EBITDA margin stood at 21 pct which is lower than EBITDA margin of 26 pct in Q1FY23. Sales from the company’s chemicals, packaging film, and technical textiles areas dragged down overall revenue.
- Tata steel- As a result of its activities in Europe, Tata Steel’s combined net profit for the first Q1FY24 fell 93 pct YoY to Rs 5248 mn. Sales volume came at 7.2 mnt Vs 7.78 mnt QoQ, 6.62 YoY. The sales decreased by 6 pct due to lower volumes, partly offset by higher realisations across geographies. Q1FY24 EBITDA Margin came at 10 pct as compared to Q1FY23 EBITDA Margin of 24 pct. It was down by 57 pct. The company has spent Rs 40,890 mn on Capex on this Quarter because of that Net Debt stands at 713,920 mn.
- HDFC AMC post a 52 pct YoY increase in its consolidated net profit to Rs 4775 mn in the Q1FY24 vs Rs 3142 mn YoY. Revenue by 10.1 pct YoY to Rs 5745 mn.
- Bajaj Auto Q1FY24 net profit increased by 42 pct to Rs 16,650 mn, sales increased by 29pct. The increase in net profit is due to a favourable product mix, solid volumes, and an increase in its lineup’s average selling price (ASP). Sales increased by 29 pct to Rs 103,100 mn in the June quarter, up from Rs 80,050 mn in the same quarter last year. EBITDA for the Q1FY23 was Rs 19,540 mn, increased 51 pct YoY, while margins of 19 pct were increased 2.8 pct. Margins dropped by 30 basis points from 19.3 pct in Q4FY23.
- Asian Paints reported 52 pct YoY increase in consolidated net profit in Q1FY24 from Rs 10360 mn to Rs 15784 mn and 25 pct increase in QoQ. The Revenue of the Company rose by 6.67 pct on YoY basis. EBITDA margin also expanded by 5 pct to 23.1pct from 18.1pct, YoY. Double-digit volume growth and a relatively healthy value growth has been seen in decorative business.
- L&T Q1FY23 net profit soared by 46 pct to Rs.24,930 mn. The consolidated Net Sales increased by 34 pct to Rs. 478,820 mn as compared to Rs. 35,8530 mn reported in Year ago period. EBITDA stood at Rs 48,690 mn during Q1FY23, which is 23 pct higher as against Rs 39,530 mn YoY, EBITDA Margin came at 10.2 pct YoY. The Board has approved total buyback of Rs 100,000 mn, maximum price capped at Rs.3000/ share via tender offer. The company has also announced special dividend of Rs. 6/share.
- Tata Motors reported Consolidated Net profit of Rs 32,028 mn in the Q1FY24 as compared to loss of Rs. 50,066 mn in the corresponding quarter of the previous Fiscal. Net sales stood at Rs.1,022,361 mn, increased by 42.1 pct YoY but decreased by 3.5 pct QoQ. EBITDA came at Rs. 135,595mn, up by 326 pct YoY and up by 6 pct YoY. EBITDA Margin came at 13 pct in Q1FY24 as compared to Q1FY23 it was 4.4 pct. Global wholesales of Tata Motors passenger vehicles in Q1FY24 were at 140,450, higher by 8 pct as compared to Q1FY23. The Company’s board has approved delisting of TATA Motors DVR by issuing 7 ordinary shares for every 10 shares held by shareholders. The Scheme will lead to a reduction in the outstanding equity shares by 4.2 pct making it EPS accretive for all shareholders. There is no cash outflow for TATA Motors hence no impact on Net Debt.
- Bajaj Finance- The Asset under Management (AUM) of the company grew by 32 pct to Rs 2,700,000 mn in Q1FY24 from Rs 2,040,000 mn in the corresponding quarter of the last year. The company has Reported YoY 27 pct increase in Net interest Income (NII) at Rs. 67,180 mn. The Net profit during Q1FY24 increased by 34 pct YoY at Rs. 34,370 mn. It reported 34 pct growth in new loan booking to 9.94 mn YoY basis. The Gross NPA stood at 0.87 as compared to 0.94 on QoQ. The NPA stood at 0.31pct as compared to 0.34 pct QoQ.
- Bajaj Finserv reported a 48.4 pct YoY increase in net profit to Rs 19,426 mn for the quarter ended June 2023, up from Rs 13,090 mn in the same period previous year. The company’s total income rose 46.5 pct YoY to Rs 232,800 mn up from Rs 158,883 mn the previous year ago period. Bajaj Allianz General Insurance company (BAGIC) gross written premium grew by 23 pct in the June quarter. Bajaj Allianz Life Insurance Company (BALIC) recorded growth of 15 pct in individual rated new business premium in the quarter under review. The consolidated total income and net profit of Bajaj Financial Securities increased by 47 pct and 48 pct respectively.
- M&M has bought 3.53 pct stake at Rs 4,170 mn in RBL Bank and it also plans to raise it 9.90 pct, subject to regulatory approval. But It is also ensures that they will not exceed 9.9 pct stake. The acquisition on stake in the RBL bank suggested that the conglomerate is now looking to expand in the Banking Sector.
- Piramal Pharma’s Board has approved Rs. 10,500 mn Right issue at Rs.81 per share. The record date for determining eligible shareholders for the right issue is August 2 and closing date is 16th august. Ratio for the Right issue is fixed at 5:46. The proceeds, according to the draft papers, will be used for debt repayment and other company objectives.
- Tech Mahindra has reported Net sales 4.07 pct lower on QoQ basis at Rs 131,590 mn vs. Rs 137,182 mn. The EBIT is 42 pct lower sequentially at Rs 8,910 mn versus Rs 15,300 mn in March 2023 quarter. EBIT margin stood at 6.77 pct vs. 9.60 pct. Net profit down by 37.5 pct at Rs 7,036 mn vs. Rs 11,250 mn QoQ. EBIT down 32.4% at Rs 8,914 mn as compared to Q4FY23 Rs 13,178 mn. The entire contract value has dropped to USD 359 million from $592 million in the March 2023 quarter. Revenues in the manufacturing, technology, and other verticals increased by 3 pct to 8 pct YoY.
Mutual Funds Industry Update
Quant Mutual Fund launches Quant Manufacturing Fund
Quant Mutual Fund has launched Quant Manufacturing Fund, an open ended equity scheme following manufacturing theme. The new fund offer of the scheme is open for subscription and will close on August 8. The performance of the scheme will be benchmarked against Nifty India Manufacturing Index. The primary objective of the scheme is to generate long term capital appreciation by investing in equity and equity-related instruments of companies that follow the manufacturing theme. The scheme will invest in companies with strong profit potential from production & exports, on the back of technology & automation, including those benefiting from the government’s ‘Make in India,’ PLI, and export incentives.
ICICI Prudential Mutual Fund launches ICICI Prudential Nifty 200 Quality 30 ETF
ICICI Prudential Mutual Fund has announced the launch of ICICI Prudential Nifty 200 Quality 30 ETF. The scheme aims to provide returns that correspond to the returns provided by Nifty 200 Quality 30 Index, subject to tracking errors. The selection universe for this index is the Nifty 200 Index. The Quality score for each company is determined based on Return on Equity (ROE), financial leverage (Debt/Equity Ratio) and earning (EPS) growth variability analysed during the previous five years.
UTI Mutual Fund launches UTI Balanced Advantage Fund
UTI Mutual Fund has launched UTI Balanced Advantage Fund, an open-ended dynamic asset allocation fund, investing in a diversified portfolio of equity and fixed income. The portfolio of the scheme will be dynamically managed, based on valuation and fundamentals driven by in-house proprietary asset allocation model. The New Fund Offer opens for subscription today and it will close on August 4. The scheme aims to provide long-term capital appreciation and income by investing in a dynamically managed portfolio of equity and debt instruments.
Outlook for the Week
Going forward, market will continue to take direction from both global as well as domestic factors. FII flows, movement of rupee against the dollar and crude oil price movement will also be watched. Some of the key earnings expected this week are Adani Transmission, Bosch, GAIL, Maruti Suzuki, Power Grid, Ambuja Cement, HPCL, Interglobe Aviation, Titan, Adani Enterprise, Bharti Airtel, Eicher Motors, Sun Pharma, M&M and SBI. Automobile companies will be in focus as they will start declaring their monthly sale numbers for the month of July.
Economic data expected this week are manufacturing PMI will be declared on 1 August and services PMI will be declared on 3 August. Globally, China and US both will announce its manufacturing PMI on 1 August and services PMI on 3 August. US non-farm payroll data and unemployment rate for July will be announced on 4 August.
The crucial support for Nifty is seen at 19,600 on closing basis below which, we may see selling intensifying towards 19100 and below in a quick span of time. The rising crude prices and base metals prices poses major threat to Indian markets with Brent Crude already confirming major breakout on weekly basis.
USDINR for the week rebounded sharply to pierce back in triangle setup after prices closed above 82 levels on Friday. The 40-week consolidation may be coming to an end with extended triangle and we expect major breakout to emerge above 82.50 with immediate target of 87. The reversal in Dollex 30 Index also points out that USDINR may see stronger up move in the coming days and may lead to major sell off in Indian equities.
Time to be cautious!
