Market gains as RBI holds rates; Quarterly results will be in focus this week
Markets gained in a holiday-shortened week in spite of global market volatility as an unchanged stance by the RBI in its monetary policy meeting aided the sentiments. The global stock market witnessed volatility on evidence of a cooling economy which accentuated worries that the Federal Reserve’s campaign to rein in decades-high inflation may cause a deep downturn. For the week, the Nifty ended higher by 1.4 pct to 17,599 levels while the midcap and smallcap index gained 1.1 pct and 2.3 pct respectively. The Nifty Realty index was the top sector gainer and was up 4.3 pct after a pause by the RBI in a policy meeting. Nifty Bank gained 1.1 pct and Nifty Auto gained 1.8 pct. The Nifty Pharma index gained 2.1 pct and the Nifty IT index was up 0.2 pct. The institutional activity was thin during the week on account of the holidays. FIIs were net buyers to the tune of Rs 16 bn and DIIs were net sellers to the tune of Rs 22.72 bn.
Crude oil prices jumped after a surprise production cut by OPEC+. For the week, Brent crude gained 6.7 pct to USD 85.12 a bbl. Gold prices posted positive returns throughout the week as the recent U.S. data fanned fears of a slowdown and spurred bets the Federal Reserve may ease up on rate hikes. For the week, it gained 2 pct to end at USD 2012 an oz.
The Reserve Bank of India announced its bimonthly monetary policy and kept the repo rate unchanged at 6.50 percent contrary to expectations of a marginal rate hike. The RBI governor said, “Amidst this volatility, the banking and non-banking financial service sector in India remain healthy, and financial markets have evolved, in an orderly manner. Economic activity remains resilient, and real GDP growth is expected to have been 7 percent in FY23. Also, the GDP is expected to jump 6.5 percent in the current financial year. Retail inflation is expected to moderate to 5.2 percent in FY2023-24. India’s service sector activity continued to expand sharply in March despite easing from last month amid favorable demand conditions and new business gains along with easing inflationary pressures. The services Purchasing Managers’ Index dropped to 57.8 in March from 59.4 in February. However, a score above 50 indicates expansion in the sector. India’s manufacturing activity expanded at the fastest pace in three months amid faster rises in new orders and output. The manufacturing Purchasing Managers’ Index, or PMI, rose to 56.4 in March from 55.3 in February. A reading above 50 indicates expansion in the sector.
Stocks/Sector in Spotlight
- Bharat Electronics- The Company’s provisional revenue numbers were in-line with its guidance of ~15 pct YoY growth to Rs 173 bn. Its export revenue for FY23 stood at USD 46.5 mn which was up 40 pct YoY, but lower than its guidance of USD 70 mn.
- Godrej Consumer Products in its pre-quarter update for Q4FY2023 said that it expects to report mid-single-digit consolidated volume growth and double-digit operating profit growth for the quarter. Its business performed exceptionally well and delivered double-digit revenue growth beating its own expectation with steady consumer demand in the domestic market, it said.
- Dabur Ltd. expects to report mid-single-digit revenue growth on a consolidated basis in Q4FY23, as demand is yet to recover fully. The demand trajectory across urban and rural markets in India has shown a slight improvement sequentially. The urban markets have returned to positive volume growth, the rural markets remain muted.
- Marico Ltd. expects to clock mid-single-digit growth in domestic volumes in Q4, with year-on-year consumption trends improving. Its gross margin was expected to expand and “drive reasonable growth” in operating profit as raw material prices fell. In the category-wise performances, Parachute coconut oil posted a “high single-digit” volume growth. Value-added hair oils touched “double-digit” value growth. Saffola oil’s performance was stable on a sequential basis.
- HDFC Bank in its Q4FY23 business update said that the advances aggregated to approximately Rs 16,005 bn as of March 31, 2023, registering a growth of around 16.9 pct YoY and around 6.2 pct QoQ. The bank’s deposits grew around 20.8 pct to approximately Rs 18,835 bn as of March 31, 2023, from Rs 15,592 bn on March 31, 2022. The retail deposits increased by around Rs 1,067 bn during the quarter, growing around 23.5 pct YoY. HDFC Ltd. said it witnessed a loan growth of 11.6 pct to Rs 93.4 bn in the March quarter.
- Bajaj Finance recorded 20 pct YoY growth in new loan bookings, touching a record-high figure in FY23. It distributed 7.6 mn new loans during the period as compared to 6.3 mn logged in the corresponding quarter of the previous fiscal. The company had core AUM of Rs 2.47 trln as of March 31, a 29 pct increase from the year-ago period. In the March quarter alone, its AUM grew by around Rs 165 bn.
- KPIT Tech declined after a brokerage-initiated coverage with an ‘underweight’ call. It sighted lower structural margins, risks from single vertical and high client concentration, and excessive valuations. It however feels that its growth drivers are intact.
International News
- US services PMI slid to 51.2 in March from 55.1 in February. While a reading above 50 still indicates growth in the sector, economists had expected the index to show a much more modest decrease to 54.5.
- The US trade deficit increased to $70.5 billion in February from a revised $68.7 billion in January. Economists had expected the trade deficit to rise to $69.0 billion from the $68.3 billion originally reported for the previous month.
- US factory orders slid by 0.7 pct in February after plunging by a revised 2.1 pct in January. Economists had expected factory orders to decrease by 0.5 pct compared to the 1.6 pct slumps originally reported for the previous month.
- US construction edged down by 0.1 pct to an annual rate of $1.844 trillion in February after climbing by 0.4 pct to a revised rate of $1.845 trillion in January. Economists had expected construction spending to be unchanged compared to the 0.1 pct dip originally reported for the previous month.
- Eurozone producer price index posted an annual increase of 13.2 pct annually in February after a 15.1 pct surge in January. Prices were forecast to gain 13.3 pct. Further, this was the slowest inflation rate since July 2021, when prices had risen 12.4 pct.
Mutual Funds Industry Update
- SEBI allows mutual funds to launch multiple ESG-based schemes
The Securities & Exchange Board of India (SEBI), the financial market regulator, has announced a slew of measures to boost ESG factor-based investing in India through mutual funds. Mutual fund houses henceforth can launch more than one scheme, the investment mandate of which is governed by ESG factors. ESG ― Environmental, Social, and Governance ― factors-based investing is catching up in all parts of the world. As per extant rules of categorization of mutual fund schemes, ESG schemes are considered thematic funds. And fund houses are allowed to launch only one ESG scheme. With the regulator allowing multiple schemes based on ESG-related factors, investors may get more alternatives in this space that suit their requirements. There are 10 ESG mutual fund schemes that manage Rs 10,216 crore.
- Sebi modifies the time limit for disclosure of NAV of international funds
Sebi came out with a new time limit for disclosure of net asset value (NAV) of mutual fund schemes investing overseas due to differences in time zones and market hours. Under the rule, mutual funds are mandated to disclose the NAVs of all schemes within a given outer time limit. However, to address the difficulties being faced in the calculation of NAV for schemes investing overseas due to differences in time zones and market hours, Sebi has made partial modifications with regard to timelines for the declaration of NAV depending on the investment objective and asset allocation of schemes. The new timeline will come into force from July 1, 2023, the Securities and Exchange Board of India (Sebi) said in a circular.
Outlook for the Week
The earnings season will begin on 12 April with the results of TCS and on 13 April- the results of Infosys will be closely tracked by the markets. IT companies are expected to report muted quarter owing to softness due to macro-overhang and a seasonally weak March quarter for some companies. There is expected to be muted demand outlook in the near term with a slowdown in discretionary spending and demand softness in key verticals.
Markets managed to post weekly gains by over 1 pct to help Nifty clear the crucial barrier of 17500 with India VIX closing at an 84-week low at the 11.8 mark. The sharp slide in India’s VIX is seen as a major catalyst for Nifty’s journey towards 19500 in Nifty Index. In the coming days, we expect India VIX to inch towards the 9 mark and thereafter Nifty may trigger massive buying in the spot market. On Friday’s closing, the Dollex 30 Index i.e. Sensex in USD terms has seen closing at the borderline of a 7-legged falling wedge setup, this would indicate that the Sensex is positioned for a 9.5 pct upside swing in the coming days.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
