Markets remain rangebound; Global cues, Adani news will remain in focus
Markets remained rangebound and ended on a flat note for the week while broader markets outperformed. On the expected lines, the Reserve Bank of India (RBI) raised the key policy repo rate by 25 bps and said it remained focused on the withdrawal of accommodation. The U.S. Fed said 2023 would be a year of “significant declines in inflation.” This renewed investor hopes for a less aggressive monetary policy that wavered after a strong U.S. jobs report last week. For the week, the Nifty ended flat at 17,857 levels while the Nifty Midcap 100 and Nifty Smallcap 100 index gained 2 pct and 1.2 pct respectively. On the institutional activity front, FIIs were net sellers to the tune of Rs 54 bn and DIIs were net buyers to the tune of Rs 64.5 bn.
USDINR for the week extended gains for the third straight week to close with a 1 pct gain after an initial attempt to test 83 levels. The recent gains in Dollar Index may force USDINR to cross above 83.25 with an immediate target of 85 in the coming weeks. On the downside, 81.5 is seen as a new level of the base where any decline may be arrested. Meanwhile, Gold prices remained in a tight range and ended flat at USD 1,863 levels. Gold faced strong resistance near USD 1,960 and now trading near the support zone of USD 1,840.
On expected lines, MPC hiked policy rates by 25 bps to 6.5 pct leaving the policy stance unchanged at “withdrawal of accommodation”. The pace of the rate hike was reduced from 35 bps in the Dec’22 meeting to 25 bps now, indicating MPC’s comfort in the current growth and inflation dynamics. MPC’s optimism on growth also reflects the fact that growth projections for Q1 and Q2 FY24 were raised by 0.7 pct and 0.3 pct respectively. Inflation expectations were marginally lowered in Q4FY23 however it is unlikely to meet RBI’s target even in FY24. In the policy statement, RBI reinstated that high-frequency indicators suggest that economic activity has remained strong in Q3 and Q4 of the current financial year and raised the real GDP growth from 6.8 pct to 7 pct in FY23.
Stocks/Sector in Spotlight
- Adani Group stocks remained in the limelight. MSCI has changed the weightage for four Adani Group stocks that are constituents in its indices which led to further selling pressure. MSCI said that it had cut the free float assessment of Adani Enterprises, Adani Total Gas, Adani Transmission, and ACC. The move, effective from March 1, will reduce the combined weightage of the four Adani stocks in MSCI’s Global Standard Index. Moody’s downgraded its rating outlook to negative from stable for Adani Green Energy.
- Bharti Airtel reported strong operational results with consolidated EBITDA/PAT of Rs 184.5bn and Rs 15.8 bn, led by strong performance across businesses. PAT had a one-time prior period license fee charge of Rs 6.7 bn. India mobile revenues were up 2.1 pct QoQ and EBITDA margins were up 140 bps QoQ to 53.8 pct led by ARPU rise to Rs193 and 6.4mn high value 4G subscribers (overall addition was 4.5mn). Africa mobile and enterprise revenues were up 3.2 pct QoQ and 2.4 pct QoQ, while EBIDTA margins were flat QoQ at 49.1 pct and 39.9 pct (+70 bps QoQ) respectively. Home services (fixed line + broadband) along with DTH had ARPU decline by 1-3 pct QoQ.
- Tata Consumer reported revenue of Rs 34,746 mn (+8.3 pct YoY/ +3.3 pct QoQ). EBITDA declined by 1.7 pct YoY but improved by 4.6 pct QoQ to Rs 4,537 mn. EBITDA margin contracted by 133 bps YoY but expanded by 16 bps QoQ to 13.1 pct. The reported PAT for the quarter was Rs 3,518 mn (+32.7 pct YoY/ +7.3 pct QoQ). Q3FY23 had an exceptional item mainly related to fair valuation arising out of acquiring control of an overseas venture. Q2FY23 and Q3FY22 also had some exceptional items. Adjusted PAT for Q3FY23 was Rs 2,732 mn (-1.8 pct YoY/ +26.0 pct QoQ). India Foods’ revenue jumped by 29.4 pct YoY, with underlying volume growth of 4.0 pct YoY. Total International revenues grew by 3.6 pct YoY. Within international, the US Coffee business grew by 10.8 pct YoY (+1.0 pct YoY in constant currency) with an underlying volume decline of 17.0 pct YoY. Growth businesses (including Tata Sampann, NourishCo, Tata Soulfull, and the RTE/RTC business Tata Smartfooz) grew by 53.0 pct YoY during the quarter and now account for 13.0 pct of the India branded business (vs. 6.0 pct in FY20).
- Tata Power reported Q3FY23 consol revenue of Rs 141 bn (+30 pct YoY) led by higher generation in Thermal plants, capacity addition in Renewables, and better sales in Distribution companies. EBITDA for the quarter came in at Rs 25.5 bn ~+47 pct YoY & ~35 pct QoQ on account of lower-than-expected fuel costs and consideration of additional benefits from CGPL Mundra (Sec-11). Adj. profit stood at Rs 9.45 bn (~+122 pct YoY). Owing to elevated coal prices, with revenue, EBITDA, and PAT of Rs 52 bn (+45 pct YoY), Rs 11 bn (-25 pct YoY), and Rs 9.5 bn (+59 pct YoY) respectively, during the quarter. With the installation of 900 public EV chargers in 3QFY23, the installed base of home chargers has crossed 30,000. Total smart meter installations crossed the 0.5mn mark across TPWR discoms in Odisha, Delhi, and Mumbai. The company expects to cover all customers within the next 3 years. The management has given a capex guidance of Rs 80-100 bn for FY23 with 80-90 pct allocation towards their green portfolio.
- Hero MotoCorp reported operating performance in line with estimates and PAT above estimates on account of higher-than-expected other income. Wholesale volumes declined by 13.2 pct QoQ, resulting in 11.5 pct QoQ, a decline in revenue to Rs 80.31 bn and EBITDA declined by 11 pct QoQ, to Rs 9.24 bn. PAT remained flat YoY to Rs 3.6 pct to Rs 7110 mn. While the newly launched EV business has dragged its operating performance in Q3FY23 the management believes that economics of scale in the EV business and improvement in the operating performance of ICs business would help it report better operating performance going forward.
International News
- US initial jobless claims rose to 196,000, an increase of 13,000 from the previous week’s unrevised level of 183,000. Economists had expected jobless claims to inch up to 190,000.
- US wholesale inventories inched up by 0.1 percent in December after climbing by 0.9 pct in November. The uptick matched economist estimates.
- The US trade deficit widened to USD 67.4 bn in December from a revised USD 61.0 bn in November. Economists had expected the deficit to widen to USD 68.5 bn from the USD 61.5 bn originally reported for the previous month.
- Consumer prices in China were up 0.8 pct on month in January. That exceeded expectations for an increase of 0.7 pct following the flat reading in December.
- Producer prices in Japan were flat on month in January. That was shy of expectations for an increase of 0.3 pct and down from the upwardly revised 0.7 pct gain in December (originally 0.5 pct).
- Rating agency Fitch has revised its forecast for Chinese economic growth in 2023 to 5.0 pct from 4.1 pct previously as consumption and broader activities are recovering faster than initially anticipated after the end of the zero-COVID regime.
Mutual Funds Industry Update
Mirae Asset Mutual Fund launches Mirae Asset Flexi Cap Fund
Mirae Asset Mutual Fund has launched Mirae Asset Flexi Cap Fund. The NFO opens for subscription on February 3 and closes on February 17. The flexi cap fund will invest across market capitalization—large-cap, mid-cap, and small-cap, thus offering a large investment horizon to help investors capture the growth curves across sectors. The fund house said that the scheme will invest in a mix of value and growth stocks and diversify across ideas, sectors, caps, and risks.
Axis AMC looks to garner Rs 3,000 crore from business cycles fund
Axis Mutual Fund is looking to garner Rs 3,000 crore from the new fund offer, Axis business cycles fund, which will open for subscription from February 2. The open-ended equity scheme will follow a business cycle-based investing theme, the fund house said. According to the fund house, the economy is looking up now and is at the cusp of a new capex cycle. It cited the stronger balance sheets, robust domestic demand, and increased focus on production-linked incentive (PLI) schemes leading to more capacity addition along with the widespread digitalization offering as the reason for the optimism.
Nippon India Mutual Fund launches Nifty SDLPlus G-Sec – Jun 2029 Maturity 70:30 Index Fund
Nippon India Mutual Fund has announced the launch of Nippon India Nifty SDL Plus G-Sec – Jun 2029 Maturity 70:30 Index Fund, an open-ended Target Maturity Index Fund with a relatively high-interest rate risk and relatively low credit risk. The New Fund Offer will open on February 6 and close for subscription on February 14. The new fund will track the Nifty SDL Plus G-Sec Jun 2029 70:30 Index. According to the press release, the investment objective of the scheme is to provide investment returns corresponding to the total returns of the securities as represented by the Nifty SDL Plus G-Sec Jun 2029 70:30 Index before expenses, subject to tracking errors. The Scheme will predominantly invest in State Development Loans (SDLs) and Government Securities (G-Secs) which have the highest safety. The Scheme may also invest in money market instruments.
Outlook Week Ahead
Going forward, the markets will look for cues from global markets for direction. News flows related to Adani Group will continue to drive sentiments for the markets. The movement of the rupee against the dollar will be watched closely as FII outflows from equities continue at a record pace. On the earnings front, Q3FY23 earnings will be monitored. Results of Zee Entertainment, Adani Enterprise, Bata, Eicher Motors, Grasim, ONGC, Siemens, and Nestle will be tracked. On the macro front, WPI inflation is due on February 14. CPI inflation for January will be declared on the same day. Markets last week ended unchanged after multiple failed attempts to cross above 17,900 thus forming Inside Bar on the weekly candlestick. For Nifty, the setup for the market still remains on the weaker side with a potential downside seen at 17,000 in the coming days. The recent breakout in Brent crude prices above USD 86 a bbl may trigger further upward momentum in energy prices with USDINR eyeing to test 85 in the coming weeks. We expect selling pressure to accelerate on breach below the previous week’s low placed at 17,655.
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.
