Nifty surpasses resistance; IT stocks to play spoilsport
Markets extended gains for the third consecutive week on continued support from global markets and FIIs inflows. The Nifty surpassed the important barrier of 17,800. The Nifty IT index fell and dragged the benchmark index and results from heavyweights TCS and Infosys were below expected. Globally, poor retail sales data in the U.S. have raised fears of a more significant recession than anticipated. For the week, the Nifty ended higher by 1.3 pct to 17,828 levels and the Nifty Midcap and Nifty Smallcap index gained 1.8 pct and 1.5 pct respectively. On the sectoral front, the Nifty Realty index gained 5.3 pct and the Nifty Auto index was up 3.6 pct for the week. Nifty Bank gained 2.7 pct. Nifty IT was the top sector loser and was down 1.5 pct. FIIs bought equities worth Rs 33.52 bn and DIIs sold equities worth Rs 4.11 bn.
Brent crude scaled multi-month highs of USD 87.49 a bbl to close the week at USD 86.31 a bbl. OPEC report stoked summer demand worries and traders took profits after benchmarks. Gold saw mild profit-taking after touching a high of USD 2,048 an oz and ended the week near USD 2,002 an oz.
India reported 10k + Covid-19 cases last week for the first time in nearly 8 months. In the high-level meeting, chaired by PM Modi, he stressed the pandemic was far from over and there was a need to monitor the status across the country on a regular basis.
Private weather forecasting agency Skymet said the country is expected to see “below normal” monsoon rainfall this year and expects monsoon rains to be 94 pct of the long-period average (LPA) because of the impact of El Niño. The India Meteorological Department (IMD) has retained its ‘El Nino alert’ and has predicted that India there is a possibility of receiving 96 pct (+-5 pct) rainfall of long period average this monsoon season.
India’s industrial output, as measured by the index of Industrial production or IIP, in February rose 5.6 pct YoY. For the 11-month period from April 2022 to February 2023, industrial output registered a growth of 5.5 pct. The January IIP growth was revised to 5.2 pct. India’s consumer price index climbed 5.66 pct YoY in March, which was slower than the 6.44 pct rise in February. Economists had forecast the rate to drop to 5.80 pct. In the same period last year, inflation was 6.95 pct.
Stocks/Sector in Spotlight
- Infosys Its revenue declined by 2.3 pct QoQ to USD 4.55bn (-3.2 pct QoQ/+8.8 pct YoY CC). EBITM declined by 50 bps QoQ to 21.0 pct. Adj. profit stood at Rs 61.3 bn, due to the miss in operating performance. It missed its own revenue estimate for FY23 due to unplanned client-side ramp-downs. Among geographies, the USA is more impacted than Europe. Infosys has guided for 4-7 pct YoY CC revenue growth for FY24, implying 1.7-2.9 pct CQGR over the next four quarters. The management has guided for 20-22 pct EBITM for FY24 which is 100bps lower than the guided margin range at beginning-FY23.
- TCS reported revenue of USD7.20b in Q4FY23, up ~0.6 pct QoQ in constant currency (CC) terms. Revenue growth was affected by a slowdown in the BFSI vertical in the second half of the quarter. Q4 EBIT margin was flat at 24.5 pct impacted by a pause in a few discretionary projects in Mar’23. Management indicated weakness in the US on account of deferrals in discretionary spending from clients, with the BFS vertical being the most affected.
- Divi’s Lab gained during the week on improved sentiments and hopes of better sales on the back of the rise in Covid-19 cases. Divi’s Lab shares rose 9 pct during the week as Company’s exports rose to USD 92 mn in March against an average of $55-60 million in the previous 11 months. The March export numbers are better than analyst expectations.
- Tata Motors jumped 7.3 pct. The Tata Motors Group’s global wholesales in Q4 FY23, including Jaguar Land Rover (JLR), were at 3,61,361 units, higher by 8 pct, as compared to Q4 FY22.
- BHEL has achieved a major milestone with the despatch of its 42nd Nuclear Steam Generator to the Nuclear Power Corporation of India Ltd (NPCIL). The steam generator, to be installed for a 700 MWe unit at NPCIL’s Rajasthan Atomic Power Project (RAPP), was flagged off from BHEL’s Trichy plant in the presence of senior officials of BHEL and NPCIL.
International News
- US FOMC meeting minutes of the March 21-22 meeting showed that most policymakers wanted to skip the rate after the failure of two regional banks but concluded high inflation remained so dominant that they increased the rate by 25 bps.
- The US consumer price index increased by 0.1 pct in March after climbing by 0.4 pct in February. Economists had expected consumer prices to rise by 0.3 pct. The report also showed the annual rate of consumer price growth slowed to 5.0 pct in March from 6.0 pct in February.
- US wholesale inventories increased by 0.1 pct in February after falling by 0.6 pct in January. Economists had expected inventories to rise by 0.2 pct.
- Eurozone retail sales declined as expected in February reflecting the weakness in food and non-food turnover. Retail sales fell 0.8 pct monthly, offsetting January’s 0.8 pct increase. The pace of decline matched economists’ expectations.
- China’s bank lending grew more than expected in March signaling more investment. Banks extended CNY 3.89 trillion in March from CNY 1.81 trillion in February, the People’s Bank of China reported. This was well above economists’ forecast of CNY 3.23 trillion.
Mutual Funds Industry Update
ICICI Prudential Mutual Fund has launched ICICI Prudential Innovation Fund
It is an open-ended thematic equity scheme that will predominantly invest in equity, equity-related securities of companies, and units of global mutual funds/ETFs that can benefit from innovation strategies and themes. The new fund offers or NFO Opens on April 10 and closes on April 24. The scheme will follow a bottom-up approach and can take exposure to companies involved in product/services/solution-related innovation. The scheme can invest across the market cap, basis suitable opportunities. The scheme will be managed by Anish Tawakley and Vaibhav Dusad. Overseas investment will be managed by Sharmila D’Mello. The benchmark of the scheme is Nifty 500 TRI. The scheme will invest a minimum of 80% in companies adopting innovation strategies and themes & Overseas Securities adopting innovation strategies and themes. The scheme will be both sector and market-cap agnostic. The scheme may invest up to 20% of its net assets in ADR / GDR / Foreign securities / Mutual Funds / ETFs.
Bajaj Finserv Mutual Fund files papers to launch seven schemes
The AMC has filed papers for launching seven schemes in equity, debt, and hybrid categories. Under the equity category, the fund house has filed papers for large & mid-cap, and flexi-cap funds. In the hybrid category, the fund house plans to launch an arbitrage fund and a balanced advantage fund. In the debt category, the fund house plans to offer three schemes: a liquid fund, a money market fund, and an overnight fund. The schemes will be open-ended schemes. The scheme under the money market fund category will be named Bajaj Money Market Fund with an investment objective to generate regular income through investment in a portfolio comprising money market instruments. The scheme will be benchmarked against NIFTY Money Market Index B-I (a scheme with relatively low-interest rate risk and moderate credit risk). The scheme will be managed by Siddharth Chaudhary and Nimesh Chandan.
L&T Mutual Fund ceases to exist as a mutual fund
L&T Mutual Fund ceases to exist as a mutual fund, capital markets regulator Sebi said. This comes after L&T Mutual Fund Trustee Ltd had informed Sebi that it wanted to surrender the registration granted to L&T Mutual Fund (L&T MF) by the markets regulator pursuant to the approval of the change in control of L&T Investment Management Ltd and the merger of schemes of L&T MF with HSBC Mutual Fund.
Outlook for the Week
This week, markets will react to the subdued results of Infosys. The results of HDFC Bank were declared on 15 April. HDFC Bank reported a 20 pct YoY rise on higher core income and lower provisions for Q4FY23. Net profit stood at Rs 120.47 bn, compared with Rs 100.55 bn a year ago. Asset quality improved with GNPA ratio at 1.12 pct, down 11 bps QoQ. Net NPA ratio too improved by 6 bps sequentially to 0.27 pct. The results were in-line with market expectations. Results of HCL Tech which will be out on 20 April will be in focus.
The recent breakout in Dollex 30 is likely to attract major buying from FIIs with a potential upside of 9% in the short term. Adding to it, a lower closing in India VIX below 12 is seen as a major relief for markets which would turn the current up move more sustainable despite any lower opening. For the week, the upside in Nifty is expected in the range of 4-5%.
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.
