Markets back in 17,800-18,200 range; Global cues will remain in focus
Equity markets continued to remain volatile during the week as caution prevailed in the later part of the week, after a fresh slate of U.S. economic data, which increased bets that the Federal Reserve would keep interest rates higher for longer. US CPI came in at 6.4 pct YoY for January, a bit higher than the 6.2 pct economists had expected. The Nifty ended higher by 0.5 pct to 17,944 levels while the Nifty Midcap 100 and Nifty Smallcap 100 fell about 1 pct each. Sector-wise, Nifty IT, Nifty Metal and Nifty Energy index gained 0.6 pct each while the Nifty Pharma index fell 1.4 pct and Nifty Bank fell 1 pct respectively. FIIs turned net buyers to Rs 40 bn and DIIs were net sellers to the tune of Rs 27.33 bn.
On the commodity market front, Crude oil prices posted weekly losses as strong U.S. economic data heightened concern that the Federal Reserve will continue the tight monetary policy to tackle inflation, which could hit fuel demand even as crude stockpiles grow. Brent crude prices fell about 4 pct to USD 83 a bbl. Gold witnessed a third straight weekly drop to USD 1,840 an oz (from USD 1863 an oz), as investors worried about more rate hikes by the U.S. Federal Reserve.
For the economic data front, India’s wholesale price index, or WPI, climbed 4.73 pct YoY in January, slower than the 4.95 rises in December. Economists had expected inflation to ease to 5.60 pct. On the other hand, India’s consumer price index, or CPI, climbed 6.52 pct YoY in January, faster than the 5.72 pct gain in December. Economists had forecast 5.90 pct inflation.
Stocks/Sector in Spotlight
- Deepak Nitrite– Deepak Nitrite reported a growth of 15.6 pct in its consolidated revenues at Rs 19.91 bn in Q3FY23 as against Rs 17.2 bn in Q3FY22. The performance was broad-based with growth in Advanced Intermediates which grew ~13 pct and Phenolics business which grew by 14 pct YoY. Its consolidated operating margins (Ex. Other Income) stood at 15.8 pct at Rs 3.15 bn in Q3FY23 as against 20.4 pct. The decline in operating performance was mainly attributable to due to lag effect in passing on high raw material prices and other utility costs. The consolidated PAT margins for the company during the quarter stood at 10.5 pct at Rs 2084 mn as against 14.1 pct at Rs 2,430 million in Q3FY22. Going ahead, the management has also pursued to move higher up in the specialty chemicals value chain gradually driven by planned expansion initiatives across SBUs and the tactical introduction of several downstream chemicals and complex chemical platforms.
- Va Tech Wabag- For 3QFY23, revenues came in at Rs 6.5 bn, down 12.6 pct YoY with a slowdown in execution. EBITDA de-grew by 1.8 pct YoY to Rs 749 mn with EBITDA margin expanding 126 bps YoY to 11.5 pct. Margins were supported by lower raw material costs. Adj PAT in Q3FY23 came in at Rs 452 mn mainly due to better operating performance. The company has bagged orders worth Rs 2.6 bn during the quarter. Order intake was strong at Rs 18.9 bn during 9mFY23 leading to a robust order book of Rs 100.4 bn (3.4x TTM sales), 63 pct of which is for EPC contracts. Biding for Chennai 400 MLD desalination project is expected to be completed by FY23 end.
- Lupin QFY23 growth and margin recovery to get delayed as gSpiriva got pushed to Q1/Q2FY24E. The company expects the US business to normalize with a quarter run rate for the base business at ~USD 170 mn. Revenues beat expectations at up 4 pct QoQ and up 4 pct YoY as US clocks healthy growth QoQ US sales up 15 pct QoQ to USD 177 mn – Suprep, Perforomist, and Tamiflu would have contributed as also acquired brands of Xopenox and to an extent Brovana to the revenue beat. India business up 3 pct YoY – excluding diabetes generics impact, growth in line with the market. PAT up 18 pct QoQ on forex gain and one-off 60 bps impact. We will hold for a quarter more before closing the position.
- Voltas reported in-line revenue at Rs20bn, up 12 pct YoY (13 pct QoQ). Voltas delivered revenue growth of 11.8 pct. UCP registered revenue growth of 11.2 pct, EMPS (Electromechanical Projects and services) saw revenue growth of 17.1 pct; while EPS (Engineering products and Services) segment declined by 5.4 pct. EBITDA decreased by 51 pct YoY to Rs 764 mn in Q3FY23 while EBITDA margin contracted by 487 bps YoY to 3.8 pct. Voltas reported a net loss of Rs 1.1 bn due to the provision for cancellation of the contract and encashment of bank guarantee. Adj. PAT declined by 72 pct YoY to Rs 269 mn. Order book of projects business stood at Rs 75.4 bn from Rs 56 bn in 2QFY23. Voltas has managed to stem its market share loss with YTD’s December market share standing at 22.5. Volt‐Bek has seen subdued demand on poor consumer sentiment which resulted in a volume decline in Q3 YoY.
- Oil India and ONGC gained after the government cut windfall profit tax on the export of diesel and ATF to their lowest while also reducing the levy on domestically produced crude in line with softening international oil prices. ONGC gained 6.75 for the week while Oil India gained 17 pct.
- Nestle India reported an in-line set of numbers for Q4CY22. It reported net sales growth of 13.8 pct YoY to Rs 42.6 bn, led by improved volume and mix. Domestic sales grew 14.1 pct YoY. Export sales grew 17.1 pct YoY to Rs 1.7 bn. Adj. PAT grew 10.2 pct YoY to Rs 6.3 bn (in-line). The company is planning a capex of Rs 50 bn over the next three years, which is expected to boost volume growth, especially in Prepared Dishes (Maggi) and Chocolates and Confectionary over the medium term. The Board has recommended a final dividend of Rs 75.
International News
- US initial jobless claims slipped to 194,000, a decrease of 1,000 from the previous week’s revised level of 195,000. Economists had expected jobless claims to inch up to 200,000 from the 196,000 originally reported for the previous week.
- US producer price index for final demand climbed by 0.7 percent in January after edging down by a revised 0.2 percent in December. Economists had expected producer prices to increase by 0.4 percent compared to the 0.5 percent drop originally reported for the previous month.
- US industrial production was unchanged in January after slumping by a revised 1.0 percent in December. Economists had expected industrial production to climb by 0.5 percent compared to the 0.7 percent decrease originally reported for the previous month.
- US Retail sales in the U.S. saw a substantial increase in the month of January. Retail sales spiked by 3.0 percent in January after tumbling by 1.1 percent in December. Economists had expected retail sales to jump by 1.8 percent.
Mutual Funds Industry Update
Navi Mutual Fund launches Navi ELSS Tax Saver Nifty 50 Index Fund
Navi Mutual Fund has announced the launch of the Navi ELSS Tax Saver Nifty 50 Index Fund, a passive ELSS tax-saver fund. The New Fund Offer will commence on February 14 and conclude on February 28. With an expense ratio of 0.12% under the direct plan, it will be the lowest-cost tax-saving ELSS fund in India. Being a tax-saving mutual fund scheme, it will have a mandatory lock-in period of three years. There will be no exit load on withdrawal post the expiry of the lock-in period.
HDFC Mutual Fund launches HDFC MNC Fund
HDFC Mutual Fund has announced the launch of HDFC MNC Fund, an open-ended equity scheme following a multinational company (MNC) theme. The scheme will follow a multi-cap strategy with investment across market cap segments. The New Fund Offer of the scheme will open for subscription from February 17 and will close on March 3. The scheme will be managed by Rahul Baijal. The minimum subscription amount for investment in these schemes is Rs 100 per application and any amount thereafter. The scheme will invest predominantly in Multi-National Companies (MNCs) across sectors and market cap segments. The scheme will be benchmarked against NIFTY MNC TRI (Total Returns Index).
Outlook Week Ahead
For the coming week, markets are expected to take cues from global markets in absence of any major cues back home. Crude oil price movement and the movement of the rupee against the dollar will be tracked closely. RBI will release the minutes of the MPC meeting that was held on 8 February on 22 February.
Technically, markets triggered a change in short-term trends after Nifty breached short-term support of 17,970 on Friday, thus activating a reversal with Bearish Pennant. The immediate reaction of Bearish Pennant should force prices to the lower end of the channel, which is placed at 17,828 and below which, we may see a steep slide towards 16,800 in the near term. We expect Bank Nifty to test 38,000 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.
