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23 Jul

This week in a nutshell (18th July- 22nd July)

Technical talks

NIFTY opened the week on 18th July at 16,183 and closed on 15th July at 16,719 (+3.3%). The index is trading above the 20DMA level of 16,580. On the upside, the 50DMA level of 17,073 might act as a resistance. The RSI (52), and MACD turning upwards suggests a positive sentiment ahead.

Among the sectoral indices, PSU BANK (+7.7%), Private Bank (+6.6%), and IT (+6.4%) led the gainers, whereas Pharma (-1%) was the only loser this week.

Weekly highlights

  • IMF chief Kristalina Georgieva cautioned policymakers from the Group of 20 major nations on Saturday to take immediate measures to tackle inflation, saying that the “exceptionally uncertain” global economic outlook may worsen if higher prices persisted.
  • Sula Vineyards has filed papers with the market regulator Securities and Exchange Board of India (SEBI) to raise capital through an initial public offering ( IPO). If the plans go forward, it will be the first IPO in India by a pure-play wine company, and the second in recent weeks by a player in the alcohol and spirits sector.
  • India’s foreign exchange reserves plunged by US$8 billion in the week ended July 8 to US$580.25 billion, the lowest in more than 15 months, data released on July 15 by the Reserve Bank of India (RBI) showed. The decline in reserves was driven by a US$6.66 billion drop in the RBI’s foreign currency assets, which fell to US$518.09 billion from US$524.75 billion as of July 1.
  • GDP growth predictions for 2022 remain the highest among developing market peers for India. Passenger vehicle sales, two-wheeler sales, electricity generation, and bank credit all increased in June for the second month in a row. The June unemployment rate (7.8 percent, according to CMIE) is higher than in May but significantly lower than it was in February (8.11 percent).
  • Less than three weeks after they were implemented, the government lifted duty on gasoline exports and reduced windfall levies on other fuels.
  • Reliance Industries Ltd reported a 7.9% increase in profit QoQ for 1QFY23 on the back of improved performance of oil-to-chemicals, retail and telecom businesses. However, it failed to meet expectations. The profit was impacted by higher finance costs as a result of rising interest rates, rupee devaluation, and lower other income.
  • The Down Jones Industrial Average, NASDAQ and S&P500 opened the week in red. However, positive earnings release resulted in a three-day winning streak for the indices. The NASDAQ and S&P500 fell 1.7 percent and 1%, respectively, on Friday, as disappointing earnings from social media companies and poor economic data stoked recession fears.
  • The ECB boosts interest rates by 50 basis points, the first increase since 2011. On Thursday, the European Central Bank raised interest rates more than anticipated, showing that concerns over runaway inflation now outweigh growth considerations, even as the eurozone economy struggles to recover from Russia’s war in Ukraine.
  • FII (Foreign Institutional Investors) were net buyers of shares worth Rs 40,380 mn and DII (Domestic Institutional Investors) were net buyers of shares worth Rs 9,380 mn this week.

Things to watch out for next week

  • With results season picking up, quarterly numbers are to be watched out for. Auto companies like Bajaj Auto, Maruti Suzuki, and Tata Motors are set to report earnings next week. Commentaries about the semi-conductor shortage situation and demand sentiments from auto companies are expected to give some color about the economic recovery.
  • We expect markets to continue volatile as a result of investor reactions to earnings releases and macroeconomic news such as supply-related constraints, interest rate hikes, and rising inflation.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By #WeekInANutshell , 0 Comments Read more...
16 May

Rising interest rates to have a positive impact on NIMs – SBI

Update on the Indian Equity Market:

On Monday, NIFTY ended at 15,842 (+0.4%). PSUBANK (+3%), REALTY (+2.6%), and AUTO (+2.3%) were the sectoral gainers while IT (-0.7%), FMCG (-0.35%), and PHARMA (-0.2%) were the losers.

Among the stocks, EICHERMOT (+8%), APOLLOHOSP (+4.2%), and UPL (+2.8%) led the gainers, while ULTRACEMCO (-3%), SHREECEM (-2.5%), and ASIANPAINT (-1.7%) led the losers.

Excerpts of an interview with Mr. Dinesh Kumar Khara, Chairman, SBI with CNBC-TV18 on 15th May 2022:

  • In terms of advances, SBI has a pipeline of about Rs 4,600 bn worth of proposals. Currently, its corporate book stands at Rs 8,100bn, and if this number fructifies, then it is going to reflect in a healthy corporate book for the bank.
  • There is enough demand in the economy. The growth is coming from the investment demand which is there from the infrastructure projects being led by the government of India. This is going to be the major lever that will bring in more and more spending for investment purposes in the economy.
  • Focus on PLI schemes, and increase in exports are some of the other growth levers that give SBI the confidence and conviction to see decent growth in their loan book.
  • SBI expects ROE (Return on Equity) to be near 15% by FY23 and reach the equivalent level by FY24.
  • It has a Capital Adequacy Ratio that can easily support 10-11% growth in the loan book but it will be closely watching the scenario in terms of growth as it doesn’t want capital to be a constraint when it comes to growth of the bank.
  • SBI expects its slippages to be down but will be closely monitoring them due to the rising interest situation.
  • The asset quality of the bank is expected to be at least at the current levels of 4% if not improved.
  • Normally, there is always a lag between the deposit rates increase and that leads to a situation where the loan interest rates might start moving faster as compared to deposits. This will have a positive impact on the NIMs of the bank.

Asset Multiplier Comments

  • We expect loan book momentum to remain healthy with economic activities picking up and the government’s initiatives to boost infrastructure-related investments.
  • We expect a higher mix of floating loans and CASA mix to contribute to margin expansion in a rising interest rate scenario.
  • We expect moderation in slippages over the subsequent quarters.

Consensus Estimates: (Source: Market screener and investing.com website)

  • The closing price of SBI was ₹ 456/- as of 15-May-2022.  It traded at 1.3x/1.2x the consensus book value per share estimate of ₹ 342/388 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 646/- implies a P/BVPS multiple of 1.6x on the FY24E BVPS estimate of ₹ 388/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Bank, SBI , , 0 Comments Read more...
04 May

20% growth in disbursements expected for the next 3-4 years – Can Fin Homes

Update on the Indian Equity Market:

On Wednesday, NIFTY ended 2.3% lower at 16,667 after RBI announced a 40bps repo rate hike. The decision of the MPC was announced as investors await US Federal Reserve’s rate decision.

Among the NIFTY stocks, APOLLOHOSP (-6.6%), and ADANIPORTS (-5%) and HINDALCO (-4.8%) were top losers while ONGC (+3.8%), BRITANNIA (+3.3%), and POWERGRID (2.5%) were the top gainers. Among the sectoral indices, CONSUMER DURABLES (-3.6%), REALTY (-3.3%), and METAl (-3.2%) were the top losers and there were no sectoral gainers in the session.

Excerpts of an interview with Mr. Girish Kousgi, MD & CEO, Can Fin Homes (CAN FIN) with CNBC-TV18 on 2nd May 2022: 

  • CAN FIN had given a growth guidance of about 18-20% both on book and disbursements. Disbursements and book growth have been at an all-time high sequentially in Q4FY22.
  • In terms of NIMs, pre-covid levels were at 3.9%, but this number was dropped to retain customers and take on the competition during the covid time. The demand came back after October 2020. Competition eased out in Q4FY21 and from there on the CANFIN’s performance improved.
  • NIM (net interest margin) is not expected to sustain 4.15% levels as they also included a benefit of LCR (Liquidity Coverage Ratio) investment, but they are expected to be between 3.7% to 3.75% for the next few quarters.
  • CANFIN’s spreads are expected to be around 2.5%.
  • In terms of growth, economic activities have picked up, and real estate has revived and is going strong. In Q4FY22, they saw a slight increase in interest rates and are expecting any further rise to be manageable enough for the company.
  • Historically, CAN FIN has managed to build its book at higher yields and expects this to continue in the future.
  • Growth is expected to be intact at 20% for the next 3-4 years on book and disbursements.
  • With the onset of covid, the provisions stood at Rs 870 mn and these were used in the subsequent quarters writing it back. CAN FIN has started building on the provisions by providing Rs 150 mn additional provisions.
  • Kousgi intends to continue as MD and CEO of the company till September 2024.
  • Every year, CAN FIN has a Regulator NHB audit and nothing came out of the same this year.

Asset Multiplier Comments:

  • With the pick-up in economic activities, we expect CAN FIN to continue its underwriting practices and loan growth trajectory. Over the next three years, the LAP (Loan against Property) book is expected to grow at a faster pace than home loans. The company plans to increase the proportion of LAP loans from 5% to 10% over the next three years.
  • We believe its better credit ratings to be positive in achieving a lower cost of funds. India’s demographics and the retail business are expected to work in favor of CAN FIN.
  • In the current rising interest rate environment, we expect some margin compression over the next few quarters.

Consensus Estimate: (Source: Marketscreener and investing.com websites)

  • The closing price of Can Fin Homes was ₹ 604 /- as of 04-May-2022. It traded at 2.2x/ 1.8x the consensus book value per share estimate of ₹ 273/319 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 755/- implies a P/BVPS multiple of 2.3x on the FY24E BVPS estimate of ₹ 226/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Can Fin Homes, Housing Finance , 0 Comments Read more...
19 Mar

This Week in a Nutshell (14th-18th March)

Technical talks

NIFTY opened the week on 14th March at 16,646 and ended at 17,287 on 17th March. NIFTY gained 1.8% throughout the week. The next support and resistance levels for the index would be 16,711 and 17,380 respectively.

All the sectoral indices gained this week, with Financial Services  (+6.8%), Bank (+5.7%), and Auto (+5.6%) being the gainers.

Weekly highlights

  • The retail inflation rate in India – measured by the Consumer Price Index (CPI)- came in at 6.07% in February 2022 as compared to 5.93% in February 2021. Commodity prices are expected to remain at elevated levels due to the geopolitical tensions disrupting supply chains and rising costs.
  • Russia-Ukraine update: Ukraine has warned that peace negotiations could last for weeks and said evacuations of combat zones continued, with another 5,000 people leaving Mariupol. Russia repeated a threat to target arms convoys sent by the US and its allies.
  • After losing ground for 5 consecutive days in the hopes of Russia-Ukraine coming to some sort of agreement, WTI crude settled above US$100/barrel on 18th March after negotiations between Russia and Ukraine deteriorated. Oil prices are expected to remain volatile till there’s some resolution on what Russia’s ultimate goal is.
  • The Federal Reserve on Wednesday raised interest rates by 25bps for the first time since 2018 and laid out an aggressive plan to push borrowing costs to restrictive levels. Investors in the US seemed to shrug off the initial jitters of the rate hike as Feds Chair Jerome Powell said the economy is strong enough to weather the rate hikes and maintain its current strong hiring and wage growth.
  • The Bank of England on Thursday hiked its main interest rate to its pre-pandemic level by 0.25%, the third increase in a row, to battle decades-high inflation. K. inflation hit a 30-year high in January and is expected to rise further as Russia’s invasion keeps energy prices high.
  • NASDAQ (+2%) and S&P500 (+1%) rallied for the fourth consecutive session on Friday as Fed met market expectations by starting its rate-hiking cycle on Wednesday.
  • The foreign institutional investors (FII) turned buyers this week and bought equities worth Rs 16,860 mn. Domestic institutional investors (DIIs) continued to be buyers and bought equities worth Rs 12,900mn.

Things to watch out for next week

  • The geopolitical tensions between Russia and Ukraine are expected to continue impacting supply chains, high commodity prices, and volatility in crude oil prices.
  • In India, the next few weeks are expected to be quiet on the corporate front as companies will be in a silent period before the announcement of the FY22 earnings.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By #WeekInANutshell , , 0 Comments Read more...
23 Jan

This Week in a nutshell (17- 21 Jan)

Technical talks

NIFTY opened the week on 17th Jan at 18,240 and closed on 21st Jan at 17,617. During the week, NIFTY declined by 3% and formed a doji candle on the daily chart on Friday, indicating indecision between buyers and sellers. At the current juncture, on the weekly chart, the index has breached the 20-weekly moving average while the RSI is at 47.  Going ahead 17,505 and 17,776 would be the next support and resistance levels, respectively.

All the sectoral indices declined in the week with IT (-7.4%), Pharma (-5.2%), and Media (-3.8%) leading the losers.

Weekly highlights

  • Equity markets in India witnessed volatility during the week ended Jan 21, 2022 due to the ongoing results season and mixed budget expectations.
  • Companies in the auto and consumer sectors are facing margin pressures due to the on-going commodity inflation. Companies expect muted demand as affordability of consumers has become uncertain and they have signaled potential price hikes to pass on higher input costs.
  • The RBI has announced two consecutive auctions to infuse funds of Rs 7,50,000 mn and Rs 5,00,000 mn into the banking system as the inter-bank rates rose.
  • The RBI on January 20 permitted all existing non-deposit-taking NBFC-Investment and Credit Companies with asset size of Rs 10,000 mn and above to undertake factoring business subject to satisfaction of certain conditions.
  • India Ratings and Research expects the India’s economy to grow at 7.6 percent YoY in FY23.
  • Turkey opened a crucial crude pipeline that runs from Iraq after it blew up by an explosion. The explosion happened after a pylon fell on a pipeline due to bad weather, causing fire. Supply disruptions complemented by the shutdown risked tightening the energy markets. The sharp rise in the crude oil price dented investor sentiments in the last week
  • China has lowered a set of key policy rates and lending benchmarks to boost its slowing economy.
  • The U.S. Treasury Secretary Janet Yellen delivered a positive outlook for the US economy of substantial inflation slowdown and signaled a potential for long-term growth of the US economy.
  • The U.S. stocks tumbled amid weak company earnings and prospects for higher U.S. interest rates. U.S. stocks closed in the red on Friday and all three major indices suffered weekly losses as the prospect of rising interest rates and shaky company earnings cast doubt on the strength of the recovery from the COVID-19 pandemic.
  • The NASDAQ 100 tumbled 7.5% as result of aggressive sell-off on the back of disappointing results from Netflix and other tech companies. Investors have been anxious about tech’s growth as the economy recovers.
  • The foreign institutional investors (FII) continued to be sellers and sold equities worth Rs 126,400 mn. Domestic institutional investors (DIIs) continued to be buyers and bought equities worth Rs 5,080 mn.

Things to watch out for next week

  • The Federal Reserve’s meeting next week will be watched carefully, as investors’ hope for more guidance on the central bank’s plan to raise interest rates. The pace at which Fed tightens the monetary policy could be key. A steeper than expected trajectory of rate increases may hurt economic growth.
  • The domestic market is expected to remain volatile next week ahead of the budget announcement on 1st February.
  • Companies such as Axis bank, L&T, Marico, Cipla, Maruti Suzuki, Dr Reddy’s Labs, and Kotak Mahindra Bank are set to report earnings next week. Management commentary on provisioning, loan book growth will be key for banks while commentary on raw material inflation, rural demand will be key for consumer companies.
  • Earnings release, risks in the global economy, expected rise in US interest rates, Budget and Geo-political events will continue to influence the market mood. Rising COVID-19 cases and threats to further curb movement and businesses and rising inflation might also set the direction of the markets.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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