Tag - Equity markets

This Week in a Nutshell (27-31 Dec)

Technical talks

NIFTY opened the week on 27th December at 17,004 and ended the week on 31st December at 17,354. The index made a weekly gain of 2.1%. On the upside, 17,400 could act as resistance while 17,166 could act as a support. RSI (14) of 53 and a positive divergence on MACD (26,12) indicates further upside in the index.

Among the indices, MEDIA was the only sector that ended the week with a loss of -1.0%. HEALTHCARE (5.5%), PHARMA (5.4%), and CONSUMER DURABLES (4.4%) led the gainers.

Weekly highlights

  • The US indices closed the curtailed week in the red, affected by low volumes due to the festive season and increasing worries of the Omicron variant of the COVID-19 virus. These factors combined with muted institutional activity and retail buying led the Indian markets higher, as Indian equities bounced back from last week’s losses Nifty50 ended ~2% higher.
  • The Central Government earned Rs 1.29 tn in gross Goods and Services Tax (GST) revenue for December. The Ministry of Finance said the average monthly gross GST collection for the third quarter of the ongoing fiscal was higher than the average monthly collection of Rs 1.10 lakh crore and Rs 1.15 lakh crore, recorded in the first and second quarters respectively.
  • India’s current account slipped into a deficit of $9.6 billion, or 1.3 percent of the gross domestic product (GDP) in the second quarter of the ongoing fiscal, the Reserve Bank of India reported. For the reporting quarter, the deficit was mainly due to the widening of the trade deficit to $44.4 billion from $30.7 billion in the preceding quarter, and an increase in net outgo of investment income.
  • The Central Board of Indirect Taxes and Customs (CBIC) stated that the GST rate on any worth of clothes will be 12% beginning next year. Currently, a 5% tax on sales up to Rs 1000 per piece is charged. Further, the GST rates on some synthetic fibres and yarn have been reduced from 18 to 12%, putting rates in line with the rest of the textiles sector, this was done to address anomalies caused by an inverted duty structure, which occurs when the tax rate on inputs is greater than the tax on the finished product.
  • Reserve Bank of India’s (RBI) financial stability report suggests stress for banks would rise in 2022, especially in the retail and MSME segment, but banks most are well-capitalized to deal with it. The report showed while bad loans may rise, they won’t hit double digits by September 2022. In the worst-case scenario, gross NPAs may rise to 9.5 percent due to all the benefits of moratoriums expiring, we might see short-term stress in the provisioning.
  • Fears over the impact of the Omicron variant of the COVID-19 virus resulted in Oil remaining volatile throughout the week. With the number of cases doubling, several countries have announced restrictions, there’s an anticipation of demand reduction and Brent Crude ended the week lower at $77.8 per barrel.
  • Foreign Institutional Investors (FII) continued to be net sellers this week, selling shares worth Rs 35,070 mn. Domestic Institutional Investors (DII) continued to be buyers and invested Rs 31,300 mn in Indian equities this week. The month of December ended with net FII outflows of Rs 4,55,790 Mn and net DII Inflows of Rs 4,02,490 Mn.

Things to watch out for next week

  • Rising cases of the Omicron variant of COVID-19 will be on investors’ minds this week. It’ll be interesting to see how India and other Emerging Markets respond to the anticipation of lockdown-like restrictions.
  • The U.S. Jobs non-farms payrolls report comes out Friday. Expectations are for growth of 400,000 jobs, vs. 210K last month and an average of 494K jobs added in the last six months. The key thing to watch out for would be the commentary of voluntary unemployment as the labour participation rate continues to fall post-pandemic.
  • The Organization of the Petroleum Exporting Countries (OPEC) meets on 04th At their previous meeting, OPEC reaffirmed their decision to increase oil production in 2022 and said that they expected a low impact from Omicron on demand for oil. With various industries reporting inflationary headwinds due to oil prices increasing, a lot of eyes will be waiting to see how OPEC responds to demands of output increase amid Omicron fears.
  • The Indian equity market is likely to see more selling pressure next week amid the concern over the spread of omicron variant and FIIs returning after a week of muted action due to the holiday season. Action is likely to be broad index specific until Q3FY22 result season beginning 12th

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.”

 

 

 

This week in a nutshell (20th-24th December)

Technical talks

NIFTY opened the week on 20th December at 16,824 and closed on 24th December at 17,004. It gained  1.1% during the week. The index is trading below its 10DMA of 17,057 which might act as a resistance. On the downside, the 16,971 level might act as a support. The RSI (44), and MACD turning downward suggests a possible decline.

Weekly highlights

  • The US indices closed the week in green as investors speculated that the spreading Covid Omicron variant may not adversely affect human health, businesses and lockdown-like situations might not arise, and hence the stock buying picked up. S&P 500 was up by 2.3%, Nasdaq 100 by 3.2%, and Dow Jones by 1.7%.
  • The Turkish currency lira tumbled to a record low after its President Recep Tayyip Erdogan pledged to continue cutting interest rates, referring to the Islamic ban of high-interest rates as a basis of his policy. The president feels that Turkey can free itself from reliance on foreign capital flows by abandoning policies that prioritized higher interest rates and strong inflows.
  • The Indian government reduced the import tax on refined palm oil to 12.5%, from earlier 17.5%, in an effort to cool near-record high vegetable oil prices. This would make refined palm oil more attractive than crude palm oil for Indian buyers.
  • Sebi suspended futures and options trading for one year in chana, mustard seed, crude palm oil, moong, paddy (basmati), wheat and soybean and its derivatives. This has not only led to a fall in prices of these commodities, but also to scaling back of inventories by traders, who say the flow of imports will slow down since they do not have a hedging platform.
  • Zee Entertainment Enterprises (Zee) and Sony Pictures Networks India (SPNI) signed a definitive agreement that will let the two merge their networks, digital assets, production operations and programme libraries. The merged entity will have a 27% market share of the general entertainment space. After the completion of the deal, Sony Sony Pictures Entertainment will hold a 50.86% stake in the combined entity, the promoters of Zee will hold a 3.99% stake and the remaining shareholders of Zee will hold a 45.15% in the merged entity.
  • Tata Motors has incorporated Tata Passenger Electric Mobility Limited (TPEML), a wholly-owned subsidiary that is involved in the manufacturing of electric motor vehicles, with an initial capital of Rs 7000 mn.
  • FII (Foreign Institutional Investors) were net sellers of shares worth Rs 65890 mn and DII (Domestic Institutional Investors) were net buyers of shares worth Rs 69156 mn this week.

 

Things to watch out for next week

  • As investors around the world seem to be cautious about the Fed’s announcement of three 25 bps increase in interest rates in CY 2022, we may see a further sell-off in Indian stocks next week by the FIIs.We may see a reduction in the level of activity as most investors in the US and Europe are away on holidays. 

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.”

This Week in a Nutshell (15th – 18th November)

Technical talks

NIFTY opened the week on 15th November at 18,141 and ended the truncated week on 18th November at 17,765. The index made a weekly loss of 2.1%. On the upside, 17,993 could act as resistance while 100DMA of 17,020 could act as a support. RSI (14) of 44 indicates the index is nearing the oversold zone.

Among the indices, AUTO was the only sector that ended the week with gains of 0.4%. METAL (-5.3%), PSU BANK (-3.4%), and REALTY (-3.3%) led the laggards.

Weekly highlights

  • Raring agency Fitch Ratings affirmed India’s long-term foreign currency Issuer Default Rating (IDR) at ‘BBB’- with a negative outlook. The negative outlook reflects lingering uncertainty around the debt trajectory. The Agency has suggested wider fiscal deficits and government plans for only a gradual narrowing of the deficit, putting a greater onus on India’s ability to return to high levels of economic growth over the medium term to stabilize and bring down the debt ratio.
  • S&P Global Ratings has predicted that the Indian economy will likely grow at 11 percent in FY22 but flagged the ‘substantial’ impact of broader lockdowns on the economy. S&P said the control of Covid-19 remains a key risk for the economy.
  • The Nasdaq Composite Index closed above 16,000 points for the first time, while the Dow Jones Industrial Average had a second successive weekly loss (-1.4%). The S&P 500 ended higher following strong retail earnings and positive signs for holiday shopping.
  • Over 4.4mn Americans left their jobs in September-21, according to the Labor Department’s Job Openings and Labor Turnover Survey. Incentivized by wage gains and other attractive terms offered by employers desperate for talent, several Americans are leaving their jobs. This has made it challenging for employers to fill positions while driving up compensation and inflation.
  • Crude oil prices fell to a six-week low following news of Australia’s lockdowns and surging Covid-19 cases in Europe threatened to slow down the economic recovery. Investors weighed a potential release of crude oil reserves by major economies for a fall in prices. Crude Oil futures settled at USD 75.7 a barrel while Brent Oil futures closed at USD 78.5 a barrel.
  • India’s wholesale price inflation (WPI) jumped to a five-month high at 12.5% in October. This month’s WPI broke the 5-month downward trend as prices of manufactured items and fuel have increased. High petrol, diesel, and cooking prices drove fuel inflation to 37.2%. high prices of basic metals, textiles, plastics, and edible oil drove inflation for manufactured items to 12%.
  • Prime Minister Narendra Modi announced that the three farm acts would be repealed in the upcoming session of the Parliament. The Prime Minister said a committee would be set up to make the minimum support price mechanism more transparent and effective.
  • Foreign Institutional Investors (FII) continued to be net sellers this week, selling shares worth Rs 44,109 mn. Domestic Institutional Investors (DII) continued to be buyers and invested Rs 39,265mn in Indian equities this week.

Things to watch out for next week

  • US markets are waiting for President Biden to nominate who will head the central bank after Jerome Powell’s term finishes in February-2022. The US markets have a truncated week next week as markets will remain shut on Thursday and Friday on account of Thanksgiving.
  • The Indian equity market is likely to see more selling pressure next week amid the rising US dollar, and the beginning of the Fed Reserve’s bond-buying program. Results for September-21 have been announced by most companies. Action is likely to be stock-specific till the end of December.

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.”

This week in a nutshell (4th – 8th October)

Technical talks

NIFTY opened the week on 4th October at 17,616 and closed on 8th October at 17,895. It made a weekly gain of ~1.6%. On the upside, 17,948 might act as a resistance. On the downside, 20DMA of 17,648 might act as a support. RSI (14 days) of 66 is indicating the index is in an overbought zone.

Weekly highlights

  • Auto companies released the monthly volume data for September-21. Domestic CV volumes were robust, aided by healthy freight availability and better freight rates. Tractor sales reported a strong MoM growth albeit on a low base due to good rainfall. Supply issues and an inauspicious period led to subdued volumes for other segments. Companies suggest an inability to cater to demand due to supply chain challenges. This has led to lower inventory build-up before the festive season. This might lead to longer waiting periods or postponement of festival purchases by customers.
  • Media reports suggest the government may abandon its demand for spectrum charges of Rs 400 bn from telecom operators to support companies. This latest move may provide another ray of hope to companies such as Vodafone Idea Ltd and Bharti Airtel Ltd after the government’s decision to offer a 4-year moratorium on dues.
  • The Organisation of the Petroleum Exporting Countries, Russia, and their allies (OPEC+) said it would stick to its existing plan for a gradual increase in oil output, which sent crude prices to three-year highs. West Texas Intermediate reached USD$ 78 a barrel while Brent Crude rose 3% to ~US$ 82 a barrel. The OPEC+ ignored calls from big consumers such as the USA and India for extra supplies after oil prices surged over 50% this year.
  • The US indices (Dow Jones Industrial Average, S&P 500, and Nasdaq) held on to weekly gains. Throughout the week, investors’ attention has been on rising energy prices, concerns about inflation, and negotiations on the debt ceiling. On Thursday, the US Senate has voted to extend the debt ceiling until December 3. This provides some relief to investors worried about the government default this month.
  • The Indian equity markets remained volatile during the week ended October 8. The key positives were RBI maintaining its stance with no rate change, and Moody’s upgrading India’s outlook to stable from negative. Rising bond yield, and crude oil prices, Fitch cutting India’s FY22 GDP growth forecast (to 8.7% from 10% in June) worried investors.
  • The government of India has sold the national carrier, Air India to the Tata Group. Tata Sons submitted a winning bid of Rs 180bn as the Enterprise value. The conclusion of this sale indicates the government is serious about its ambitions of privatisation.
  • Though the foreign institutional investors (FII) selling continued this week, the quantum was much lower at Rs 36,857mn vs Rs 61,520mn last week. Domestic institutional investors (DII) buying reduced to Rs 34,581mn from the Rs 75,030 mn in the previous week.

Things to watch out for next week

  • The 2QFY22 result season has started with TCS reporting earnings this week. The result season takes centre stage next week with other IT companies such as Infosys, Mindtree, and Wipro set to announce their earnings. While the street is estimating sequential revenue growth for the companies, commentary on deal wins and margin pressures due to rising employee costs & attrition would be critical.

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.”

Demand growth visible despite price hikes – Blue Star

Update on the Indian Equity Market:

On Wednesday, NIFTY ended lower at 17,629 (-1.1%). All the sectors were losers today led by METAL (-3.0%), PSUBANK (-1.9%), and PHARMA (-1.9%). Among the stocks, TATACONSUM (+2.5%), ONGC (+2.2%), and UPL (+1.7%) led the gainers while HINDALCO (-4%), SBILIFE (-3.6%), and INDUSINDBK (-3.4%) led the losers.

Excerpts of an interview with Mr. B Thiagarajan, MD, Blue Star with CNBC TV18 on 5th October 2021:

  • The sales of room air conditioners in the month of Sep-21 were better than last year (Sep-20) and have reached the pre-pandemic levels.
  • The summer season, which is the strongest quarter for the company, was impacted by the second COVID-19 wave. It will be extremely tough for the company to make up for it in 2QFY22E and 3QFY22E.
  • However, demand from the month of Jul-21 has been considerably higher than industry expectations. As people are working from home and spending more time in their homes, they are renovating and upgrading their houses which could be the reason for robust demand. The company anticipates strong demand throughout the next festival season.
  • In 1QFY22, Bluestar was at 35% of pre-pandemic levels and in Sep-21 have reached the pre-pandemic levels.
  • The company is getting growth from first-time buyers, as the number of first-time purchasers has considerably grown. Despite the price seen in the months of Jan-21, Apr-21and Sep-21 the demand is not impacted. 50 percent of buyers used consumer finance schemes.
  • In terms of price hikes, there was an average rise of roughly 4% in the month of Sep-21.
  • On a YoY basis, the company anticipates a 1% decrease in margins due to raw material inflation, which would be compensated by operating costs. Hence the overall EBIT/PBT Margins would not be impacted.
  • The firm does not anticipate any significant increases in freight and commodities in the near term.
  • The B2B segment is performing well in the manufacturing sector. There are also various infrastructure projects like metro railway project and data center which are important segments for Bluestar. It includes air conditioning and electro-mechanical work. The company is closely tracking this segment and participating actively in the enquiries.
  • In the B2B segment, the important sector is building which includes offices and light commercial or retail (shops, showrooms, boutiques, and restaurants). Such kind of infrastructure is built upon in many Tier-3/4/5 cities. The manufacturing, commercial segment, and buildings account for 30%, 40%, and 30% of the B2B segment revenues respectively.

Asset Multiplier Comments

  • There has been a bounce-back in demand starting from July-21 which will likely be reflected in 2QFY22 sales numbers. However, a complete recovery will likely be visible in 1QFY23E.
  • Upcoming investments in infrastructure and a recovery in real estate bode well for the company that predominantly services large infra-projects. The Company will have the added benefits of PLI Schemes, New Greenfield Project in FY23 adding to top-line growth and margin improvement.

Consensus Estimate: (Source: market screener website)

  • The closing price of BLUESTAR was ₹ 871/- as of 06-Oct-2021. It traded at 52x/33x/27x the consensus earnings per share estimate of ₹ 17/26/32 for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 845/- implies a PE multiple of 26x on FY24E EPS of ₹ 32/-.

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.”

 

This week in a nutshell (6th – 9th September)

Technical talks

NIFTY opened the week on 6th September at 17,399 and ended the truncated week at 17,369 on 9th September. The index made a weekly loss of 0.2%. On the upside, 17,378 might be a critical level to watch for. On the downside, 16,451 might act as a support. The RSI (82) indicates the index is in the overbought zone.

Weekly highlights

  • World stocks hit fresh record highs on Tuesday on growing bets that the U.S. Federal Reserve will push back tapering its bond purchases and keep its expansive policy for the near term. The latest rally, which started after Fed Chair Jerome Powell’s dovish speech at the Jackson Hole Symposium in August, received a further boost from a surprisingly soft U.S. payrolls report on Friday. The U.S. economy created 235,000 jobs in August, the fewest in seven months as hiring in the leisure and hospitality sectors stalled, reducing expectations that the Fed will opt for an early tapering of its monthly bond purchases.
  • Investors were caught by surprise by a sudden rally in the benchmark 10-year Indian bond yield. In the previous week (ended 3rd September), the yield had dropped ten basis points, the biggest weekly drop since April. There was a quick turn of sentiment after the benchmark 10-year bond yield rose to its highest since March. The sentiment change was aided by 1QFY22 GDP growth which grew ~20% YoY albeit on a low base and global market cues. The rally in the bond yield was led by mutual fund investors and overseas investors. The spike in overseas investors’ interest could be attributed to the appreciation of INR against USD. (Source: Bloomberg Quint Read more at: https://www.bloombergquint.com/business/a-surprise-bond-rally-sweeps-over-india-as-global-funds-pile-in )
  • The Securities and Exchange Board of India (SEBI) has introduced an optional T+1 settlement cycle for the market, which will come into effect from January 1, 2022. The T+1 cycle means settlements will have to be cleared within one day of the actual transactions taking place. A switch to the T+1 settlement cycle is expected to boost market liquidity and trading turnover while reducing settlement risk and broker defaults. While this move could be beneficial for the domestic investors, foreign investors may face challenges adjusting to this system due to time zone differences. While the regulator has come up with the new settlement cycle, the onus is on the exchanges if they want to opt for the shorter cycle.
  • The monthly data for life insurance premiums collected by companies was released by the Life Insurance Council. The industry reported a 3% YoY increase in the New Business Premiums (NBP) collected, led by private players. This growth comes after the NBP collected reported a decline of 11% YoY in July-21.
  • Stocks ended lower Friday, with major indexes booking weekly losses as the Dow Jones Industrial Average and the S&P 500 extended a losing streak to five sessions. Investors said uncertainty around the spread of the delta variant of the coronavirus that causes COVID-19 hung over markets this week as investors also weighed the timing of the Federal Reserve’s eventual tapering of its monthly bond purchases. The slide left the Dow down 2.2% for the week, while the S&P 500 suffered a 1.7% fall and the Nasdaq declined 1.6%.
  • Institutional activity trends reversed this week compared to last week. Foreign institutional investors (FII) turned sellers with an outflow of Rs 11,139mn. Domestic institutional investors (DII) tuned buyers with an inflow of Rs 11,160mn.

Things to watch out for next week

  • The Indian CPI and WPI data are expected next week. A key indicator for measuring the changes in purchasing trends and inflation.
  • As the result season has drawn to a close, the developments from Wall Street will be the guiding force for the Dalal Street.

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.”

This week in a nutshell (April 26th to April 30th)

Technical talks

NIFTY opened the week on 26th April at 14,449 and closed on 30th April at 14,631. It made a weekly gain of 1%. The index is trading above its 20DMA of 14,618 which might act as a support. On the upside 50DMA of 14,783 might act as a resistance. The RSI (50), and MACD turning downwards suggests a further possible decline.

Weekly highlights

  • The Reserve Bank of India (RBI) capped the tenure of MDs and CEOs of private banks at 15years. Promoters can hold this post for a maximum of 12 years but the RBI can choose to give them a 3-year extension under extraordinary circumstances. These rules apply to private banks, small finance banks, and wholly-owned subsidiaries of foreign banks. These new rules will apply once the tenure of existing MDs/CEOs for which approvals have been taken is completed. This will impact banks such as Kotak Mahindra Bank, where Mr. Uday Kotak has been the head of the institution for 17 years and there could be a change in the management once his term is completed in 2024.
  • The Securities and Exchange Board of India (SEBI) has directed the mutual fund (MF) industry that a fifth of the salary of top executives is to be paid in the form of mutual fund schemes they oversee. The allotment of MF units will be done every month and will be subject to a 3-year lock-in. The industry welcomed the move as it increases accountability and would ensure a better selection of securities.
  • Several automobile manufacturing companies have announced plans to shut down plants for up to a fortnight from May 1. The surge in Covid-19 cases and scattered lockdowns across states and cities are the reasons attributed to the temporary shutdown. This will impact production and sales in the June-21 quarter.
  • FII (Foreign Institutional Investors) selling and DII (Domestic Institutional Investors) buying trend continued this week as well. There was a net outflow of Rs 44571mn from the FII kitty while DII invested Rs 52833 mn.

Things to watch out for next week

  • The Automobile companies will report monthly volume data for April-21. The data will be important to ascertain the impact of the second Covid-19 wave and lockdowns on the demand.
  • The 4QFY21 result season continues in the next week as well. The Commentary from biggies such as Hero MotoCorp and HDFC will be critical.

This week in a nutshell (Feb 15th to Feb 19th)

Technical Talks

During this week NIFTY declined as expected, opening on 15th Feb at 15,270 and closing on 19th Feb at 14,982, a weekly loss of 1.9%. After hitting a new high of 15,432 this week, the index has started to decline. With the RSI (58) and MACD on a declining trend, the technical indicators indicate a further possible decline. On the downside, 20DMA of 14,759 could act as a support. On the upside, 15,432 is the key level to watch out for as the last high could act as a resistance.                                                                 

Weekly highlights

  • The Indian Cabinet launched a production-linked incentive scheme (PLI) for telecommunication and networking products. The outlay of ~Rs 122bn over five years is approved for manufacturing telecom equipment, 4G/5G next generation radio access network and wireless equipment, Internet-of-Things (IoT) access devices and other wireless equipment, and equipment like switches and routers. The scheme will be operational from April 1, 2021. This scheme is expected to incentivize telecom service providers and is another push for the Prime Minister’s Atma Nirbhar Bharat plan.
  • On the other side of the world, a severe winter storm hit North America, with Texas being the worst hit. The storm has impacted crude oil output in the energy rich state of Texas and it is estimated that about 4mn barrels a day of output is offline.
  • The Brent crude futures and US West Texas Intermediate (WTI) crude futures, both corrected after rallying to 13-month highs of $65.5 and $62.3 per barrel respectively. The correction has been due to worries that refineries will take time to resume operations after the big freeze.
  • On the domestic front, consecutive hikes in petrol and diesel are pinching the pockets of Indians. The rise in international crude prices and higher central and state taxes have led to petrol prices crossing a century in some states.
  • The foreign institutional investors’ (FII) buying in Indian equity market continued to decline. FIIs inflows for the week were Rs 44,080 mn. Domestic institutional investors’ (DII) selling continued this week as well with outflows of Rs 62,840mn vs Rs 56,430 mn in the previous week.

Things to watch out

  • With the quarterly result season out of the way, the attention is now onto macroeconomic developments.
  • The benchmark 10-year bond yields have surged post the Budget announcement of additional borrowing to bridge the deficit. To keep the yields under control, RBI has held a special G-sec auction, a separate open market operation (OMO) and Operation Twist this week. Further measures by RBI will be something to watch for. Equity markets are inversely related to interest rates so increasing bond yields could lead to a decline in share prices.