PremiumNifty and Sensex jumped over 1% around mid-session trade on Tuesday but turned negative later in the day amid weakness in global markets as concern over the possibility of a recession outweighed optimism over US-China talks aimed at tariff reductions. Markets will take cues from US Fed minutes of meeting on Wednesday and the June quarter earnings season going forward.
Benchmark indices erased all gains made in the first half of trade on Tuesday as US futures and European markets fell. Sensex slipped 732 points from intra-day high to close 100 points lower at 53,134 . Nifty failed to hold the 16,000 level, ending 215 points from highs to end 25 points lower at 15,811.
Infosys, ITC and HDFC were the biggest contributors to the fall on Sensex. ITC, Wipro, HDFC Life, Britannia Industries and Maruti Suzuki were among the laggards on Nifty. Barring Nifty Metal and Pharma, all sectoral indices ended in the red. The BSE midcap index fell 0.4%, while BSE Smallcap index rose 0.2%. The Indian rupee plunged 41 paise to a record low of 79.36 against US dollar.
Inflation-targeted monetary and liquidity tightening, along with hardening rates, generally comes bundled with a system-level GDP/credit growth sacrifice. For banks, it also seems reasonable to expect a rise in borrower segment-specific risk aversion. As we state in our sector initiation Shaken, not stirred, the signature impact of rising rates is not the small boost to margins, but the acceleration of prime credit market share gain for high-CASA large private banks. We do not foresee major asset-quality incidents and adequate provisioning/capitalisation raises insulation.
Too soon for a rate hike impact, too late for Covid surprises
However, (i) slowing credit growth, (ii) small boost in margins and (iii) mix shift toward prime credit are unlikely to manifest in 1QFY23 results, we think. Even in an accelerated timeline, the earliest print impact should not predate 2QFY23. On the other hand, Covid-driven “irregular" assets have settled in “restructured" or “GNPA" buckets with a clear line of sight on provisioning and credit costs. Problems are known and their quantum more or less crystallised. We expect 21% NII growth, 17% PPoP growth and 49% PAT growth y-y in our coverage aggregate.
Commentary key to finer nuances of sector strategy
This is the first quarter during which banks will discuss inflation and material interest rate hikes as baseline expectations, not possibilities. They will have even more clarity on their provisioning trajectory for restructured and other “irregular" assets and lay out their segment preferences and pricing strategy in relation to the evolving macro situation. For us, this holds the key to gauging their earnings trajectory over the next 12-15 months and should set the yardstick against which performance will likely be evaluated by the stock market.
Early disclosures offer no major surprises
Of the banks under our coverage that have made early disclosures on 1QFY23 fundamentals – HDFC Bank, IndusInd Bank and AU Small Finance Bank – none have delivered surprises that necessitate re-evaluation of our sector stance. AU and IndusInd have shown a strong set of numbers that are marginally ahead of expectations, while HDFCB has disappointed a bit on CASA (2.2% y-y decline), but with a higher-than-expected (5% y-y) retail loan growth as a silver lining.
Britannia Industries' shareholders have voted against a resolution to authorise the board to make investments, give loans and provide guarantees of up to ₹5,000 crore in the AGM concluded last week.
The special resolution for approval to increase limits for making investments, loans, Special guarantees and security was "not Passed with requisite majority," said a regulatory filing from Britannia Industries on June 29, 2022.
US index futures and European equities fell as concern over the possibility of a recession outweighed optimism over US-China talks aimed at tariff reductions. The euro slipped to a 20-year low. The Stoxx Europe 600 fell 0.5% while futures on the S&P 500 lost 0.6%
The windfall taxes on domestic crude oil production and fuel exports will generate close to $12 billion ( ₹94,800 crore) for the government in the remainder of the current fiscal while trimming profits of firms such as Reliance Industries Ltd and ONGC, Moody's Investors Service said Tuesday.
On July 1, the government imposed windfall gain taxes on the export of petrol, diesel and aviation turbine fuel (ATF), and on the domestic production of crude oil. It has also mandated exporters to meet the requirements of the domestic market first.
The issue will open on July 5 and close on July 26 with an option of early closure, the company said in a statement.
The public issue of secured redeemable non-convertible debentures (NCDs) or bonds will have a face value of ₹1,000 each. The issue has a base issue size of ₹150 crore with an option to retain an oversubscription of up to ₹150 crore, aggregating to ₹300 crore.
Global shares rose on Tuesday as positive economic data and hints of easing Sino-U.S. tensions offered some respite after recent sell-offs, though fears of a global recession and sky-high inflation tempered the mood.
Tokyo - Nikkei 225 closed 1% higher; Hong Kong - Hang Seng Index: rose 0.5%; Shanghai - Composite ended flat. London - FTSE 100 was up 0.3 %.
India has expanded the excise duty exemption for biofuels to encourage the blending of higher proportions of ethanol and components of vegetable oil with gasoline and diesel, a government order said.
The tax exemption will be applicable to an ethanol portion of 12%-15% blended with gasoline, up from 10% previously. For diesel, the exemption will apply to a 20% portion of alkyl esters of long chain fatty acids obtained from vegetable oils, the order said. (Reuters)
Automobile retail registration data reported by FADA indicates total vehicle retail for Jun’22 increased by 27% YoY with growth across categories i.e. 2W, 3W, PV, Tractors and CV were. However, compared with Pre-Covid level of Jun’19, total vehicle retail was down by -9% with sharper decline in 2W and 3W which de-grew by 16% and 6% respectively. Though few categories are consistently showing recovery, full recovery is yet to be witnessed when compared to pre-covid times. Increased wholesale reflects ease in semi-conductor availability thus reducing supply side constraints going ahead. We expect strong bounce back in 2HFY23 with rural recovery post favourable monsoon and further ease on semiconductor availability. We expect YoY volume growth across categories in FY23E with M&HCVs and 3Ws expected to record 30%+ growth.
Passenger vehicle retail sales in the country rose 40 per cent in June indicating an improvement in semiconductor supplies even as demand, especially for SUVs, remained robust, auto dealer' body FADA said on Tuesday.
According to the Federation of Automobile Dealers Associations (FADA), passenger vehicle (PV) registrations rose to 2,60,683 units last month, as compared to 1,85,998 units in June 2021.
Warnings from Indian crypto exchanges that a controversial new transaction tax would erode trading are coming true, with volumes evaporating since the levy took effect.
Three exchanges -- ZebPay, WazirX and CoinDCX -- suffered declines of between 60% and 87% in the value of daily trading immediately after the 1% tax deductible at source became effective on July 1, data from CoinGecko show. A fourth, Giottus, saw trading sink 70%, its chief executive said.
Acme Group on Tuesday announced developing its green hydrogen and ammonia project in Tamil Nadu at an investment of ₹52,474 crore.
The proposed project includes a 5 giga watt (GW) solar power plant, a 1.5 GW electrolyzer and 1.1 million tonnes of ammonia production.
In Asia, nearly 7 in 10 companies are confident about their cyber resilience despite rapid digital transformation, rising number of cyberattacks, and increasing modes of cyber threats. However, nearly half (48%) admit that there is still room for improvement when it comes to cyber hygiene measures essential to managing cyber risks. This is according to the Asia Insights of The State of Cyber Resilience, published Tuesday by Marsh, the world’s leading insurance broker and risk advisor, and Microsoft Corp., a leading platform and productivity company for the mobile-first, cloud-first world.
Shares of Marksans Pharma rallied more than 17% to ₹50 apiece on the BSE in Tuesday's trading session after the company informed its plans to consider the issue of bonus shares. Bonus shares are fully paid additional shares issued by a company to its existing shareholders.
Oil held gains as investors assessed still-strong underlying market signals against concerns a recession will eventually sap demand.
West Texas Intermediate traded above $110 a barrel in Asia after a long holiday weekend in the US. The benchmark is more than 1% higher than Friday’s close as there was no settlement on Monday. Key market timespreads remain robust, indicating that there’s solid demand for near-term supplies.
The carmaker expects second half of the current fiscalto be better in terms of performance with gradual improvement in the overall supply situation and stabilisation in commodity prices, according to company chairman N Chandrasekaran.
Gold rates in India continued their recent uptrend with futures on MCX hitting over two-month high of ₹52261 per 10 gram, up 0.2% from previous close. Silver futures rose 0.5% to ₹58,780. Despite inflation and growth worries, gold has been under pressure in the past few months amid rate hikes by central banks to tame runaway inflation.
India's dominant services industry expanded at the fastest pace in over eleven years in June amid strong demand but stubborn inflation remains a concern as prices charged rose at the sharpest rate in almost five years, a private survey showed no Tuesday. The S&P Global India Services Purchasing Managers' Index rose to 59.2 in June from 58.9 in May, its highest since April 2011 and above the 50-mark separating growth from contraction. A Reuters poll had predicted a dip to 58.7.
Nifty has shown a strong follow-up buying post the favorable previous trading session that could be seen as an encouraging sign for the bulls of D-street. On technical parameters, the 15700-sub zone has once again proved its mettle, and till the time index manages to sustain above the same, any minor correction could be seen as a buying opportunity in the near term. On the contrary, the 15950-16000 zone is likely to act as a sturdy wall, and only a breakthrough could ascertain the bullish momentum to continue in the coming sessions.
The market has seen some strong traction by the fag end favoring the bulls. However, the global market could act as a catalyst in either propelling the bullish sentiments or putting a halt to the same. Hence, keeping a tab on the developments across the global bourses is advisable. Meanwhile, our index is likely to stay within the mentioned range until any decisive breakthrough on either of the sides is not seen. Hence considering the recent price action, we advocate utilizing any dip towards the support zone and continuing with a stock-specific approach for better trading opportunities.
India’s trade deficit widened to a record in June, adding further pressure on the Indian currency, which has hit new lows against the dollar in the past weeks.
Merchandise exports growth slowed for the third straight month in June to touch a four-month low of $37.94 billion, while imports surged by 51% to a record $63.58 billion from a year earlier
Tata Steel Long Products up 3% as company has completed the acquisition of state-owned Neelachal Ispat Nigam Ltd for ₹12,100 crore, the Centre said. The strategic divestment of the Odisha-based steelmaker was underway since January 2021.
- Room AC segment saw strong rebound, DC refrigerator demand remains weak.
-Voltas is yet to recover lost ground, Lloyd maintained strong growth momentum
- High inventory levels with commodity prices correction; Weak rural demand.
Demand softness witnessed towards end of the quarter, due to commodity price correction (~10-15% in June month) and offset of summer season. Overall companies have been reluctant in taking price hikes. Although commodity cost correction has begun, our channel check indicate that further price hike will be inevitable going forward. Rural demand remains weak. We expect our consumer durables universe to register sales growth of 70% YoY (low base due to COVID 2nd wave). With sustained RM inflation, inability to increase prices due to weak demand and return of some discretionary costs, we expect margins to remain under pressure (+10bps QoQ) for our coverage universe. We expect EBITDA/PAT growth of 98%/ 103% YoY (low base due to COVID 2nd wave) across our coverage universe. Although we remain structurally positive on long term prospects, we see demand headwinds due to high inflation in near term
We maintain our positive stance on Consumer Durables because of low penetration and market consolidation. Butterfly acquisition will further strengthen its positioning in kitchen appliance market. We rate CROMPTON as our top pick. We believe Voltas’s re-rating depends upon market share rebound in room AC segment which we expect to happen by year end. Havells’s is benefitting from Lloyd’s ramp-up but profitability is yet to improve which would further re-rate the stock. Weak rural demand is not favorable for Bajaj Electrical in near term. KEI/Polycab wil continue to benefit from industrial uptick.
U.S. equities were closed on Monday for Independence Day holiday. Recession fears are likely to dominate the markets going forward. The economic data, including the ISM Manufacturing Survey and construction spending, were bad enough to knock second-quarter GDP down 2.1%. On unemployment data, the market is looking how rising borrowing costs and inflation affect the labour market. Economists polled by The Wall Street Journal expect U.S. employers to have added 250,000 jobs in June, down from 390,000 in May. Factories around the world are reporting weakening demand for products.
The Indian equities ended in green with Nifty rose 0.5% while broader markets outperformed the main indices as Nifty Mid Cap and Nifty Small Cap increased 0.9% and 0.6% respectively. Nifty FMCG witnessing the highest jump at 2.7% followed by Nifty PSU Bank which climbed, 1.7%. Nifty Metal and Nifty IT were the major laggards which slumped 1% and 0.6% respectively. Meanwhile, the revenue secretary stated that India will only withdraw its windfall tax for oil producers and refiners, introduced earlier, if global crude prices fall as much as $40 a barrel from current levels. Global macroeconomic trends, movement in crude oil prices and FII activity will dictate the markets ahead of the start of quarterly earnings season.
As 1QFY23 has ended, markets await on corporate earnings results for cues. Rising inflationary pressures and concerns of global recession, continue to impact overall sentiments amid geopolitical issues of the prolonged Russia-Ukraine war. With the arrival of monsoons, crop sowing has picked up its pace which should mitigate food inflation, and is likely to influence India's economic outlook in the coming weeks. The government is banking on the monsoon rain to keep rice production, inventories and food inflation at a manageable level. While Oil and food input prices have majorly pushed up inflation, commodity prices are showing signs of settling down. The markets are likely to see gap up opening, SGX nifty is flat compared to previous spot Nifty closing. Asian Markets are trading in green, Nikkei is up 0.82% while Heng Seng is up 0.78%.
The department of telecommunications has asked e-commerce companies not to sell wireless boosters or jammers, considering that existing laws authorize only licenced telecom service providers to sell and install such equipment.
NSE International Exchange, or NSE IFSC Ltd, offers trading in 50 popular US stocks such as Apple, Amazon, and Tesla. Yet, investors don’t seem impressed—none of the scrips has witnessed active trading over the past few sessions, data from the company’s website showed. (Full report)
The GST Council’s decision to impose a 5% tax on hospital room rents that are over ₹5,000 a day has left hospitals in a fix over how to implement it because most offer treatment packages that already include room rent.
Besides, hospitals are also concerned about the non-availability of input tax credit in this case as cascading of embedded taxes will increase the cost of treatment for patients. (Full report)
TCS, Muthoot Finance, Tata Motors, Vedanta are some of the companies that will also be in news today.
The crowded skies over India have set off a talent war like never before, with the upcoming launch of Akasa Air, return of Jet Airways under its new promoters and the Tata Group’s takeover of Air India.
With the new promoters of the two major airlines and the new entrant going all guns blazing to rope in the best for a perfect take off, incumbents are scurrying to retain their top pilots and cabin crew with bonuses and pay hikes to thwart attempts at poaching. (Full report)
Gold dipped slightly on Tuesday as a recovery in U.S. Treasury yields from last week's one-month lows reduced the appeal of non-yielding bullion, with a strong dollar also piling on. Spot gold was down 0.1% at $1,807.93 per ounce, while U.S. gold futures rose 0.4% to $1,808.50.
Brent crude futures extended gains on Tuesday as a strike in Norway is expected to disrupt oil and gas output, fanning tight supply worries. Brent crude futures rose 82 cents, or 0.7%, to $114.32 a barrel after a 2.4% gain on Monday. US West Texas Intermediate crude climbed $2.58, or 2.4%, to $111.01 a barrel,