PremiumThe stock slide, rising bond yields and dollar strength are tightening financial conditions ahead of looming U.S., U.K. and Australian interest-rate hikes, while price pressures are being stoked by the elevated cost of commodities ranging from fuel to food, in part due to disruptions from Russia’s war in Ukraine.
Domestic share markets started off May on a tepid note, ending lower on Monday. Losses were largely led by auto, IT and capital goods stocks, while weak global cues added to the pressure.
In Europe, stocks were mixed Monday and the dollar was steady as worries over high inflation, tightening monetary policy and China’s Covid lockdowns contributed to investor caution.
Europe’s Stoxx 600 index followed Asian stocks lower in sessions affected by holiday closures. U.S. futures rose after April’s slump, among the worst since the pandemic roiled markets in 2020.
Back home, the Sensex fell 84.88 points, or 0.15%, to end the day at 56,975.99, while Nifty fell 33.40 points to 17,069.10. About 1,201 shares advanced, 2,180 declined, and 175 were unchanged.
Capital goods, auto and IT indices fell a percent each. Midcap and smallcap indices also ended in the red.
Sri Lanka has extended a credit line with India by $200 million in order to procure emergency fuel stocks, the country's power and energy minister said on Monday, with four shipments due to arrive in May.
Colombo was also in talks with New Delhi over extending the credit line by an additional $500 million, minister Kanchana Wijesekera told a news conference.
German Chancellor Olaf Scholz plans to invite Indian Prime Minister Narendra Modi as special guest to a Group of Seven leaders’ summit next month as part of an effort to forge a broader international alliance against Russia.
Germany, which currently holds the rotating G-7 presidency, will also welcome the leaders of Indonesia, South Africa and Senegal to the gathering in the Bavarian Alps June 26 to June 28, said people with knowledge of the matter. The decision could be announced as early as Monday, when Scholz welcomes Modi for talks in Berlin and a joint German-Indian cabinet meeting.
Despite concerns over the prime minister’s reluctance to condemn Russia’s invasion of Ukraine and a recent jump in India’s fossil-fuel imports from Russia, Scholz decided the G-7 should court India, according to people familiar with the matter.
Indian Meteorological Department (IMD) on Monday issued a yellow warning for Northwest India due to a Western Disturbance, soon after the heatwave spell subsided across the country.
Senior scientist of IMD, RK Jenamani said that there are chances of the heatwave being over in most parts of India, including Delhi, Punjab, Haryana and Uttar Pradesh, as per the analysis of IMD today. However, there are chances of a heatwave in West Rajasthan and Vidarbha, but the major heatwave spell is ove
State-owned insurance behemoth LIC has said that it will retain part of its stake in IDBI Bank to reap the benefits of the bancassurance channel.
Along with the government, Life Insurance Corporation (LIC) will also divest its stake in IDBI Bank, but may not exit completely, LIC Chairman MR Kumar told PTI in an interview.
LIC is currently doing roadshows for its maiden public issue, which opens for subscription on May 4.
Oil prices fell on Monday as concerns about weak economic growth in China, the world's top oil importer, outweighed fears of potential supply stress from a potential European Union ban on Russian crude.
Brent crude futures fell 71 cents, or 0.6%, to $106.43 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 70 cents, or 0.6%, to $103.99 a barrel.
After pencilling in RoAs of 0.4% for FY22, driving it up towards FY23 target of 0.75% and 1.0-1.5% by FY25 will require advance growth scale up to mid-teens and cost efficiencies, besides further improvement in NIM trajectory and sustained credit cost. We expect RoA profile of 0.6% / 0.7% for FY23E / FY24E. There is turnaround in relevant operating metrics and improved confidence in stability of franchise. Nonetheless, we remain cognisant of risks from delay in resolution of stress pool, net labelled exposure of 5.3%, modest RoE profile during transition and supply overhang post the expiry of lock-in shares. We maintain HOLD with an unchanged TP of Rs14.
European Union energy ministers will meet Monday to discuss Russia’s decision to cut gas supplies to Bulgaria and Poland, and debate planned new sanctions over Moscow’s war on Ukraine.
The 27 nation-bloc has imposed five rounds of sanctions on Russian officials, oligarchs, banks, companies and other organizations since Russian troops invaded Ukraine in February.
State-owned CIL on Monday said coal supply to the power sector rose 15.6 per cent to 49.7 million tonne last month in the wake of high demand of the dry fuel from electricity generating plants and stressed that it is planning to augment its dispatches further, especially to power plants in the coming months.
The statement comes at a time when several parts of the country are grappling with power crisis.
"With the intense demand for coal continuing unabated driven by an upward spiral in the electricity generation, CIL (Coal India) pushed up its supplies to power plants of the country to 49.7 million tonnes (MT) in April'22. This is 6.7 MT more supply compared to April’21 when the power sector’s dispatch was 43 MTs," the maharatna firm said.
With higher output, CIL is aiming to increase its dispatches further, especially to power plants in the coming months.
Coal India, which accounts for over 80 per cent of domestic coal output, is one of the major suppliers of fossil fuel to the power sector.
Outlook & Valuation: At the upper end of the price band the LIC IPO
is offered at P/EV (embedded value) of 1.1x as compared to other large listed private life insurance companies which are trading at multiples of 2.5-4.3x Sep’21 EV. Though there are concerns over LIC regarding market share loss in individual insurance business and historically lower margins, we believe that valuations factor in most of the negatives. Expected improvements in product mix and greater transfer of surplus to shareholders account over the coming years are expected to drive profits from current low levels, which along with cheap valuations provide comfort.
The issue is priced in the range of ₹902-949.
European stocks fell in thin trade on Monday, pressured by heavyweights such as Mercedes-Benz trading ex-dividend, while data that signalled a steeper pace of contraction in China's factory activity also dampened risk appetite.
The pan-European STOXX 600 index was down 0.8%, set to snap a three-day session of gains, although trading volumes were likely thinned by a UK bank holiday.
Ex-dividend factors weighed heavily on the STOXX 600, with automaker Mercedes-Benz, healthcare company Bayer , auto parts maker Continental and chemical group BASF all losing their payout attraction.
Mumbai saw a 30% fall in property sale registrations of 11,744 units in April, compared to 16,726 units in March, contributing over ₹738 crore to the state revenue.
However, the number of units registered in April 2022 was the best in a decade for the month of April, said property advisory Knight Frank India. Around 55% registrations were in the price band of above ₹1 crore while in terms of apartment size, mid-sized homes (between 500-1000 sq ft) were the most preferred category of property registered during the month. (Read here)
India's electricity demand touched a record high in April as its northern states reeled under the hottest pre-summer months in decades, with a surge in the use of air conditioning triggering the worst power crisis in more than six years.
Power demand grew 13.2% to 135.4 billion kilowatt hours (kWh), as the electricity requirement in the north grew between 16% and 75%, a Reuters analysis of government data showed.
Electricity use is expected to grow as India's weather office has forecast above normal maximum temperatures over most parts of the west central, northwest, north and northeast.
Mid-size motorcycle maker Royal Enfield, a subsidiary of Eicher Motors, on Monday said it has tied up with Italian riding gear brand Alpinestars to create a riding apparel collection with high protection and performance.
Founded in 1963 in Asolo, Italy, Alpinestars is now a world-leading manufacturer of professional racing products, motorcycling airbag protection, high-performance apparel, gear and technical footwear.
The partnership aims to provide Indian riders with the essential tools needed to make the best of their adventures, Royal Enfield said in a statement.
Shares of Tata Chemicals Ltd jumped more than 10% in Monday’s morning trade on the National Stock Exchange. This is on a day when the benchmark Nifty50 index was 0.7% down.
What gives?
The reason is simple. The company announced results for the fourth quarter of FY22 (Q4FY22) on Friday after market hours and performance has exceeded Street expectations. Plus, management commentary has been upbeat.
The company's sales grew 24% year-on-year to 295,308 units in April.
Total two-wheelers sales also grew 24% to 280,022 units in April. Domestic two-wheeler sales grew 37% on year 180,533 units last month.
Stable Occupancies Led by Back-to-Office Drive
Embassy REIT’s Q4FY22 revenue at ₹749 Cr was in line with our estimate amidst stable occupancies coupled with resilient collections after the pandemic. The occupancy was 87.1% on the total portfolio of 33.8 msf at the end of Q4FY22. Reported NOI margins are 82.4% and EBITDA margins improved to 76.7% due to a fall in indirect expenses. EMBASSY has Leased 2.2 msf at 18% spreads across 47 deals, achieved 14% rent escalations on 7.7 msf across 89 deals for FY22, focused on occupiers from high growth sectors such as SaaS, EV, and E-Commerce.
The management has guided NOI of ₹2,710 Cr (on average) for FY23 and NDCF/distributions of ₹2,050 Bn. DPU guidance stands at ₹21.7 per unit for FY23 on a similar base of 948 Mn units. Furthermore, the office leasing momentum continues to grow backed by a healthy return to workplace trajectory coupled with robust hiring by technology and global captive players and record tech investments. The company remains focused on delivering growth to Unitholders and scaling up its industry-leading portfolio.
Gold prices fell on Monday as elevated U.S. Treasury yields pressured demand for zero-yield bullion, ahead of a widely expected big interest rate hike by the Federal Reserve to contain broadening inflationary pressures.
Spot gold was down 0.6% at $1,884.50 per ounce. US gold futures dropped 1.5% to $1,883.30.
The market is concerned that the Fed could be quite hawkish, pricing in a 50 basis point hike, and it could be 75 basis points in July, said Stephen Innes, managing partner at SPI Asset Management. The U.S. central bank's Federal Open Market Committee is scheduled to begin its two-day meeting on May 3 and announce its decision the next day. U.S. Fed policymakers look set to deliver a series of aggressive rate hikes at least until the summer to deal with rapid inflation and surging labour costs, even as two reports released on Friday showed tentative signs that both may be cresting.
Maruti Suzuki India's Q4FY22 performance was ahead of expectations on the margin front, aided by operating leverage benefits, lower discounts, and price hikes.
With low inventory and a large order book, we expect MSIL to come back strongly in terms of profitability along with volume recovery. Going forward, near-term headwinds of chip shortages weighing on production and commodity cost pressures will weigh on MSIL’s financial performance. We expect margin contraction in H1FY23E and normalization in H2FY23E.
We maintain our BUY rating on the stock with an unchanged TP of ₹9,800/share, valuing the stock at 27x its FY24E EPS. The TP implies an upside of 27% from the CMP.
Q4FY22 Results: IndusInd Bank reported a healthy performance.
GNPA down 21 bps QoQ to 2.27%. Restructured book down 70 bps to 2.6%
Total loan related provisions declined to 3.5% vs. 3.7% QoQ
Loan growth up 12.4% YoY and microfinance picked up with 18% YoY while deposits were up 15% YoY
NII up 12.7% YoY, NIMs improved QoQ to 4.2%, PAT at | 1361 crore
What should investors do? IndusInd Bank’s share price has gained ~1.8x in the past 18 months. We believe the bank will show improved business traction with corporate book adding to the momentum.
We retain our BUY rating on the stock
Target Price and Valuation: We value the bank at ~1.6x FY24E ABV and maintain
a target price of ₹1150 per share.
Factory activity in India picked up last month, bolstered by a solid increase in demand as pandemic restrictions were eased, but rising energy prices pushed input costs to a five-month high, a private survey showed.
International demand also jumped robustly to a 9-month high after contracting in March and domestic demand was above average.
The Manufacturing Purchasing Managers' Index compiled by S&P Global, improved to 54.7 in April from 54.0 in March.
Wipro Ltd's March quarter earnings were disappointing.
In Q4FY22, IT services revenue grew 3.1% in constant currency (CC) terms sequentially, missing consensus estimate of 3.4%. Ebit margin declined 60 basis points sequentially to 17%. Ebit is short for earnings before interest and tax. One basis point is one hundredeth of a percentage point. Analysts at JM Financial Institutional Securities Ltd note that Ebit margin is the lowest since 1QFY19 levels impacted adversely by the dilutive impact of acquisitions made by Wipro through the past 18 months. (Read here)
Mahindra & Mahindra Ltd. today announced that its overall auto sales for the month of April 2022 stood at 45640 vehicles.
Mahindra’s farm equipment segment sold 39,405 units in India during April, up 51% on year.
Shares of the company traded 0.8% higher at ₹929.55 apiece on the BSE.
Wipro’s 4QFY22 IT services revenue grew by 3.1% QoQ/28.5% YoY in constant currency (CC) to $2.7bn, in line with our estimates. Sequential growth came at 3.1% in CC terms, vs. our estimate of 3%. EBIT margin of IT services business is at 17%, broadly in line with our estimate of 17.1%, due to high attrition rate. Net income stood at Rs30.9bn (up 4% QoQ/up 4% YoY), 2.6% higher than our expectation of Rs30.1bn. Nine large deal TCV signed with a combined TCV of over $400mn in 4QFY22. Management guided for 1QFY23 revenue from IT Services business to be at $2.75-2.80bn. This translates into a sequential growth of 1-3%.
We expect the restructuring efforts, which include a simplified operating structuring, step-up in capability upgrade and talent management to bode well for WPRO in the medium term. However, margin pressure would continue. We lower FY23E-FY24E EPS estimates by 6% each, factoring weak margin profile. We retain our BUY recommendation and revise the target price to Rs570 (vs. the prior Rs720) and value the stock at 21x (earlier 25x) FY24E earnings.
At CMP, Wipro trades at 18.7x FY24E EPS, which is at 26%/17% discount to the larger peers (TCS/Infosys).
The markets are likely to see gap down opening, SGX Nifty is down 200 points compared to Friday’s spot Nifty closing. Asian markets trading in red with Nikkei is down 0.5%, while Hang Seng is closed for labour day.
Jet fuel prices on Sunday were hiked by 3.22% to an all-time high, reflecting a surge in global energy prices. This was the ninth straight increase this year.
The price of aviation turbine fuel (ATF) was raised by ₹3,649.13 per kilolitre, or 3.22%, to ₹1,16,851.46 per kl ( ₹116.8 per litre) in the national capital, according to a price notification of state-owned fuel retailers.
Shares of RIL, HDFC, Maruti, Wipro, Yes Bank, Tata Motors, Adani group will be in focus today.
HDFC, Britannia Industries, Alembic Pharmaceuticals, Adani Wilmar, Castrol India, Devyani International, IDBI Bank, Inox Leisure, JBM Auto, Jindal Stainless, Mahindra & Mahindra Financial Services, Meghmani Organics are among the key companies scheduled to announce their earnings today
Dalal Street has been bustling as a record 34.6 million new investors flocked to the bourses last fiscal. With this, India clocked 89.7 million dematerialized (demat) accounts by the end of March 2022, registering a jump of 63% in FY22, data from the Securities and Exchange Board of India showed. In FY21, the demat tally had risen nearly 35% to 55.1 million.
The relentless rally in stocks since the outbreak of the pandemic has lured younger and tech-savvy cohorts. (Read here)
Growth in the eight infrastructure sectors of the economy slowed in March after recovering to a four-month high in the previous month after supply-side disruptions caused a contraction in coal and crude oil output and a slowdown in some others.
The sectors—coal, crude, natural gas, refinery products, fertilizers, cement, steel and electricity—expanded by 4.3% in March from 6% in February, data released by the ministry of commerce and industry showed on Friday. However, fertilizers, cement and electricity posted a swift recovery.
With the last two weeks of range-bound movement, the daily time frame chart exhibits a ‘Triangle’ pattern and prices are inching closer to their apex point. Hence, the breakout in either direction is imminent. As of now, we expect it to happen in the northward direction where 17400 – 17450 are the levels to watch out for. The moment we surpass this, we could see a lot of individual stocks participating in the next leg of the rally. This view would be negated if the index slides and sustains below the lower range.
Most of the key indices are placed at a crucial juncture and they are waiting for some trigger to make a move. We hope to witness a much-awaited breakout in the early part of May which will certainly bring back a wider smile in the traders’ fraternity.
Oil prices fell on Monday in holiday-sapped trade in Asia as concerns about slowing economic growth in China, the world's top oil importer, outweighed fears of potential supply disruptions from a looming European Union ban on Russian crude.
Brent crude futures fell $1.21, or 1.1%, to $105.93 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 99 cents, or 1%, to $103.70 a barrel. Markets in Japan, India and across Southeast Asia were closed for public holidays on Monday.
Prices fell after China released data on Saturday showing that factory activity in the world's second-largest economy contracted for a second month to its lowest since February 2020 because of COVID lockdowns.
Nifty futures on the Singapore Exchange fell 266.50 points, or 1.56%, to 16,860 in early deals on Monday, signalling a weak start for Indian benchmarks.
On Friday, the benchmark Sensex fell 460 points to close at closed at 57,060.87, led by losses in banking, IT, and energy shares. The Nifty tanked 142.50 points to end the day at 17,102.55.
Stock markets in Japan, Australia, and South Korea fell on Monday, while US equity futures struggled as high inflation, tightening monetary policy and China’s Covid lockdowns deepened concerns about the global economic outlook.
Markets in China, Hong Kong, Indonesia, Singapore, Taiwan, and Thailand are closed on Monday for public holidays.
S&P 500 futures rose 0.1% and Nasdaq 100 futures climbed 0.2%.
Japan’s Topix index shed 0.2%, Australia’s S&P/ASX 200 Index fell 1.1%, and South Korea’s Kospi index fell 0.7%.
The Federal Reserve is expected to raise rates by a half point Wednesday, the largest increase since 2000. The question is how high it needs to go to get runaway inflation under control and whether that will trigger a recession.
On Friday, the Dow Jones Industrial Average slumped more than 900 points as another sharp sell-off led by technology stocks added to Wall Street's losses in April. The benchmark S&P 500 fell 3.6% and finished April with an 8.8% loss, its worst monthly slide since March 2020. The Nasdaq composite, heavily weighted with technology stocks, bore the brunt of the damage this month, ending April with a 13.3% loss, its biggest monthly decline since the 2008 financial crisis.
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