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PremiumIndian share indices ended 1.2% higher on Wednesday as soft crude oil prices supported sentiment. FMCG, banks & financials and auto stocks led the rally. Stocks dipped in Asia today as fears of an economic downturn lingered over financial markets, leaving the dollar hovering at the highest level in more than two years.
Benchmark Indian indices clocked robust gains on Wednesday as inflation worries eased amid weakness in crude prices. Sensex closed 616.62 points or 1.16% higher at 53,750.97, and the Nifty rose 178.90 points to 15,989.80. Auto, FMCG, IT and banks & financials led the rally in the market today.
Broad market indices were positive as the BSE midcap index rose 1.7%, and BSE Smallcap index gained around 1%. Bajaj Finance, Bajaj Finserv, and HUL were among the top gainers on the indices. Power Grid Corp, NTPC were among the major losers. Meanwhile, the Indian rupee recovered marginally to close at 79.31 against the US dollar.
India's latest measures aimed at boosting domestic oil supplies could reduce its diesel and gasoline exports in the second half of the year, keeping global supplies tight and underpinning prices, traders and analysts said.
The world is grappling with tight gasoline and diesel supplies as Western sanctions have reduced exports from Russia while demand has surged in a post-pandemic recovery. (Reuters)
Bajaj Finance reported a good set of numbers for Q1FY23, Company reported the highest ever quarterly increase in its customer franchise of 2.7 MM.
Bajaj Finance has reported its quarterly business update, the company's customer franchise reached 60.3 Mm as compared to 50.5 Mm last year, this is the highest quarterly increase in customer franchise by Bajaj finance of 2.7 Mm in Q1FY23. Along with the customer franchise the company has also reported good numbers for the new loan book which is at 7.4 Mm for Q1FY2023 as compared to 4.6 in Q1FY22.
Overall the Q1FY23 quarterly update seems to be very strong for Bajaj Finance and the company is back on its pre-covid growth momentum. We expect bajaj finance to continue this growth momentum for the next couple of quarters.
We have a neutral outlook on Bajaj Finance looking at the current valuations and comparing them with peers group.
Goldman Sachs believes that Kotak Mahindra Bank stock may go up to ₹2,135 per share levels in next 12 months and may hit $100 billion market cap by FY27.
Goldman Sachs report says, "We believe Kotak Mahindra Bank is positioned for an earnings upgrade cycle; we raise our estimates by 7%/13% for FY23E-FY25E on higher margins and lower loan-loss provisions, driving our 12-m TP to Rs2,135 (from Rs1,984, based on a blend of relative P/E and SOTP). We expect core operating profits to grow at a 22% CAGR (vs. a <15% CAGR in FY19-22) and net profits to grow at an 18% CAGR in FY22-25E (21% adj. for provision reversal in FY2022), and our FY23E-25E estimates are c.8% higher on average than VA consensus."
A rise in public investment in production linked incentive scheme (PLI) has resulted in a growth in hiring intent for July-September as 61 per cent of companies surveyed said they are keen to hire more, according to a report by TeamLease Employment Outlook Report.
The government has notified certain procedural changes in the GST rules, including those related to threshold, for filing annual returns for the 2021-22 fiscal, a move that will help ease the compliance burden on small players.
The changes were vetted by the Goods and Services Tax (GST) Council at its meeting last week.
With the amendments notified by the Central Board of Indirect Taxes and Customs (CBIC), businesses have also been allowed to make tax payments on the GSTN portal by using IMPS and UPI payment modes. (PTI)
European shares climbed on Wednesday, as Norwegian oil and gas workers called off their strike and assuaged fears of a heightened energy supply crunch, while Just Eat Takeaway.com rose after Amazon agreed to buy a stake in unit Grubhub.
The continent-wide STOXX 600 was up 1.3%. Germany's DAX gained 1.4% after losing almost 3% in the previous session. .
Equities fell in Asia on Wednesday and the euro was stuck at a 20-year low as recession fears continued to flow through trading floors. Adding to the uncertainty was a fresh flare-up of coronavirus cases in parts of China that has seen some cities locked down.
Tokyo's Nikkei 225 closed 1.2% lower, Hong Kong's Hang Seng Index fell 2.1%. Shanghai's Composite ended 1.4% lower.
· Topline growth of 36% y/y (ex-financial & OMCs) is largely driven by E&P companies like Reliance and ONGC, while sectors like Automobiles and IT are also likely to see impetus, estimated to witness a low double-digit growth. Performance in 12 out of 15 sectors under our coverage (ex-financial & OMCs) is likely to see flattish growth in the quarter, indicating that only three sectors are doing most of the heavy lifting.
· After seeing three consecutive quarters of contraction operating margins are likely to remain flat (up 15bps y/y) on account of strong margin expansion in Oil & Gas space (excluding OMCs). Auto sector is also likely to witness an expansion after three consecutive quarters of contraction. On the negative side, Cement, Pharma & IT are likely to witness margin collapse by 9.4, 3.4, and 2.3 ppts y/y basis respectively
· PAT growth of 74% is predominantly driven by 147% PAT growth y/y for Oil & Gas (ex[1]OMC) space, (accounting for 45% of our earnings ex-Finance and OMC). While, Auto and Telecom, which reported losses in Q1 FY22 are also likely to witness significant positive traction
For Financials: PAT to grow at 48% y/y, spearheaded by NBFC
· NII for Banks is expected to register a healthy 16% y/y growth, boosted by a decent uptake in credit demand. Even though PPoP is likely to register a de-growth of 1.4% y/y, the lowest number on recent records as an unfavourable rise in G-Sec yield translates into a weak treasury income. Lower provisioning and higher NII will improve PAT by 29% y/y.
· NBFC & SFB are likely to witness one of the strongest growth post-COVID. Both the topline and bottom-line are expected to grow by 25% and 145% y/y respectively
Credit rating agency Icra on Wednesday said that malls can expect rental income to increase by 30% year-on-year in FY23 driven by improved recovery in business.
Malls have reported an uptick in footfalls as well as demand; many retailers have also gone back to pre-covid rentals as malls report recovery.
Near normal economic activity, healthy retail sales (Q1FY23 averaging at ~92% of pre-Covid levels), robust demand in PV segment amid new launches in the SUV domain, cut in excise duty on fuels (| 8/litre on petrol, | 6/litre on diesel) in May 2022 and plummeting key raw material prices (mainly metals) towards the fag end of the quarter post their peak in April-May 2022 were the key highlights for Q1FY23E. Total industry volumes in Q1FY23 are expected to jump up ~10% QoQ led by the robust performance by the industry leader in the 2-W space with rest of the categories (PV, 3-W, CV) witnessing de-growth QoQ. Building in conservative estimates & quarterly lag of RM costs impact, we build in ~50 bps gross margin decline for our coverage companies in Q1FY23E. We expect our coverage universe (ex-Tata Motors) to report 1.5% QoQ topline growth & ~10 bps QoQ margin improvement to 12.2% with PAT expected to decline 9.7% QoQ primarily tracking exceptional gains in Q4FY22 (Ashok Leyland, Bajaj Auto). However, on a YoY basis, operational performance is likely to be robust at high double digit growth due to Covid impacted lower sales in the base year.
The second half of 2022 will be another subdued period for equity capital markets, especially for initial public offerings (IPOs) with a volatile stock market being one of many macroeconomic headwinds, experts said.
Overall fundraising in the equity capital markets dropped to ₹1.01 trillion in the first half of calendar year 2022, compared to a fundraising of ₹1.26 trillion the same period last year, according to data from primary markets tracker Prime Database.
Marico Ltd’s business update for the quarter-ended June (Q1FY23) indicated downtrading across products in essential categories on account of increased inflationary pressures. Saffola Oils volume fell by double digits year-on-year (y-o-y) as consumers shifted their preference from premium to mass segment in edible oils. Plus, it didn’t help matters that Q1FY22 had a high base owing to the increased in-house consumption. (Full report)
Fast moving consumer goods maker Dabur India Ltd., expects its domestic business to post “high single digit" revenue growth in the June quarter, the company said in a quarterly update ahead of announcing earnings for the first quarter.
A whole bunch of stocks will be in focus this week as they undergo their corporate actions and declare dividend, bonus shares, etc. One of the leading Indian pharma stocks engaged in research, development, manufacturing and marketing of generic pharmaceutical formulations, Torrent Pharma is set to declare bonus shares later this week. (Read here)
Stable Demand Outlook and Digitalization to Support Revenue Growth
We expect the IT companies under our coverage universe to report strong deal momentum (strong book-to-bill ratio and solid deal pipeline) across most verticals in 1HFY23 due to a strong demand seen for transformation and digitalization, while demand would moderate 2HFY23 onwards. We expect 2.4-3.7% and 2.5-3.7% sequential growth in CC revenue for 1QFY23 for the large cap and mid-cap companies, respectively. Further, revenue growth is likely to be broad-based across verticals. We expect the deal bookings to remain strong, given the ongoing digital transformation trend.
Lower Utilization & Supply Side Issues to Impact Margins, but Attrition to Peak Out now
We expect the companies under our IT sector coverage universe to report 47bps QoQ decline in EBIT margin due to: (1) accelerated hiring (both freshers and laterals) amid the high attrition; (2) marginal step-up in investment in sales and capabilities, and (3) lower utilization due to hiring freshers (4) higher S&GA cost, due to visa cost and increasing travel expenses. We highlight the margin pressure in 1QFY23 owing to higher employee incentives amid the rising attrition and cross-currency headwind. We expect companies with higher EU exposure to face stronger cross-currency headwind due to likely weakening of GBP and EUR against USD. Though attrition would remain elevated, we believe that it has already peaked out now. We expect cost pressure to continue over the next 2 quarters, while margin would recover with moderation in attrition in 2HFY23 and would stabilise. Additionally, we believe the large cap IT names are in a better position to address supply side concerns along with better pricing power compared to their mid-cap peers. Going ahead, we believe margin expansion would depend on: (1) improved pricing; (2) operating leverage (double-digit revenue growth); and (3) currency movement.
IT Names to Maintain FY23 Revenue Growth Guidance
We expect the IT companies to maintain revenue guidance for FY23 on the back of a deal backlog and healthy deal environment. We also believe a broad-based consensus exists among the large cap and mid-cap IT companies regarding better technology demand. We expect Infosys to maintain FY23 revenue growth guidance to 12-14% and EBIT margin in the range of 22-24%. We expect Indian IT names to record low-teen double-digit revenue growth in FY23 with minor moderation in margins in 1HFY23E due to cost pressure and currency headwinds, while margins would recover by ~50bps in 2HFY23E. We expect a decline in the utilization rate due to fresher hirings and a rise in discretionary cost.
Our View
The IT sector (coverage universe) is set to post another quarter of healthy growth with decent CC growth despite cross currency headwinds and cost pressure, based on (1) increasing digital transformation/shift to cloud, 2) healthy deal pipeline, and 3) investment in the hyperscalers/SaaS ecosystem. We expect the IT companies to invest the margin gains that they witnessed over the last 2 years for capability addition and talent retention, which will aid their market share gain over the medium term. We also expect accelerated disclosures on the progress of cloud business. Majority of global enterprises are still at an early stage of digital adoption, which is a huge opportunity for the Indian IT companies for long term. Though FY23E revenue growth outlook for the sector remains strong, FY24E revenue growth would see moderation amid uncertainties on global business environment and worsening macros. We believe high salary inflation in developed markets, increasing travel expenses and higher visa costs would impact margins, despite some relief from better pricing. Post recent price correction, valuations are now below the 5-yr avg and further valuation contraction is unlikely. With double digit revenue growth and likely margin recovery 2HFY23 onwards, we remain positive on the sector despite near-term challenges.
The pain for Indian stock market continues, with key benchmark index Nifty falling nearly 5% in June, following a 3% decline in May. The market closed in the red for the third consecutive month in June, marking the steepest month-on-month decline since March 2020, said analysts at Motilal Oswal Financial Services Ltd.
Compared to other Asian markets, the Indian stock market has seen relatively less correction. For instance, key benchmark indices in Korea, Taiwan and Brazil have fallen over 10% each in June compared to May, in local currency terms. In fact, even the MSCI Emerging Markets index slumped 7% m-o-m in June.
India recorded 16,159 fresh coronavirus infections in the last 24 hours, pushing active cases in the country to 1,15,212, as per data released by the Union health ministry. With this, total covid cases reported in the country so far stand at 4,35,47,809. About 28 people succumbed to the disease in the last 24 hours, pushing the death toll to 525,270.
Customer Franchise – Customer franchise stood at 60.3Mn( +19.4% YoY/ +4.7% QoQ). New customer acquisition improved and stood at 2.7mn(22.7% QoQ). Both these parameters have shown improvement over Q4’22 when there was a +3.9%QoQ rise in customer franchise and a 14% decrease QoQ in new customer acquisition
AUM- Core AUM showed strong growth and came in at INR 20,40,000 Mn ( +30.7% YoY/+6.19% QoQ)
New loans booked at 7.4Mn vs 4.6Mn in Q1’22 and 6.3Mn in Q4’22
Deposits came in at INR 3,41,000 Mn( +22% YoY/ +10.7% QoQ) . Deposit momentum has been strong last quarter had seen only a +2.6% QoQ rise.
Outlook: AUM growth was strong but slightly below our expectation of 9% QoQ growth but customer acquisition has rebounded strongly after it had seen a de-growth in the last quarter which is a strong positive. Increasing customer acquisition through its omni channel is crucial and company has been successful in doing so
We have a BUY rating valuing the company at 8.7x Sep’24E ABV with TP at ₹8,953.
On the technical front, 15650-15700 holds the demand zone for the index, and any correction could be seen as a buying opportunity. On the contrary, a decisive closure above the 16000 mark could only ascertain the bullish trend in the near period.
Hence, looking at recent price action that construes an unclear market trend, participants are advised to avoid any undue risk and stay abreast with global developments. Also, as much action is seen outside the index, we advocate continuing with a stock-centric approach for better trading opportunities.
The PLI scheme aims to provide nearly ₹2.4 lakh crore worth of incentives over the next five years, with the lion's share going to electronics, auto components, and pharma.
"The Indian consumer was missing in action for almost 5 years due to multiple reasons like demonetization, GST, COVID, and lack of inflation. The growth in per capita GDP picked up in FY22 and per capita GDP was higher than in FY20 after a dip. The discretionary income of Indian consumers is likely to rise from FY23 to FY27," said brokerage firm Emkay Investment Managers.
Global gold prices found some respite today after slumping to lowest in more than six months on Tuesday, amid a rally in US dollar. The greenback surged to the highest in more than two years as investors retreated to the haven, putting pressure on bullion. Today gold prices recovered a bit, rising 0.4% to $1,770.71 per ounce. On Tuesday, gold fell 2.3% to $1,767.53 an ounce, the lowest since December in intraday trading. In India, the fall in bullion has been cushioned by the recent import duty hike.
Bajaj Finance has booked 74 lakh new loans in April-June quarter against 46 lakh a year ago. Consolidated core AUM grew 31% to ₹2.04 trillion. Deposits rose 22% to ₹34,100 crore as on 30 June.
Oil marketing companies--IOC, BPCL, HPCL-- on Wednesday increased the price of domestic 14.2 kg LPG cylinder by ₹50 per unit with effect from today. Domestic LPG cylinder will now cost ₹1053 in Delhi.
The second half of 2022 will be another subdued period for equity capital markets, especially for initial public offerings (IPOs) with a volatile stock market being one of many macroeconomic headwinds, experts said.
Overall fundraising in the equity capital markets dropped to ₹1.01 trillion in the first half of calendar year 2022, compared to a fundraising of ₹1.26 trillion the same period last year, according to data from primary markets tracker Prime Database.(Full report)
Even as volatility rocked debt and equity markets over the past year, infrastructure investment trusts (InvITs) and real estate investment trusts (Reits) became an oasis of stability, with many analysts expecting returns from these instruments to rise further.
With office occupancies and shopping mall footfalls rising steadily after two years of covid-related disruptions, these instruments have performed better than many other asset classes in recent quarters, experts said, with yields of 6-10%. Some analysts expect their returns to cross mid-teens in the medium to long term.
Vodafone Idea Ltd plans to offer its mobility and integrated internet of things (IoT) solutions, including cloud telephony and auto-receptionist, to nearly 250,000 micro, small and medium enterprises over the next year, a top company executive said. India’s third-largest telco is eyeing the advisory business to corner the opportunities in this under-tapped segment.
The two firms and several companies in West Asia, have expressed interest in Coal India’s proposed aluminium project in Odisha, two officials aware of the matter told Mint The world’s biggest coal producer recently invited expressions of interest (EoI) for equity partners in the project that includes bauxite mining, alumina refinery and aluminium and an associated coal preparation plant. (Full report)
Adani Power, Tata Motors, Biocon, Marico, NTPC and other stocks that will be in focus today.
Gold prices gained on Wednesday, following a selloff in the previous session that pushed bullion to a seven-month low, after the dollar halted its rally.
Spot gold rose 0.4% to $1,770.71 per ounce, as of 0059 GMT. U.S. gold futures firmed 0.3% to $1,768.80. Gold lost more than 2% on Tuesday.
Safe-haven demand strengthened the dollar in the previous session to levels last seen in 2002, making greenback-priced gold more expensive for buyers holding other currencies.
