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PremiumIndian shares ended marginally higher on Thursday amid volatility. Global markets were mixed as traders weighed the outcome of US inflation which was at its highest in decades, but largely met economists' expectations, cooling fears that the Federal Reserve would have to pull back support even more forcibly than already expected.
Indian benchmark indices ended marginally higher on Thursday, marching northwards for the fifth day in a row, amid choppy trade. Sensex ended at 61,235.30, up 85.26 points, while Nifty settled at 18,257.80, up 0.25%. Tata Steel and Sun Pharma were the biggest gainers, while Wipro was the top laggard post its Q3 earnings. Smallcap and midcap stocks gained in line with benchmarks. While metal and pharma stocks outperformed, banks and realty stocks were under pressure today.
Mirae Asset Mutual Fund increased its holding in One97 Communications (Paytm) through a number of its schemes during December even as shares of the company continued to see a free fall since its dismal listing in November 2021.
This is despite Paytm eroding half of IPO investors’ wealth since the listing on November 18.
At the same time, data from ValueResearch showed that other mutual houses such as HDFC Asset Management Company and BNP Paribas Mutual Fund trimmed their holdings or completely exited during December.
Overall, mutual fund houses through their 19 schemes were holding 68.74 lakh Paytm shares valued at ₹917 crore at the end of December compared with 57.53 lakh shares (valued at ₹977.80 crore) at the end of November.
Financial Performance: Wipro Ltd’s (Wipro) revenue growth stood below our expectations at ₹20,313 Cr, up 3.1% QoQ and 27% YoY in CC terms. Operating profit grew robust 30.8% YoY to ₹3,492 Cr, aided by better executions, better employee management, and service mix. However, the operating margin declined by 20bps at 17.6% QoQ. Net profit for the quarter reported a growth of 34% YoY as it stood at ₹2,972 Cr.
Operating Performance: The company’s BFSI vertical grew by 3.5% QoQ while the E&U vertical delivered a de-growth of 3% over the same period. While the Communication vertical grew by 1.8% QoQ, Consumer business/ Manufacturing verticals grew by 4.7%/ 1.9% QoQ, respectively. The majority of the verticals are witnessing strong growth and are likely to continue their growth in the forthcoming quarters in the backdrop of a strong deal pipeline.
Outlook & Valuation: Over the years, Wipro has proactively built a resilient business. Furthermore, its EBITDA margins are likely to expand in the near term driven by long-term contracts with the world’s leading brands, depreciation in INR, lower travel cost, and lower on-site expenses. We recommend a HOLD rating on the stock and assign a 27x P/E multiple to its FY24E earnings of ₹27.7/share to arrive at a TP of ₹750/share, implying an upside of 9% from CMP.
“Indian markets opened flat to marginally positive despite negative Asian market peers after higher inflation reading from US and China's bank lending declined more than expected in December. During the afternoon session markets managed to trade in green albiet with a narrow range. Traders were positive, as Commerce and Industry Minister said start-ups of the country will help India transition from an assembly economy to a knowledge-based economy. Adding more relief, a private report stated that digital platforms help unlock up to 30% more value for micro entrepreneurs who are associated with them by helping overcome challenges like market access and credit."
Financial Performance: Tata Consultancy Services Ltd (TCS) reported a 4.3% revenue growth QoQ in Q3FY22 in Rupee terms, much in line with our expectations. The company’s revenues stood at ₹48,885 Cr, up 16.3% YoY and 4.3% QoQ. While its operating profit stood at ₹13,237 Cr, the company’s Operating Margins declined 60bps QoQ to 25.0%, led by its superior execution in the quarter.
Impressive Operating Performance: TCS delivered encouraging growth in the majority of the verticals during the quarter. Life Sciences & Healthcare grew by 16% YoY, BFSI by 17.9% YoY, Manufacturing by 18.3% YoY, and Technological Services by 17.7% YoY. Furthermore, Communication & Media grew by 14.4% YoY and Regional Markets & Others, too, improved by 5.2% YoY.
Outlook & Valuation: From a long-term perspective, we believe TCS has built a resilient business model by securing multiple long-term contracts with the world’s leading brands. With an encouraging growth in volumes and efficient execution, the company is expected to regain its operating margins at the desired level of 26%-27%. We recommend a HOLD rating on the stock and assign a 31x P/E multiple to its FY24E earnings of ₹135.2/share to arrive at a TP of ₹4,200/share, implying an upside of 9% from CMP.
Stock markets were mixed globally as traders fought to maintain the previous day's upward momentum, though data suggesting that US inflation may be stabilising provided some fresh cheer. Japan's Nikkei and Shanghai - Composite ended 1% lower each, while Hong Kong's Hang Seng Index closed 0.1% higher. London's - FTSE was trading 0.2% lower, while Frankfurt's DAX lost 0.3%.
Anil Agarwal-promoted Vedanta Aluminium Business has become the largest industrial consumer of renewable energy (RE) in 2021 as it led renewable energy procurement on Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL).
The company procured about 2 billion units of RE power in the year 2021 for consumption at its aluminium smelter in Jharsuguda, Odisha, reducing green house gas emissions intensity at the smelter by more than 1540 KtCO2e (kilo tonnes of CO2 equivalent) in the year, said a company statement.
Listed depository, Central Depository Services (India) Ltd (CDSL), on Thursday announced that its wholly-owned subsidiary CDSL Ventures Ltd (CVL), has received the Securities and Exchange Board of India (Sebi) approval to set up an accreditation agency for accreditation of eligible Investors.
The recognition of CVL as an accreditation agency will be valid for a period of three years with effect from 1 February 2022.
Sebi in August 2021 had introduced a concept of ‘accredited investor’ in the Indian securities market.
The National Company Law Appellate Tribunal (NCLAT) on Thursday refused any interim relief to e-commerce giant Amazon in its plea challenging a CCI order that suspended an earlier approval for its deal with Future Coupons Pvt Ltd (FCPL).
Instead, the appellate tribunal, led by M Venugopal and Justice V P Singh, has directed the Competition Commission of India (CCI) and FCPL to file their reply in next 10 days and Amazon to file a rejoinder over it.
The matter will be next heard on 2 February, which is a day before the deadline for Amazon to pay the ₹202 crore fine imposed by CCI.
The Central Board of Direct Taxes (CBDT) has issued income tax refunds of over ₹1.54 lakh crore to more than 1.59 crore taxpayers between 1 April 2021 and 10 January 2022, the Income Tax (IT) department said on Wednesday. Refunds of ₹53,689 crore have been issued in 1.56 cases, while corporate tax refunds of about ₹1 lakh crore have been issued in 2,21,976 cases.
The finance minister will be presenting the Union Budget 2022-23 on 1 Feb which will be keenly watched by the markets. We expect that the Union Budget will focus on targeted spending while maintaining fiscal discipline. We expect the Government fiscal deficit for FY23 will be well below the budget estimate of 6.8% for FY2022 due to better than expected tax collections. We expect that the Government will continue its focus on providing support to the rural economy and manufacturing sector through increased spending and PLI schemes. We also expect the Government will increase allocation to the Infrastructure and housing sector given their high multiplier effect on the economy. We do not expect any major announcement in the Union Budget and believe that the Government will continue with its reform process even outside of the Budget.
The future prospects of KEC International Ltd look bright with good order inflows being reported by the company. It recently announced robust multiple order wins across segments worth ₹1,025 crore.
The outlook for order inflows in FY23 remains strong with expected rise in ordering from railways and civil projects.
The stock prices are up about 7% since order win announcements a few days back. (Full report)
Cash-rich Tata Consultancy Services (TCS) Ltd is walking the talk on its capital return commitment made to investors. It has announced a buyback of up to 4 crore shares with the IT company buying shares at ₹4,500 per share. This is nearly 17%, premium compared to its last traded price of the stock when this buyback was announced, analysts note.
The stock is trading at a one-year forward price-to-earnings multiple of around 31 times and is the most expensive listed technology stock, showed the Bloomberg data. Analysts note that stock's FY23 valuation multiple is around 60% premium to its long-term average. (Full story)
South Korean steel giant Posco is making aggressive bets in India, for which it has signed an agreement with Gautam Adani-promoted Adani Group to set up an integrated steel mill at Mundra with an investment of around $5 billion.
Prior to entering Gujarat, the South Korean steel major had tested waters in Orissa and Karnataka and had a successful operation in Maharastra.
"The index seems to be in the midst of a jubilant wave and en route to 18500 as the next level of target and resistance. With good support at 17800, traders can use intraday dips or corrections to accumulate long positions on the Nifty."
The Indian rupee was trading in a narrow range in morning trade on Thursday as muted domestic equities and weak domestic macroeconomic data weighed on investor sentiments.
At the interbank foreign exchange, the rupee opened at 73.91 against the American dollar, then inched higher to 73.89, registering a rise of 4 paise from the last close. The local unit also touched 73.97 in early deals.
The automaker said JLR sales continued to be constrained by semi-conductor shortages. Retail sales for the quarter ended 31 December were 80,126 vehicles, down 13.6% from the preceding September quarter and 37.6% from the same quarter a year ago.
Gold prices are trading up by 0.1% at ₹47,826 per 10 grams. Meanwhile, silver prices are trading at ₹61,883 per kg.
Gold held near a one-week high hit in the previous session, as the US dollar and Treasury yields retreated after inflation data came in line with expectations and reiterated the need for a quicker interest rate hike.
In global markets, spot gold was flat at US$1,824.55 per ounce while US gold futures were down 0.2% to US$1,824.
· India’s CPI inflation increased by 5.6% YoY in December from 4.9% YoY in November.
· On sequential basis, the Headline CPI Index was lower by 0.4% in December compared to the last month, implying that an adverse base effect was behind this rise.
· Core inflation remains sticky at 6.2% but with no clear evidence of pass-through from the WPI or being demand-led.
· While we believe that the RBI will continue to support growth and delay any monetary policy tightening through a rate action, its hands might get tied by the US Fed who is now priming the markets for a balance-sheet run-off to start close to the onset of Fed rate increases.
· We expect 50bps increase in the repo rate for FY23 in Q1 and Q3
India added 2,47,417 new coronavirus infections taking the total tally of cases to 3,60,70,510 according to the Union Health Ministry data updated on Thursday.
Of the total 5,488 cases of Omicron variant, 2,162 people have recovered or migrated so far.
India's second-largest software services firm on Wednesday reported an 11.8% rise in consolidated net profit to ₹5,809 crore for December quarter. The firm also increased its revenue growth guidance for FY22 to 19.5-20%. The IT giant's revenue grew 22.9% to ₹31,867 crore.
The company reported ₹2,969 crore profit for the third quarter of the current financial year, a tad higher than ₹2,968 crore recorded during the same quarter of last year. The company's gross revenue during the quarter stood at ₹20,313 crore ($2.7 billion), posting an increase of 29.6% year-on-year and 3.3% quarter-on-quarter.
Yes Bank Ltd, which is in the process of selecting a partner for an asset reconstruction company (ARC) to warehouse a large portion of its bad loans, is seeking as much as ₹12,000 crore from potential investors, two people directly aware of the ongoing negotiations said.
The private sector lender, which plans to transfer non-performing assets (NPAs) of close to ₹54,000 crore to the ARC by the end of the current fiscal, is seeking bids anywhere between ₹10,000 and ₹12,000 crore, the people said, requesting anonymity. The bank has sought binding bids by 25 January from private equity investors. (Read more)
Both revenue and EBIT margin slightly below expectation. Reported revenue of ₹203.1bn( up 3.3% QoQ in INR terms- below expectation ). IT services revenue grew 2.3% QoQ in USD terms to $2.64bn. The revenue growth was led by strong performance in BFSI snd consumer verticals.
EBIT margin was down 37 bos QoQ to 16.9%, mainly led by higher employee cost ( cost of revenue) that grew 4.2% sequentially.
Deal booking remained strong as it closed 11 large deals with TCV of over $600 mn.
Total number of active customers increased by 31 QoQ to 1315. Total number of headcount increased by ~10,300 QoQ to 231,671. Net utilization was down 340 bos QoQ to 85.8 %, led by higher fresher onboarding and seasonal factor.
LTM attrition increased by 220 bps QoQ to 22.7%, as demand for talent remains strong.
Declared an interim dividend of ₹1/ share.
Guided for sequential revenue growth of 2-4% QoQ for Q4FY22.
We currently have 'Add' rating on the stock.
India’s December retail inflation quickened to a five-month high of 5.56% amid soaring food prices, while industrial growth slipped to a nine-month low of 1.4% as pent-up demand during the festive months failed to sustain in November.
The unwelcome combination poses a dilemma for the RBI, which needs to raise interest rates to contain inflation even as businesses need monetary support to revive growth and add jobs. (Full report)
India’s three leading software services companies—Tata Consultancy Services Ltd (TCS), Infosys Ltd, and Wipro Ltd—kicked off the earnings season on Wednesday, reporting strong revenue numbers for the seasonally weak fiscal third quarter.
Infosys outshone its rivals, raising its full-year revenue growth forecast to 19.5-20% in constant currency from the 16.5-17.5% it had predicted earlier, citing strong demand.
Wipro, which forecasts for the quarter ahead, expects its March quarter revenue to grow in the range of 2-4% in constant currency from the preceding three months, translating to full-year growth of 27-28%. TCS does not give a revenue growth forecast but has indicated an upbeat outlook.
TCS’s net profit for the December quarter grew 12.3% from a year ago to ₹9,769 crore on the back of robust revenue growth of 16.3% to ₹48,885 crore. Consensus Bloomberg estimates pegged TCS’s profit at ₹9,980 crore and revenue at ₹48,533 crore. The Mumbai-based company’s dollar revenue grew 15.4% in constant currency to $6.52 billion.
Oil prices slipped on Thursday, trimming big gains from the previous two sessions, amid uncertainty over near-term demand as cases of the highly contagious Omicron variant of the coronavirus surge around the globe.
U.S. West Texas Intermediate (WTI) crude futures slipped 7 cents, or 0.1%, to $82.57 a barrel, after climbing 1.7% in the previous session. Brent crude futures shed 6 cents, or 0.1%, to $84.61 a barrel, after rising 1.3% on Wednesday.
