The interim Budget proposals that will be presented on February 1 in the backdrop of the general elections scheduled in April/May 2024 are likely to have a hint of populism, believe analysts, but are unlikely to derail the government from its path of fiscal prudence.
Investors shunned shares of oil marketing companies (OMCs) on Friday as they feared that the government's decision to cut retail prices of petrol and diesel could hurt the companies' profit margins in the near term. On Thursday, the government announced that OMCs will reduce pump prices of petrol and diesel after a record 22 months, making them cheaper by Rs 2 per litre in the national capital. The changes were effective from Friday.
rediffGURU Ulhas Joshi answers your mutual fund queries.
The headline for corporate profit growth has been very encouraging in the July-September quarter (Q2) of 2023-24 (FY24), with the combined net profit of listed companies up by 38 per cent year-on-year. However, the earnings distribution has been very lopsided, with most of the growth coming from public-sector oil-marketing companies (OMCs), banks, non-bank lenders, automobile (auto) companies, and cement producers. By comparison, companies from information technology services, fast-moving consumer goods (FMCG), retail, and consumer durables were disappointed, experiencing a sharp slowdown in net sales growth and a relatively muted increase in reported net profit.
Corporate India's net profit as a percentage of gross domestic product (GDP) dipped in the 2022-23 financial year (FY23) -- after rebounding sharply in FY22 -- amid a decline in global commodity prices. Top 500 companies' combined net profit stood at 4.1 per cent of the GDP for FY23, down from 4.3 per cent in the previous financial year when it had gone up from just 3.5 per cent in FY21. "The year-on-year (YoY) decline was led by global commodities, which contributed adversely to the ratio, while the financial sector contributed positively.
Closely watched by the world for any escalation, the Iran-Israel conflict is already showing early signs of stress for India Inc - longer deliveries, doubling freight rates, extended working capital cycles, and higher costs. For those yet to feel the heat, there is growing apprehension and nervousness over future developments, observed industry executives.
Reliance Industries' (RIL's) consumer business is expected to lead earnings growth in the Q3FY24 performance, according to analysts. While the energy business is expected to show sequential weakness, the consumer business, especially retail, is estimated to show strong growth. The oil-to-telecom conglomerate will announce its Q3FY24 financial results on Friday.
Tata Motors surpassed Maruti Suzuki (India) (MSIL) to become the most-valuable automobile company, in terms of market capitalisation (mcap), after a gap of seven years. With this, the company's stock hit a new high on the BSE on Tuesday (January 30). The combined mcap of Tata Motors (Rs 285.51 crore) and Tata Motors DVR (Rs 29,119 crore) stood at Rs 3.146 trillion.
Even as the near-term outlook for the quick service restaurant (QSR) industry remains muted, brokerages are positive about the prospects of Sapphire Foods India. Their preference for the QSR chain comes on the back of the steady performance of Kentucky Fried Chicken (KFC), superior execution and reasonable valuations. The Sapphire Foods stock is up 11 per cent since the start of November.
Domestic equity markets will be driven mainly by quarterly earnings, global trends, and the movement in crude oil prices in this holiday-shortened week, analysts said. Investors would also keep an eye on the Middle East amid the ongoing Hamas-Israel conflict and the trading activity of foreign investors. Markets will remain closed on Tuesday for Dussehra.
The slowdown in private consumption in the economy is taking a toll on the growth of fast-moving consumer goods (FMCG). The net sales growth of listed FMCG companies hit a 14-quarter low of 2.5 per cent in October-December 2023 (Q3FY24). This is the lowest revenue growth for the industry since the June 2020 quarter, when the FMCG firms in the Business Standard sample had reported a 13.2 per cent Y-o-Y decline in combined net sales owing to the lockdown.
State-backed Life Insurance Corporation of India (LIC) recorded strong growth in the value of new business (VNB) margin in the third quarter of financial year 2023-24 (Q3FY24) while major listed private life insurers reported a weak performance. VNB refers to the profit that an insurer is likely to garner from new business, which comes from policies sold in a particular period. VNB margin is the profit margin of the insurer.
Retail investors now own a bigger slice of smallcap companies than at the start of 2023-24 (FY24), underscoring their growing conviction about investing in this red-hot space. Data from Capitaline shows mutual funds' (MFs') average holding in the National Stock Exchange Nifty Smallcap 250 rising to 9.26 per cent from 8.67 per cent during the first six months of FY24, with the number of companies with over 20 per cent MF holdings increasing from 24 to 28. In comparison, MF holdings in Nifty50 companies have gone up only marginally, from 9.67 per cent to 9.75 per cent.
Reliance Industries Ltd was the biggest wealth creator during the five-year period from 2018 to 2023 while Adani Enterprises Ltd was the top all-round wealth creator, according to a study by Motilal Oswal Financial Services. The study, based on stock market performance of companies, said for the fifth time in succession, Reliance emerged as the largest wealth creator, adding Rs 9,63,800 crore wealth over 2018-23. It was followed by Tata Consultancy Services (Rs 6,77,400 crore wealth addition), ICICI Bank (Rs 4,15,500 crore), Infosys (Rs 3,61,800 crore) and Bharti Airtel (Rs 2,80,800 crore).
HDFC Bank's market capitalisation (market cap) touched Rs 13 trillion in Thursday's (December 28, 2023) intra-day trades as the largest private sector lender is set to report its sharpest monthly rally in the past two years. At 10:33 AM; HDFC Bank's market cap stood at Rs 13.03 trillion, the BSE data shows. The stock was up 1 per cent at Rs 1,717.90 in intra-day trades on December 29, inching towards its record high of Rs 1,757.80 touched on July 3, 2023.
The country's most valuable lender HDFC Bank can perhaps no longer claim to be a favourite of foreign portfolio investors (FPIs). Two data indicators, both somewhat interconnected, point to this - the diminishing premium of HDFC Bank's American depositary receipts (ADRs) compared to local shares, and the ample investment opportunities available to FPIs in the domestic market. The ADR premium has shrunk to below 5 per cent, down from over 30 per cent in March 2021, and even lower than recent levels.
Analysts have turned cautious on Cipla, as the recently issued form 483 by the US FDA with eight observations to its Pithampur (Indore) plant is expected to delay the launch of the company's key generic - Advair - in the US. The Indore plant contributes around 5 per cent of Cipla's revenues, as per analysts' estimates. While the respiratory product, which is used to treat asthma, had cleared the pre-approval inspection of the regulator at the Indore unit; the final approval could be unlikely until the company clears the recent US FDA observations, analysts say.
Despite a largely stable December quarter, investors booked profit in shares of IndusInd Bank (IIB) as an increase in slippages took them by surprise. Analysts, on their part, believe investors may, now, wait for actual delivery on slippage decline, potentially limiting near-term upside. "The management has indicated that corporate slippages (from legacy stressed book) have ended and inch up in consumer finance slippages was more one-off, and should meaningfully improve Q4FY24 onwards.
rediffGURU and financial planning expert Colonel Sanjeev Govila (retd) answers your personal finance-related questions.
Investors' wealth eroded by Rs 7.59 lakh crore on Monday as the equity market took a heavy drubbing amid escalating tensions in the Middle East. The 30-share BSE Sensex plunged 825.74 points or 1.26 per cent to settle at 64,571.88 points. During the day, the index plummeted 894.94 points or 1.36 per cent to 64,502.68 points.
Investors should view any bounce-back in bank stocks as an opportunity to exit the pack, analysts suggested, as the worst may not be over yet. The recent quarterly results of HDFC Bank and Axis Bank disappointed the Street, triggering a marketwide selloff by foreign institutional investors, especially in banking counters. While HDFC Bank, which was the anchor for the market correction during the past week, ended 2 per cent higher amid short covering on Wednesday, Axis Bank's shares settled 3 per cent lower.
Indian drug firms continue to work closely with the FDA, and most have also appointed consultants to help them grasp the regulatory minutiae in the US.
Bharat Forge, the Pune-based automotive component maker, has been one of the top-performing companies in its segment. The company's stock price is up 39.3 per cent since the beginning of the 2023 calendar year, surpassing other leading automotive component makers such as Bosch and Samvardhana Motherson International. The stock also outperformed the benchmark BSE Sensex, which is up 17.3 per cent year to date so far.
From its lows in December, the stock of Tata Motors is up about 15 per cent. The gains came on the back of better than expected December volumes in its UK-based subsidiary Jaguar Land Rover (JLR). This coupled with gradual recovery in the global passenger vehicle demand, improving profitability due to product mix and lower commodity costs are expected to be key positives for the company.
rediffGURU Dev Ashish answers your personal finance and mutual fund queries.
Mutual funds (MFs) are lining up distinguished new fund offerings (NFOs) for the next financial year to win over investors after a lukewarm response to product launches in the 2022-23 financial year (FY23). NFOs drew a lukewarm response in FY23 as launches were mostly in the passive debt space, which has a comparatively lower popularity among retail investors. The limited launches in equity space also failed to rake in huge sums due to subdued investor sentiments in a volatile market.
With the first quarter earnings season coming to an end, the domestic equity markets would be driven by global trends and trading activity of foreign investors this week, analysts said. The movement of global oil benchmark Brent crude and the rupee against the dollar would also drive trends in the market. "Macroeconomic indicators, trends in global stock markets and FII activities will be pivotal in shaping market trends in the coming days," Pravesh Gour, senior technical analyst at Swastika Investmart Ltd, said.
rediffGURU Ramalingam Kalirajan answers your personal finance queries.
The banking regulator was uncomfortable with the runaway pace at which consumer credit was growing.
The Indian equity market valuation has been moving in tandem with the US 10-year treasury yield. While the benchmark US bond yield has witnessed a nearly 70 basis point decline since the end of October this year, dropping from 4.93 per cent to 4.23 per cent on Friday, the Sensex earnings yield has slipped by nearly 45 basis points - from 4.5 per cent to 4.05 per cent. Previously, Indian equities' earnings yields rose in sync with the US bond yields.
A strong performance in the July-September quarter of 2023-24 (Q2FY24), an upward revision in the margin guidance and sustained momentum in US sales has helped the stock of pharmaceutical major Cipla gain about 2 per cent over the last two trading sessions. The brokerages have upgraded the earnings estimates for this financial year (FY24) by 6-9 per cent to factor in the improved margin guidance and sales in the US market. Led by the US market, which rose by 31 per cent, the company posted a 16 per cent growth in revenues.
Titan Company on November 21, became the second Tata group firm to join Rs 3 trillion market capitalisation (market cap) club after its shares hit a new high of Rs 3,400, up nearly 2 per cent on the BSE in Tuesday's intra-day trade. At 12:28 PM; with a market cap of Rs 301,847 crore (Rs 3.02 trillion) Titan stood at number 16th position in overall market cap ranking on the BSE listed companies, the exchange data shows. Titan overtook paint company Asian Paints, which has a market cap of Rs 300,579 crore, data shows.
Shares of Bajaj Finance sprinted 4.7 per cent to Rs 7,732 per share on the BSE in Thursday's (January 4) intra-day trade as the non-bank finance company's (NBFC's) December quarter business update reflected minimal impact of the Reserve Bank of India's ban on two of its lending products. The shares, eventually, ended 4.4 per cent higher at Rs 7,710 per share as against 0.69 per cent gain in the benchmark S&P BSE Sensex. The NBFC's asset under management (AUM) topped the Rs 3-trillion-mark at the end of December 2023, swelling by roughly Rs 20,700 crore (35 per cent year-on-year) to hit Rs 3.11 trillion-mark.
Gold price declined Rs 305 to Rs 56,035 per 10 grams in the national capital on Thursday amid a fall in rates of precious metal in the overseas markets, according to HDFC Securities. The yellow metal had settled at Rs 56,340 per 10 grams in the previous trade. Silver also plummeted Rs 805 to Rs 65,095 per kg.
Brokerages believe that the Bharatiya Janata Party's (BJP's) stronger-than-expected showing in state elections reduces political risks for the domestic markets going into 2024. However, after the short-term excitement, the focus will soon shift to earnings, global liquidity conditions, and the interest rate trajectory. "BJP's win in the three state elections is much better than what exit polls suggested and reinforces the consensus expectations of a Modi win in the 2024 national elections with a greater likelihood of 300+ seats for the BJP.
Bajaj Auto's market capitalisation (market cap) hit Rs 2 trillion mark for the first time. The stock of the two and three-wheeler major rallied 6 per cent to hit a new high of Rs 7,420 on the BSE in Tuesday's (January 9) intraday trade after its board approved Rs 4,000 crore share buyback at Rs 10,000 per share. The stock ended the day at Rs 7,093.75, up 1.55 per cent and its market cap a shade above Rs 2 trillion.
India's leading capital goods and engineering firms are in the midst of one of their busiest seasons, with the combined orderbook surging past Rs 8 trillion in value. As on September 30, 2023, 13 of India's top 15 listed capital goods and engineering firms, for which data for the September 2023 quarter was available, had a total orderbook worth Rs 8.45 trillion - a number unseen at least since 2018-19. "This intuitively looks like an all-time high factoring in inflation," said Anupama Arora, a senior independent analyst who tracks the capital goods sector.
InterGlobe Aviation, the operator of India's leading airline IndiGo, delivered a better than expected performance across most parameters in Q2FY24. The company posted its fourth consecutive quarter of net profit of Rs 188 crore. It had reported a loss of Rs 1,583 crore in the same quarter a year ago.
Corporate margins and profits in India remain vulnerable to changes in crude oil prices in the international market. Historical quarterly data from listed companies (excluding banks, finance and insurance, oil and gas, and power sectors) indicate an adverse correlation between corporate margins and crude oil prices.
This is a good opportunity for long-term investors to pick quality small and midcap stocks at reasonable valuations.
