Sensex, Nifty Close Lower For A Second Day As Banks Drag
India’s stock benchmarks declined for a second day, with HDFC Bank Ltd. leading losses after the lender’s quarterly results missed analyst estimates as it set aside more funds for bad loans.
The S&P BSE Sensex shed 1.10% to 52,553.40, and NSE Nifty 50 Index lost by a similar magnitude to 15,752.40. HDFC Bank Ltd. contributed the most to the index decline and had the largest move, decreasing 3.4%.
The broader markets fared better than their larger peers. The S&P BSE MidCap shed 0.58% while the S&P BSE SmallCap declined by 0.31%. Fifteen of the 19 sectoral indices declined with S&P BSE BANKEX index declining nearly 1.8%. Only three sectoral indices gained with S&P BSE Realty index gaining 0.23%.
The market breadth was skewed in favour of the bulls. About 1,771 stocks advanced, 1,552 stocks declined and 169 remained unchanged on the BSE.
Shares across the region dropped as investors remain concerned over the impact of a surge in coronavirus outbreaks and higher inflation on economies.
In earnings, three of the four Nifty companies that have announced results so far fell short of analysts’ estimates. HCL Technologies Ltd. is scheduled to post earnings later today.
“Sub par June quarter performance reported by HDFC Bank during the weekend along with visible stress in asset quality can weigh on overall financials,” Binod Modi, head of strategy at Mumbai-based Reliance Securities Ltd. said in a note. “Domestic equities do not look to be inspiring as of now.”
Camlin Fine Sciences Snap 4-Day Winning Streak; RSI Indicate Overbought
Shares of Camlin Fine Sciences Ltd. shed nearly 7.23% to Rs 209.90 apiece, snapping a four-day rally.
The chemicals company's stock has gained nearly 68% so far this year. The relative strength index on the stock is 79.63, indicating it may be overbought.
All four of the analysts tracking the company have a ‘buy’ recommendation with the consensus price target of analysts indicating a further 7% upside in the company.
On July 8, India Ratings upgraded the long-term issuer rating on Camlin Fine Sciences due to the steady improvement in the operating performance over FY18-FY21.
Rupee Falls With Stocks Amid Global Virus Spread
India’s rupee weakened with its emerging-Asian peers as concern over a virus resurgence around the world sapped demand for risk assets. The central bank will convert shorter-maturity bonds to longer ones and auction Rs 9,700 crore ($1.3 billion) of state government debt.
USD/INR rose 0.3% to 74.7700, headed for its biggest one-day gain since July 6
“Risk-off sentiment is prevailing as the third-wave expectations increase, while the U.K. opens completely,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors
The number of Covid cases in the U.K. and U.S. have increased significantly, taking the dollar index higher amid risk-aversion sentiment
India’s benchmark 10-year yield climbed 1bp to 6.23%
HDFC Life Drops After Q1 Earnings
Shares of HDFC Life Insurance Company Ltd. shed 2.74% to Rs 678.90 apiece after it reported net income for the April-June quarter below analyst estimates.
Net income in the June quarter slipped to Rs 302.35 crore vs Rs 451.09 crore (down 32.97% YoY) in the corresponding quarter in the previous fiscal. On a sequential basis, net income slipped 4.9% from the Rs. 317.94 crore in the quarter ended March.
Net premium income rose to Rs 7,548.48 crore vs Rs 5,721.84 crore in Q1FY20, up 31.92% YoY. Net premium income declined on a sequential basis by 41.41% from Rs 1,2868.01 crore in the last quarter of the previous fiscal (Q4FY21).
HDFC Life witnessed steep rise in death claims in the June quarter with the management stating that the peak claims in second wave was around 3-4 times of the peak claim volumes in the first wave in Q1FY21.
CEO Vibha Padalkar noted that customer engagement and interest in life insurance policies have risen over the past month as economic activity picks up gradually while cases continue to decline.
Out of the 37 analysts tracking the company, 26 maintained ‘buy’, 9 maintained ‘hold’ and 2 maintained ‘sell’ recommendations on the company. The consensus 12-month price target of analysts tracked by Bloomberg implied a upside of 14.2%.
Indian Bank Q1 Net Income Beats Estimates
Indian Bank reported net income for the first quarter that beat the average analyst estimate.
Net income Rs 1,180 crore vs. estimate Rs 704 crore
Gross non-performing assets 9.69% vs. 9.85% QoQ
Provisions Rs 2,610 crore, +49% QoQ
Interest income Rs 9,620 crore, -4.9% YoY
Interest expense Rs 5,630 crore, -9.9% YoY
Other income Rs 1,880 crore, +41% YoY
COMMENTARY AND CONTEXT
Q1 tax gain Rs 320 crore
Bank holds 100% provision in 12 accounts where fraud involving Rs 388 crorewas committed
Estimated liability of Rs 230 crore for Covid interest relief yet to be refunded/adjusted
Shares of the public sector lender have gained nearly 60% in the year. Out of the 10 analysts tracking the bank, 8 maintained ‘buy’ and 2 maintained ‘hold’ recommendations. The consensus 12-month price target of analysts tracked by Bloomberg implied a upside of 26.2%.