Sensex, Nifty Log Second Weekly Decline, But End July Higher

India's equity benchmarks logged their second weekly drop as companies continued to report lackluster earnings for the latest quarter amid the pandemic and rising commodity inflation.

The S&P BSE Sensex lost 0.13% to 52,586.84, down 0.7% for the week. The NSE Nifty fell by a similar magnitude to 15,763.05.

Sun Pharmaceuticals Industries was the top performer on the Sensex today, rising 10%, after its June quarter earnings were ahead of consensus estimates. Bajaj Finance and State Bank of India contributed the most to the index’s decline.

The broader markets outperformed their larger peers. The S&P BSE Midcap rose 0.52% while the S&P BSE Smallcap added 0.69%. Eleven of the 19 sector sub-indices compiled by BSE Ltd. climbed, led by healthcare companies.

Most quarterly earnings so far have failed to impress the market. Of those companies that have reported results, 18 of the 27 Nifty firms have missed analyst estimates.

Shares of Marico Ltd gained 3.44% to Rs 546.00 apiece after the company reported June quarter numbers in-line with average analyst estimates.

June Quarter Results (Consolidated, QoQ)

• Net Income at Rs 365 crore vs estimate of Rs 363 crore (Bloomberg consensus)

• Revenue from operations at Rs 2,525 crore vs estimate of Rs 2,501 crore

• Total expenses at Rs 2,085 crore vs Rs 1,739 crore

• Other income at Rs 27 crore vs Rs 29 crore

• Ebitda at Rs 481 crore vs estimate of Rs 496 crore

Out of the 41 analysts tracking the company, 33 maintained ‘buy’, 7 maintained ‘hold’ and 1 analyst maintained ‘sell’ recommendations. The overall consensus price of analysts tracked by Bloomberg hinted at a downside of 8.4%.. Shares of Marico have added 35.3% in 2021 so far.

COMMENTARY AND CONTEXT

• Company says it holds its aspiration to deliver 13%-15% revenue growth over the medium term on the back of 8%-10% domestic volume growth and double-digit constant currency growth in the international business

• Resurgence of Covid-19 in Bangladesh and Vietnam, and political unrest in South Africa have affected business in July and could soften the performance of the international business in the immediate near term

• India demand trends have improved as positivity rates are back to pre-second Covid wave levels

• Rural consumption moderated due to the second wave, but company expects it to grow ahead of urban.

Shares of Indian Oil Corporation Ltd. gained 2.31% to Rs 106.30 apiece after it reported net income for the June quarter that beat average analyst estimate.

June Quarter (Standalone, QoQ)

• Revenue down 4.1% at Rs 1,18,670.52 crore vs Rs 1,23,714.04 crore (Bloomberg Consensus Estimate of Rs 1,27,900 crore)

• Net profit down 32.3% at Rs 5,941.37 crore vs Rs 8,781.3 crore (Estimate Rs 3,547.4 crore)

• EBITDA down 17.6% at Rs 11,126.08 crore vs Rs 13,501.79 crore (Estimate Rs 8,606.3 crore)

• EBITDA margins at 9.4% vs 10.9% (Estimate 6.7%)

Sun Pharmaceutical Industries Ltd. recovered from a surprise quarterly loss last year and swung back into profit as the U.S., its largest overseas market, started reopening after curbing its Covid-19 outbreak.

The firm headed by billionaire Dilip Shanghvi posted a net income of Rs 1,440 crore ($193.7 million) for the quarter ended June 30 compared to an average profit estimate of Rs 1,413 crore based on a Bloomberg survey of analysts.

Revenue rose 28% to Rs 9,720 crore, according to an exchange filing Friday. It also took a much smaller one-time charge of Rs 631 crore in the latest quarter.

Shares of TVS Motor Co. Ltd. climbed as much as 7.7%, in their biggest advance in more than three months, before paring their gains to 4.7%, as analysts remain optimistic about local and export demand for two-wheelers.

The Indian company reported net income for the first quarter that missed the average analyst estimate, as employee expenses rose due to salary increments and bonuses.

“The outlook on domestic two-wheeler volume is positive and premium motorcycles/scooters could outperform going ahead. The export outlook is also encouraging across most markets, owing to higher commodity prices and better forex availability to importers,” analysts led by Raghunandhan NL at Emkay Global Financial Services Ltd. wrote in a note.

The broker has maintained its buy call on the stock and raised its target price to Rs 780 from Rs 730.

Jefferies India Pvt. also expects local demand to recover from an “abnormal cyclical trough” and forecasts a sequential improvement in margins. It retains a buy with a price target of Rs 800.

Shares of fertiliser companies gained amid reports of China curbs on exports to ensure domestic supply.

Fertiliser prices in China have hit records this year amid stronger demand from overseas, lower production domestically and high energy costs. According to a statement on the NDRC website, companies were asked to not excessively hoard fertilisers and drive up prices.

"India has limited dependency on China with imports of urea (5-10% of demand) and DAP (20-30% of demand) as finish products and this can be easily replaceable with other countries. Urea is completely imported by government agencies and hence, it will not have any impact on Indian companies." broking firm PhilipCapital said in a note.

• Madras Fertilizers Ltd. - up 9.35%

• Rashtriya Chemicals and Fertilizers - up 8.85%

• Chambal Fertilizers Ltd. - up 7.35%

• Gujarat State Fertilizers and Chemicals - up 5.49%

• Deepak Fertilizers and Petrochemicals - up 5%

India's stock benchmarks are set for second week of decline as quarterly earnings trickle in.

The S&P BSE Sensex added 0.16% to 52,737.33, and NSE Nifty 50 Index posted gains of similar magnitude to 15,814.70.

The broader markets outperformed their larger peers. The S&P BSE MidCap rose 0.82% while the S&P BSE SmallCap gained 0.83%.

Sixteen of the 19 sectoral indices posted gains with S&P BSE Auto rising nearly 1.5% and S&P BSE Industrials adding 1.33%. On the flipside, S&P BSE Telecom declined by 0.34%

The market breadth was skewed in the favour of bulls. About 1,910 stocks advanced, 1,199 declined and 132 remained unchanged on the BSE.

The IPO was subscribed 13.88 times as of 12:00 p.m. on July 30.

Institutional subscription: 6.64 times

Non-institutional subscription: 12.01 times

Retail subscription: 18.81 times

Shares of Asahi India Glass Ltd. added 13.26%, the steepest rise since August 21, 2020, to Rs 408.30 apiece.

The company announced a partnership with Ahmedabad-based Vishakha Group for setting up India’s largest solar glass manufacturing plant at Mundra. In an exchange filing, the company said that the plant is expected to be commissioned in 18-24 months.

Asahi India Glass also reported a sequential decline in revenue and net profit in its June quarters earnings today.

June Quarter earnings (Consolidated, QoQ)

• Revenue at Rs 603.84 crore vs Rs 814.85 crore

• Net Profit at Rs 34.73 crore vs Rs 84.19 crore

• Total expenses at Rs 555.54 crore vs Rs 700.77 crore

• Other income at Rs 1.32 crore vs Rs 15.01 crore

The relative strength index of the stock was 73.72 implying that it may be in overbought territory. Shares of Asahi India Glass have added 46% in 2021 so far.

Shares of Deepak Nitrite Ltd. gained 9.26% to Rs 2,076.90 apiece after it reported a sequential uptick in revenue and net profit in the June quarter after market hours on Thursday.

June Quarter Numbers (Consolidated, QoQ)

• Revenue up 4% at Rs 1,526.22 crore Vs Rs 1,463.23 crore

• Net profit up 4% at Rs 302.63 crore Vs Rs 290.11 crore

• Ebitda down 1% at Rs 451.50 crore Vs Rs 454.66 crore

• Margins at 29.58% Vs 31.07%

Out of the 10 analysts tracking the company, 8 maintained ‘buy’ and 2 maintained ‘sell’ recommendations. The overall consensus price of analysts tracked by Bloomberg implied a downside of 5.1%. The relative strength index of the stock is 73.25 implying that it may be in overbought territory. Shares of Deepak Nitrite have added over 120% in 2021 so far.

Shares of SRF Ltd. gained 10% to a record high of Rs 8,274.80 apiece as analysts hiked the target price after the company reported a better-than-expected June Quarter.

Out of 25 analysts tracking the company, 18 maintained ‘buy’, 4 maintained ‘hold’ and 3 maintained ‘sell’ recommendations. The overall consensus price of analysts tracked by Bloomberg implied a downside of 11%. The Relative Strength Index (RSI) was 81.79 indicating that the company may be in overbought territory. Shares of SRF have added 56.7% in 2021 so far as compared to 11.3% gains for S&P BSE Sensex.

Here's what the brokerages have said about SRF's June Quarter earnings.

Dolat Analysis & Research Themes

• Maintains ‘accumulate’ with the price target increased to Rs 8,837 from Rs 7,179.

• Untethered outlook towards capex plan with Rs 2000 cr worth investment planned in FY22 a positive.

• Capex increase in chemicals business presents a strong case for RoCE improvement in the long-run.

• Outlook for growth in specialty chemicals is likely to be in the range of 15-20%.

• Anticipate near-term margin pressure in packaging films, which could be partially offset by an improvement in margins of technical textiles.

Motilal Oswal

• Maintains ‘neutral’ with an upward price target revision to Rs 7,230 from Rs 6,686.

• Margin expansion in technical textiles and chemicals aided June quarter performance.

• Higher raw material prices and export freight rates led to sequential margin contraction in chemicals segment.

• Encouraged by the long term structural opportunity in the chemicals sector.

• Fluorochemicals segment witnessed higher sales volumes in refrigerants and blends segment, especially from export markets and lower offtake in domestic market due to localised lockdowns.

Nirmal Bang

• Maintains ‘accumulate’ with the target price increased to Rs 7,600 from Rs 6,600.

• Operating performance significantly higher than consensus estimates due to continued growth in chemicals and packaging segments.

• Input cost inflation impacted operating margin of the chemicals segment on a sequential basis.

• Improved profitability likely to sustain on account of significant demand potential and pricing negotiation with long-term clients.

• Remain structurally positive on the long-term prospects of the company.

JM Financial

• Maintains 'buy' with the target price increased to Rs 8,565 from Rs 8,375.

• June Quarter gross profit was 7% higher whicle gross margins were 120bps better than our estimates.

• Strong performance in packaging films and technical textiles segment aided June Quarter performance.

• Addition of pharma products in the specialty chemicals division to help offset the cyclicality of agrochemicals.

• Robust order book likely to aid 14-20% growth in revenue from specialty chemicals business.

Shares of Privi Chemicals Speciality Ltd. jumped the most in more than four years after the aroma chemicals manufacturer announced a joint venture with Switzerland-based Givaudan, one of the world’s largest flavour and fragrance companies.

• Trading volume was more than 18 times the 20-day average for this time of day.

• The relative strength index on the stock was above 70, indicating it may be overbought.

The joint venture will include setting up a new greenfield production facility which will be built in Mahad, where Privi's main manufacturing plants are located. “The facility will have state of the art manufacturing equipment tailor made to manufacture small-volume fragrance ingredients of medium to high complexity, also known as specialty ingredients,” a press release stated. Privi will hold 51% of the equity capital in the joint venture company.

Maurizio Volpi, the president of Givaudan’s fragrance division, said the joint venture with Privi supports their ambition to enhance fragrance capabilities in high-growth markets and advance manufacturing capabilities.

Shares of Ashok Leyland Ltd. gained 9.82%, the steepest rise since Feb. 1, to Rs 137.50 apiece. Trading volume was more than 10 times the 20-day average for this time of day.

U.S.-based Electric drivetrain component supplier Dana has picked up 1% stake in Ashok Leyland’s electric commercial vehicle arm for about $18 million (Rs 13 crore).

As part of the strategic deal, Dana will also be a preferred supplier of electric drivetrain components for Ashok Leyland's e-bus and EV commercial vehicle offering – including e-Axles, gearboxes, motors, inverters, software and controls, and electronics cooling.

On Thursday, the Hinduja group flagship firm said it will invest up to $200 million (nearly Rs 1,500 crore) in its electric vehicles venture through its U.K.-based arm Switch Mobility in the next few years, according to company press release.

Switch Mobility will be launching its first electric light commercial vehicle (e-LCV) in India by the end of December; it has secured 2,000 orders. These vehicles will be manufactured in India and sold under the Switch brand. The group has plans to invest $150-200 million in the EV space in the next few years.

"Investors and strategic partners keen to tie up. We do not see any immediate fund requirement from Ashok Leyland," said Dheeraj Hinduja, chairman, Ashok Leyland and Switch Mobility.

Out of the 47 analysts tracking Ashok Leyland, 34 maintained ‘buy’, 9 maintained ‘hold’ and 4 analysts maintained ‘sell’ recommendations. The overall consensus price of analysts tracked by Bloomberg hinted at an upside of 3%.

Ashok Leyland's stock has risen 42.6% so far this year as compared S&P BSE Auto Index's 9.24% advance over the same period.

Shares of the software services provider jumped as much as 8.5% to a record high of Rs 1,224 after reporting first quarter earnings that beat analyst estimates.

Key Highlights From Q1

• Net profit Rs 1,353.2 crore vs estimate: Rs 1,216.2 crore

• Revenue up 5% at Rs 10,197.6 crore vs estimate Rs 10,072.7 crore

• Ebit at Rs 1,545.30 crore vs estimate: Rs 1,457.6 crore

• Margins at 15.2% vs estimate 14.47%

Jefferies

• Recommends ‘hold’ with a target price of Rs 1,250.

• Sharp revenue growth helped in controlling margin decline.

• Growth remained broad-based with both communications vertical and enterprise vertical seeing healthy growth on the back of new deals.

• Deal TCV was healthy at $815 million.

• Optimism over 5G-related deal traction encouraging.

• Expect margins to range between 14.7-15.3% over FY22-24.

• While net hiring was strong, subcontracting costs are likely to remain high.

• Expect Tech Mahindra to deliver 9%/8% revenue/EPS CAGRs over FY22-24

Motilal Oswal

• Maintains ‘neutral’ with a target price of Rs 1,220.

• Communications and enterprise segments led revenue growth.

• Expect Tech Mahindra to deliver revenue growth of 13% in this fiscal.

• Expect Tech Mahindra to deliver stable to improving margin performance over the next three quarters.

Key risks:

• Attrition and utilization levels remain a key risk on the downside for margins

Indian stock benchmarks fluctuated between gains and losses amid weak Asian trade as investors assessed risks from China’s regulatory crackdown and a disappointing earnings season locally.

The S&P BSE Sensex was little changed at 52,639.98, after falling and rising as much as 0.2% in opening trade. The NSE Nifty 50 Index too was flat at 15,770.50. Tech Mahindra Ltd. contributed the most to the index gain and had the largest move, increasing more than 8%.

The broader markets too gained along with their larger peers. The S&P BSE Midcap rose 0.4% and the S&P BSE SmallCap climbed 0.7%. The market breadth was skewed in favour of bulls. About 1,675 stocks advanced, 842 declined and 96 remained unchanged on the BSE. Twelve of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of automobile makers.

Indian equity benchmarks are set for their second weekly decline amid a mostly unimpressive June quarter earnings performance. Of the 25 Nifty companies that have reported to date, 18 have missed the consensus while six managed to beat analysts’ estimates. Kotak Mahindra Bank is the only one to report earnings in line with Street expectations.

The initial public offering of Devyani International Ltd., operator of KFC, Pizza Hut and Costa Coffee stores in India, will raise as much as Rs 1,840 ($248 million), according to an advertisement in the Financial Express newspaper Friday.

• The Indian franchise partner for Yum! Brands is raising Rs 440 crore selling new shares, while its holders will sell 155.3 million shares

• Investors can bid for minimum 165 shares of face value Re 1 each in the sale, which opens Aug. 4 and closes Aug. 6

• The company has reserved 550,000 shares in IPO for its employees

• Kotak Mahindra Capital, CLSA India Pvt., Edelweiss Financial and Motilal Oswal Investment are managing the IPO

Indian bond traders will watch for demand at a Rs 32,000-crore ($4.3b) debt sale on Friday after an auction had to be rescued by primary dealers last week.

• NOTE: RBI hasn’t so far announced any purchase plan for liquid bonds since the rescue last week and recent buys through the govt securities acquisition program have been in illiquid papers

• Yield on 6.1% 2031 bond rose 1bp to 6.20% on Thursday; 5.63% 2026 bond yield rose 2bps to 5.72%

• USD/INR fell 0.1% to 74.2838 on Thursday

  • Implied opening from forwards suggest spot may start trading around 74.28

• RBI to hold Rs 2 lakh crore of reverse repo auction on Friday

U.S. equity futures slid and Asian stocks dipped Friday as traders weighed signs of a slowdown ahead for megacap technology companies and risks from China’s regulatory crackdown.

Stocks fell in Hong Kong and China as well as Japan. Nasdaq 100 contracts shed more than 1% as Amazon.com Inc. tumbled in extended trading on indications its rapid growth through the pandemic is waning.

India’s SGX Nifty 50 Index futures for Aug. delivery fell 0.5% to 15,755, while MSCI Asia Pacific Index -0.6%. The NSE Nifty 50 Index added 0.4% Thursday to 15,778.45.

Asia-Pacific stocks had jumped Thursday after Beijing tried to allay fears over regulatory curbs on private industries, but U.S.-listed Chinese equities later resumed declines.

S&P 500 futures also fell. The gauge rose overnight on data signaling scope for the Federal Reserve to keep policy ultra-loose. U.S. economic growth was solid while trailing estimates. Jobless claims dropped but were higher than forecast.

The dollar snapped a four-day retreat but is on course for its biggest weekly drop since May. Oil mostly held recent gains on expectations that demand from economic reopening will weather delta-strain Covid-19 flareups.

Back home, Tech Mahindra, Indus Towers, TVS Motor, Shriram City, Deepak Nitrite, Container Corp, Oberoi Realty, Ajanta Pharma, Motilal, MRPL may react as the companies reported quarterly results after the market closed Thursday.

Sun Pharma, Indian Oil, UPL, Bandhan Bank, Exide, Britannia, Cholamandalam, Marico, Lodha are among the companies scheduled to report earnings Friday. Tata Motors, Axis Bank, Tech Mahindra, Coforge, Blue Dart, Jyothy Labs, Fortis are holding their annual shareholders’ meeting.

Foreign investors sold net Rs 2,440 crore of stocks on Wednesday, according to NSDL website.