Sensex, Nifty Log Second Weekly Loss Amid Global Virus Worries

India stock benchmarks registered their a second weekly decline as worries return over the global economic recovery amid the spread of Covid-19 variants.

The S&P BSE Sensex fell 0.3% to 52,386.19 while the NSE Nifty 50 Index declined 0.2% to 15,689.80. Both the indices clocked a 0.2% weekly loss.

Information-technology bellwether Tata Consultancy kicked off corporate-earnings reporting for the June quarter Thursday, and missed analysts’ estimates for profit and revenue as the deadly wave of coronavirus infections in India hurt its domestic business. The company’s shares ended 1.5% lower, and was among prominent contributors to the Sensex's decline.

The broader markets outperformed their larger peers. The S&P BSE MidCap rose 0.6% while the S&P BSE SmallCap gained 0.4%. Ten of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of real estate companies, followed by metal makers.

“Domestic equities continue to look soft due to weak global cues as of now,” Binod Modi, head of strategy at Reliance Securities, said in a note. He expects investors to focus on progress of southwest monsoon in the country as well as quarterly earnings and Covid-19 related situation in the term.

Shares of Oracle Financial Services Software Ltd. gained on the back of new deals.

The stock rose as much as 5% in the afternoon trade on Friday, and more than 8% for the week.

A subsidiary of Oracle Corporation, Oracle Financial Services is a technology solutions provider for banking and insurance industry. It has announced 58 unique deals in FY21 against 51 in the entire FY20. Most of the deals were in corporate banking solutions and analytics.

According to Dolat Capital, Q1 FY22 would be a key quarter to take note of as it’s seasonally the best for Oracle Financial Services in terms of new licence wins as well as growth. The brokerage maintained the company as its preferred pick with a ‘buy’ rating and target price of Rs 4,000 apiece.

Key tweaks around the BFSI segment, rising focus on digitization and cloud shift, gaining preference for data analytics augured well for the company. The use of artificial intelligence and machine learning as key principles in product development are being viewed as an advantage, Dolat said.

• Tata Consultancy options volume 4.1x the 20-day average, with 150,814 calls changing hands vs 76,889 puts

  • Stock down 1.5%, volume 2.5x the 20-day average for this time of day

• Bajaj Finserv options volume 3.5x the average, with 29,612 calls vs 9,465 puts

  • Stock up 4.3%, volume 2.2x the average

• Divi's Labs options volume 1.5x the average, with 11,878 calls vs 3,535 puts

  • Stock up 2.2%, volume 0.9x the average

• Nifty 50 options volume 0.6x the average, with 4.82 million calls vs 4.29 million puts; gauge down 0.2%

  • Cost of hedging as measured by the 90/110, one-month skew ranks in the 56th percentile over the past year

• Nifty Bank index options volume 0.5x the average, with 7.94 million calls vs 7.88 million puts; gauge down 0.6%

  • 90/110, one-month skew in the 42nd percentile

• India VIX Index down 3.2%

Indian stock benchmarks are on course for weekly losses amid the decline in global markets. The NSE Nifty50 slipped over 0.3% to trade below 15,700 level. The S&P BSE Sensex shed nearly 200 points and hovered around 52,400 mark.

Broader markets rallied with Nifty Midcap (+0.32%) and Nifty Smallcap (+0.31%) extending their outperformance over Nifty (-0.32%). Among sectors, Nifty Realty (+1.51%), Nifty Metal (+0.97%), Nifty Media (+0.65%), Nifty Pharma (+0.33) gained.

Banking stocks slipped with Axis Bank (-1.25%). HDFC Bank (0.80%) and ICICI Bank (-0.74%) leading the decline.

Shares of TCS fell over 1.28% to Rs. 3,216.84 after it posted its Q1FY22 earnings after markets hours on Thursday

Shares of Bajaj Finserv gained 3.37 to a new all-time high with the company’s market capitalisation crossing the Rs 2 lakh crore milestone. The stock added over 10% over the last month when compared to 0.8% gain for Sensex

Progress of monsoon, measures to ease supply of certain commodities, and gradual unlocking of states with declining virus cases would mitigate cost pressures going forward, the finance ministry said in its monthly economic report.

• However, rising international commodity prices, especially of crude and logistics costs, pose upside risks to the inflation outlook

• The economy is showing signs of revival, but the recovery is uneven

• The recently announced economic relief package is expected to “further oil the wheels” of the capital expenditure cycle

Shares of Tata Steel Ltd. gained more than 2% amid rising prices of the alloy.

The steelmaker has rallied over 6.5% in the last five sessions, in excess of 10% in the past month, and nearly 90% in 2021 so far.

Tata Steel on Thursday told the bourses that CARE Ratings Ltd. has upgraded its rating on the steel mill from ‘AA’ (outlook: negative) to ‘AA+’ (outlook: stable). That, it said, was on account of the company’s strong performance in FY21, both domestic and European operations, besides increase in steel prices, which has led to a substantial cash flow generation.

According to JPMorgan, Tata Steel’s near-term prospects in Europe remained intact with material upside risk for the business over FY22-FY23. Steel prices, predicted to remain at healthy levels for the next 12 months, alongside rising demand are likely to be key growth drivers for Tata Steel. JPMorgan said the June-quarter results would act as a catalyst for consensus revision of FY21 estimates and pricing regime till 2022.

Shares of Asia’s largest software outsourcing provider fell as much as 1.4% after its first quarter earnings missed analysts' estimates as a second deadly wave of coronavirus infections in India hurt its domestic business.

Net income at the Tata company rose 29% to Rs 9,010 crore ($1.2 billion) in the quarter through June, compared with an average estimate of Rs 9,397 crore. Sales climbed to Rs 45,410 crore, versus the Rs 45,768 crore projected.

CLSA

• Results broadly in line with our estimates

• Healthy growth in exports (3.4% QoQ) and order book

• Seasonal impact of annual wage hikes along expected lines

• Broadbased growth across segments despite the impact due to second wave

• Company focused on transformational deals that allow differential pricing over larger cost-takeout deals

• Margin defence likely to keep cash conversion healthy

• Expect growth to sustain in FY23-24

• Maintain Outperform with a 12-month target price of Rs 3,770

Morgan Stanley

• Underlying business remains very strong despite the miss in revenues

• Continue to expect strong revenue growth in FY22

• Margin execution healthy despite impact due to wage hike

• Revenue from India business likely to bounceback sharply in the current quarter

• Robust revenues in core verticals and strong headcount addition are positive indicators

• Company believes that it is in the midst of a multi-year technology cycle

• Company seeing early success in Growth & Transformation-related business

• Record order booking despite no mega deal win points to strong execution capabilities

• Consensus estimates may struggle for direction but valuation should hold

• Maintain Overweight with a target price of Rs. 3,870

BofA Securities

• Q1 revenue growth (domestic) of 2.4% QoQ and 16.4% YoY below our estimates

• Decline in domestic business driven by second wave of Covid

• Growth expectedly strong across key markets

• Deal signings remained robust for the second consecutive quarter

• Recovery in verticals of retail & manufacturing likely to aid growth

• Company well-positioned to increase spends in digital technologies

• Discretionary costs to fully normalise by the end of the year

• Expect discretionary costs to be offset by operating leverage

• Attrition unlikely to have an adverse impact on profitability, as yet

• Reiterate neutral rating with a target price of Rs 3,259

Indian equity benchmarks fell amid weak global cues and a shaky start to the quarterly earnings season.

The S&P BSE Sensex lost as much as 0.6% to 52,228.01, and the NSE Nifty 50 too declined by a similar magnitude to 15,632.75. Both the indices are headed for their second straight weekly loss, down 0.3%.

Reliance Industries Ltd. contributed the most to the index decline, decreasing 0.9%. IndusInd Bank Ltd. had the largest drop, falling 1.4%.

The broader markets outperformed their larger peers. The S&P BSE MidCap rose 0.35% while the S&P BSE SmallCap gained 0.23%. Twelve of the 19 sectoral indices declined, led by the S&P BSE BankEx index, down 0.8%.

The S&P BSE Metal index was the best performer, gaining 0.9%.

“Domestic equities continue to look soft due to weak global cues as of now,” Binod Modi, head of strategy at Reliance Securities, said in a note. He expects investors to focus on progress of southwest monsoon in the country as well as quarterly earnings and Covid-19 related situation in the term.

Indian bond traders will await the results of a sale of new 10-year bond Friday to see at what cutoff yield level the central bank auctions the security. RBI plans to sell Rs 26,000 crore ($3.5 billion) of government bonds, including Rs 14,000 crore of a new benchmark 10-year bond maturing in 2031.

• 10-year yields fell 4bps to 6.13% on Thursday; while the current benchmark coupon was set at 5.85%, five traders surveyed by Bloomberg expects the central bank to sell the new bond at a cutoff yield of 6.1% at Friday’s auction

• “Given the RBI’s focus on keeping yields around 6% and market already pricing-in higher cutoff yields for the new paper, it’s a possibility that the RBI is poised for another round of tussle,” says Madhavi Arora, lead economist at Emkay Global Financial Services.“The RBI will have less sway over the 10-year yields initially”

• USD/INR rose 0.1% to 74.7137

  • Implied opening from forwards suggest spot may start trading around 74.70

Asian shares followed U.S. equities lower Friday on growing anxiety that the spread of Covid-19 variants could hamper the global economic recovery.

MSCI Inc.’s gauge of Asia-Pacific stocks tumbled to the lowest since mid-May with equities retreating from Japan and China to Australia. A key Hong Kong gauge of Chinese stocks fell into a bear market.

India's SGX Nifty 50 Index futures for July delivery fell 0.4% to 15,641, while MSCI Asia Pacific Index down 1.5%. The NSE Nifty 50 Index fell 1% Thursday to 15,727.90.

U.S. contracts slipped after the S&P 500 and Nasdaq 100 pulled back from records. Economically sensitive sectors such as industrials and materials led Wall Street lower.

U.S. government bonds pared an overnight advance but the benchmark 10-year yield remains on course for the biggest weekly slide since June last year. At one point in U.S. hours the 30-year Treasury yield dipped below 1.90% for the first time since February.

Oil traded around $73 a barrel, paring a weekly loss, after data showed a slump in U.S. stockpiles and record fuel demand. Elsewhere, Bitcoin has fallen back toward the lower end of a trading range amid a pull back in cryptocurrencies.

Back home, TCS may react as the company reported quarterly results after the market closed Thursday. Federal Bank, United Breweries, Dishman Carbogen among companies holding their annual shareholders’ meeting. Foreign investors bought net Rs 661 crore of stocks on Wednesday, according to NSDL website.