Key domestic indices edged higher on Monday, led by IT major Infosys reporting good Q1 results and raising its revenue forecast. Firmness in IT shares boosted indices, while weakness in FMCG shares capped gains. Strength in other Asian indices also supported gains. Most Asian indices ended higher after China's second-quarter economic growth came in line with consensus, and industrial output and retail sales topped general forecasts.
The Sensex rose 160.48 points or 0.41% to settle at 38,896.71. The index rose 287.74 points, or 0.74% at the day's high of 39,023.97. The index fell 39.63 points, or 0.10% at the day's low of 38,696.60.
The Nifty 50 index rose 35.85 points or 0.31% to settle at 11,588.35. The index rose 65.90 points, or 0.57% at the day's high of 11,618.40. The index fell 20.20 points, or 0.17% at the day's low of 11,532.30.
The S&P BSE Mid-Cap index fell 0.61%. The S&P BSE Small-Cap index fell 0.63%. Both these indices underperformed the Sensex.
The market breadth was tilted in favour of sellers. On the BSE, 864 shares rose and 1615 shares fell. A total of 154 shares were unchanged.
Among the sectoral indices on the BSE, the S&P BSE Capital Goods index (down 1.46%), the S&P BSE Telecom index (down 0.96%) and the S&P BSE FMCG index (down 0.87%), underperformed the Sensex. The S&P BSE IT index (up 3.53%) and the S&P BSE Healthcare index (up 0.69%), outperformed the Sensex.
IT major Infosys jumped 7.20%. IT major Infosys announced that its net profit fell 6.8% to Rs 3802 crore on 1.23% increase in revenue from operations to Rs 21803 crore in Q1 June 2019 over Q4 March 2019. Operating profit fell 3.2% to Rs 4471 crore in Q1 June 2019 over Q4 March 2019. Operating margin was 20.5% in Q1 June 2019. The result was declared after market hours on Friday, 12 July 2019.
The company has increased FY20 revenue growth guidance to 8.5-10% in constant currency, while maintaining FY20 operating margin guidance in range of 21-23%.
We had a strong start to FY20 with constant currency growth accelerating to 12.4% on year over year basis and digital revenue growth of 41.9%. This was achieved through our consistent client focus and investments which have strengthened our client relationships, said Salil Parekh, CEO and MD. Consequently, we are raising our revenue guidance for the year from 7.5%-9.5% to 8.5%-10%.
TCS rose 1.77%. The company during market hours today, 15 July 2019, announced a partnership with NXP Semiconductors, to transform the latter's enterprise supply chain lT operations with ignio and the TCS Private Cloud on alpha architecture.
Among other IT shares, Oracle Financial Services Software (up 2.71%), Tech Mahindra (up 1.73%), MindTree (up 0.98%), Wipro (up 0.42%), HCL Technologies (up 0.24%) and Hexaware Technologies (up 0.21%), edged higher. Persistent Systems (down 0.19%) and MphasiS (down 0.94%), edged lower.
Most FMCG shares declined. Nestle India (down 1.7%), Tata Global Beverages (down 1.42%), Colgate Palmolive (India) (down 1.18%), Godrej Consumer Products (down 1.13%), Marico (down 0.57%), GlaxoSmithKline Consumer Healthcare (down 0.55%), Britannia Industries (down 0.19%) and Jyothy Laboratories (down 0.09%), edged lower. Hindustan Unilever (up 0.3%), Dabur India (up 0.69%) and Procter & Gamble Hygiene & Health Care (up 0.81%), edged higher.
Bajaj Consumer Care fell 0.13%. On a standalone basis, the company's net profit rose 9.09% to Rs 58.66 crore on an 8.14% rise in net sales to Rs 232.46 crore in Q1 June 2019 over Q1 June 2018. EBITDA rose 2% to Rs 71.89 crore in Q1 June 2019 over Q1 June 2018. EBITDA margin was reported at 30.93% in Q1 June 2019 compared with 32.79% in Q1 June 2018. The announcement was made during market hours, today, 15 July 2019.
Avenue Supermarts spurted 4.89%. The company's consolidated net profit rose 31.87% to Rs 323.09 crore on 26.94% rise in total income to Rs 5825.51 crore in Q1 June 2019 over Q1 June 2018. The result was announced on Saturday, 13 July 2019.
Dewan Housing Finance Corporation (DHFL) slumped 29.15%. DHFL reported a net loss of Rs 2223 crore in Q4 March 2019 as compared to a net profit of Rs 134 crore in Q4 March 2018. Total income rose 7.41% to Rs 3057 crore in Q4 March 2019 over Q4 March 2018. The result was announced on Saturday, 13 July 2019.
DHFL warned that it was undergoing substantial financial stress and its ability to raise funds was substantially impaired and the business has been brought to a standstill with there being minimal/virtually no disbursements. These developments may raise a significant doubt on the ability of the company to continue as a going concern, DHFL said in notes accompanying results for the fourth quarter ending 31 March, signed by chairman and managing director Kapil Wadhawan.
In a separate announcement during market hours today, 15 July 2019, the firm clarified that DHFL remains a strong going entity. The company said that some of the media have used select portions of our statement and created panic/ confusion especially regarding the statement on the going concern. It urged that the entire statement be read in entirety, so that the news is factual and not sensationalized. While the sectorial stress is well known for months, DHFL has withstood intense pressure and continues to remain strong and solvent. DHFL has also cleared significant amount of obligation to the tune of Rs 41,800 crore since September 2018, it added.
InterGlobe Aviation rose 1.81%. The company after market hours on Friday, 12 July 2019 clarified to a news item titled, IndiGo shareholder pact to be checked by Govt for violations. The company said that it has not received any official communication in relation to the matters referred to in the news report.
Piramal Enterprises jumped 6.78% on reports that the company was on the verge of finalising a massive Rs 9,600 crore capital infusion deal with Softbank and one more party. The capital infusion in Piramal Enterprises is likely to be in two tranches, and will be announced shortly.
The report said Softbank is interested in Piramal Group because Ajay Piramal, as well as his in-law Mukesh Ambani, have been discussing a new business together in which Softbank sees strong potential. Reliance Jio and the Piramal Group may set up a joint venture for consumer lending and fintech, reports added.
Meanwhile, CRISIL has reaffirmed its 'CRISIL A1+' rating on the commercial paper programme of Piramal Capital and Housing Finance (PCHFL). The entity was formed as a 100% subsidiary of Piramal Finance (PFL). Subsequently, the board of Piramal Enterprises (PEL), the parent of erstwhile PFL, approved a scheme of amalgamation of PFL and Piramal Capital (PCL) into PCHFL. PCL was a subsidiary of PEL and had limited operations.
Sun Pharmaceutical Industries rose 3.61%. The company before market hours today, 15 July 2019, announced the US launch of Ezallor Sprinkle (rosuvastatin) capsules for the treatment of three types of elevated lipid disorders in people who have difficulty swallowing, a problem that is estimated to affect approximately 30- 35% of long-term care residents.
A foreign brokerage has reportedly upgraded stock to overweight and raised price target to Rs 505 from Rs 470 per share, implying 24% potential upside on expectations of revival in earnings FY21 onwards.
Indoco Remedies fell 2.91%. The company announced during market hours today, 15 July 2019, that it has received a warning letter from the United States Food and Drug Administration (USFDA) for its Oral dosages Plant, situated at L -14, Verna Industrial Road, Goa (Plant I), as a result of the inspection carried out in January 2019. The facility had received 6 observations in Form 483s and was classified as 'OAI' (Official Action Indicated') in March, 2019. The company responded to these observations with a detailed remediation plan, the implementation of which is still on-going.
Tata Steel fell 0.93%. The company on Sunday, 14 July 2019, announced provisional production and sales figures for Q1 June 2019. The company's India unit reported a 20.05% rise in steel production to 4.37 million tonnes in Q1 June 2019 from 3.64 million tonnes in Q1 June 2018. It further reported 15.87% rise in steel sales to 3.87 million tonnes from 3.34 million tonnes in Q1 June 2018. The company said that the liquidity issues in the NBFC and banking sector along with rural stress have negatively impacted sentiments and overall economic activities including domestic consumption.
Yes Bank reversed early gains and fell 1.01% to settle at Rs 93.20. The stock hit a high of Rs 99.30 in intraday today after the media reported that a US-based PE firm is leading a four-member consortium to pick stake in the private lender. According to media reports, Yes Bank has received an $850 million-term sheet offer over the weekend by the marquee PE investor. The consortium is comprised of two US-based PE investors and two domestic investors, reports suggested. Yes Bank is in the final stage of stake sale, and the announcement is likely after June quarter results on 17 July, reports added.
Last week, Yes Bank clarified to the bourses that its financial position is sound and stable and its liquidity and operating performance continue to be robust.
IndusInd Bank fell 2.38%. The company announced on Sunday, 14 July 2019, that S. R. Batliboi & Co. LLP have tendered their resignation as statutory auditors of the bank with effect from 10 July 2019. The Reserve Bank of India on 3 June 2019 had disapproved S. R. Batliboi & Co. LLP for carrying out statutory audit assignments in commercial banks starting from 1 April 2019.
Allahabad Bank fell 7.74% after the bank reported fraud by Bhusan Power and Steel.The announcement was made on Saturday, 13 July 2019. On the basis of forensic audit investigation findings and the CBI's FIR against the company and its directors, alleging diversion of funds from banking system by Bhushan Power and Steel (BPSL), a fraud of Rs 1774.82 core has been reported by the bank to the Reserve Bank of India (RBI). The bank has already made provisions amounting to Rs 900.20 crore against the exposure of the bank in BPSL.
It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from the consortium of banks. At present, the case is at NCLT which is in advance stage and the bank expects good recovery in the account, the bank said.
Last week, the Punjab National Bank (PNB) also reported a fraud worth Rs 3805.15 crore by Bhushan Power and Steel.
Adani Ports and Special Economic Zone (APSEZ) fell 0.90%. APSEZ after market hours on Friday, 12 July 2019, announced that its board of directors has approved issuance of USD denominated foreign currency bonds (Bonds) which may be issued in one or more tranches overseas. The proceeds of the Bonds will be used for the refinancing of existing notes due in 2020 and other permissible end uses. The total amount raised will not exceed $700 million. The Bonds will be issued on a private placement basis or otherwise, to eligible persons, entities, bodies corporate, companies, banks, financial institutions and any other categories of eligible investors permitted to invest in the Bonds under applicable laws.
Future Enterprises fell 5.15% after the company said its chief financial officer was arrested for allegedly evading customs duty worth Rs 14.58 crore. The announcement was made on Sunday, 14 July 2019.
The Directorate of Revenue Intelligence (DRI) arrested Dinesh Maheshwari, executive director and CFO of Future Enterprises (FEL), for flouting import rules that allow duty-free shipments of certain items from Bangladesh under the South Asian Free Trade Area (SAFTA).
FEL said it has received confirmation from its vendors, who are supplying goods from their facilities in Bangladesh, that they have complied with the SAFTA Rules, 2006 and obtained SAFTA certificates from relevant regulatory authorities. They assured continued support for completion of proceedings with authorities. Further, FEL has recently also deposited part of the disputed amount with the authorities. FEL is engaged with its lawyers and tax experts to place the full records before the DRI. FEL and its officers are cooperating fully with the department and remains confident that the said matter will be resolved quickly to the satisfaction of the department.
Magma Fincorp fell 6.96%. The company announced during market hours today, 15 July 2019, that its asset backed finance (ABF) business CEO Kaushik Banerjee has stepped down from the full time CEO responsibility as his health and family commitments were not permitting him to continue with full time CEO role. He shall however continue as an advisor to the ABF business on an exclusive basis.
Most telecom shares fell. MTNL (down 6.31%), Tata Teleservices (Maharashtra) (down 3.29%) and Bharti Airtel (down 1.35%) declined. Vodafone Idea rose 0.17%.
Reliance Communications fell 4.76%. With reference to a news item titled, 'SBI probe flags Rs 5,500 crore deals among Anil Ambani cos', the company clarified that the media report refers to alleged findings of an audit conducted by lenders led by State Bank of India (SBI), through BDO India LLP (BDO). It added that BDO has not submitted any report nor raised any queries or discussed their findings with RCom's management. Hence, no disclosure has been made in this regard.
Hathway Cable & Datacom fell 7.36%. The company announced Q1 June 2019 result after market hours on Friday, 12 July 2019. On a consolidated basis, Hathway Cable & Datacom reported net loss of Rs 9.72 crore in Q1 June 2019 compared with net loss of Rs 51.69 crore in Q1 June 2018. Net sales rose 16.9% to Rs 449.78 crore in Q1 June 2019 over Q1 June 2018.
On the macro front, the annual rate of inflation, based on monthly Wholesale Price Index (WPI), stood at 2.02% (provisional) in June 2019 (over June 2018) compared with 2.45% (provisional) in the previous month and 5.68% during the corresponding month of the previous year. The data was announced during trading hours today, 15 July 2019.
India's industrial production (base year 2011-12=100) rose at slower pace of 3.1% in May 2019, while showing moderation in growth from a six-month high of 4.3% in April 2019. However, the industrial production growth for April 2019 has been revised sharply upwards to 4.3% from 3.4% as reported provisionally.
The all-India general CPI inflation rose to 3.18% in June 2019 (new base 2012=100), compared with 3.05% in May 2019. The corresponding provisional inflation rate for rural area was 2.21% and urban area 4.33% in June 2019, as against 1.86% and 4.51% in May 2019. The core CPI inflation eased to 4.09% in June 2019 compared with 4.23% in May 2019. Both the data were released by the government after market hours on Friday, 12 July 2019.
In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 68.55, compared with its close of 68.69 during the previous trading session.
In the commodities market, Brent crude for September 2019 settlement was up 35 cents at $67.07 a barrel. The contract rose 20 cents or 0.30% to settle at $66.72 a barrel in the previous trading session.
Overseas, European markets were trading lower while most Asian markets ended higher after investors digested data showing Chinese economic growth slowed in the second quarter. Markets in Japan were closed on Monday for a holiday.
China's Shanghai Composite index rose 0.40%. China released second-quarter figures showing that its economy slowed to 6.2%. From April to June, China's economy grew 6.2% from a year ago, the country's statistics bureau said on Monday.
China's industrial output grew 6.3% in June from a year earlier, official data showed on Monday, picking up from May's 17-year low. Retail sales for June rose 9.8% in annual terms.
China's fixed-asset investments for the first half of the year rose 5.8% from a year earlier, according to data published by the National Bureau of Statistics. Private sector investment in fixed assets, which make up 60% of the country's total investments, rose 5.7% in January-June, compared with a 5.3% rise in January-May.
US stocks posted record closing highs on Friday after Federal Reserve Chairman Jerome Powell in two days of congressional testimony bolstered investor expectations for an interest-rate cut at the end of the month. As per reports, the Fed will move at its July 30-31 meeting to cut its fed-funds rate by at least a quarter point and to potentially deliver further cuts before year-end.
Meanwhile, worldwide optimism for business activity and corporate profits in the year ahead has fallen to its lowest since the global financial crisis, accompanied by reduced expectations for employment and investment spending, according to the IHS Markit Global Business Outlook Survey.
Inflation expectations have also weakened. Developed world sentiment has hit the joint-lowest since 2009 as a marked deterioration in sentiment in the US takes optimism about future output growth below that of the Eurozone and UK, both of which have seen sentiment pick up slightly. Japan remains the gloomiest of the developed world economies.
Business optimism about the year ahead has meanwhile also fallen across the four largest emerging markets to the lowest since 2009. The IHS Markit Global Business Outlook Survey, based on responses from a panel of 12,000 companies and conducted three times per year, shows the net balance of global firms predicting output to rise over the coming year less those predicting a decline has fallen from +24% in February to +18%, its lowest since data were first collected in 2009.
Output expectations are especially weak in manufacturing, where the net balance has hit a post- global financial crisis low of+14% from +21% in February. However, service sector expectations have also deteriorated, dropping to the third-lowest level since the global financial crisis. Expectations of profits growth in the year ahead have mean while also worsened to a post-crisis low, with the survey net balance down from +15% in February to +70/0in June. Profits gauges are down to new survey lows in both manufacturing and services, with the latter indicating especially weak optimism (a net balance of +3% against +9% in services).
Anecdotal evidence shows growing anxiety about US trade tensions, especially with China, Mexico and the EIJ, as well as heightened political uncertainty, with notable uncertainty regarding the 2020 US elections and disruptive impact of Brexit. More generally, there are worries about forecasts of slower global economic growth in the coming year, with reduced spending expected to curb sales and expansion plans, the Survey stated.
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