Rangebound trend last week; Uptrend intact in Nifty, 18,500 in sight
Markets remained volatile in the week gone by and ended almost unchanged as Nifty closed above 18200 levels, with a mixed performance from the broader markets. Uncertainties related to U.S. interest rates and the U.S. debt ceiling standoff have prompted investors to stay cautious even as FIIs continued to pump money into Indian equities. Global markets stayed in action on hopes that U.S. President Joe Biden and Congressional leaders are closer to a deal to raise the U.S. debt ceiling and avoid a default. The Nifty ended down by 0.6 pct to 18,203 levels while the Nifty Midcap 100 and Nifty Smallcap 100 index gained 0.2 pct and 0.9 pct respectively. FIIs were net buyers of Rs 40.97 bn in equities and DIIs were net sellers to the tune of Rs 6.76 bn.
Crude oil made a base near USD 70 a bbl and saw a marginal upside. For the week, oil prices settled up as optimism over oil demand and U.S. debt ceiling negotiations outweighed worries about abundant supply. Brent closed the week with gains of about 2 pct to USD 75.58 a bbl. Gold continued its previous week’s fall as safe haven buying returned to the dollar index. The yellow metal tumbled below the USD 2,000 an-ounce level for the first time in two weeks. Gold prices fell 1.9 pct to USD 1,981.6 an ounce.
India’s wholesale price index dropped by 0.92 pct YoY in April and March WPI was reversed to 1.34 pct. Economists had expected a 0.2 pct fall. Further, this was the first decline in wholesale prices since July 2020. India’s trade deficit fell to the lowest since September 2021 on lower exports and imports. The merchandise trade deficit eased to $15.2 billion in April from USD 18.4 bn a year ago.
Stocks/Sector in Spotlight
- SBI reported its Q4FY23 numbers. PAT rose 83 pct YoY to Rs 166.9 bn, aided by lower provisions in Q4FY23. PPoP reported a miss of 9 pct hit by higher opex. NII growth was healthy as the margin expanded ~10bp QoQ during the quarter. Slippages remained under control at Rs 35 bn, while recoveries and upgrades stood higher than slippages. As a result, the GNPA/NNPA ratios improved from 36bp/10bp QoQ to 2.8 pct/0.7 pct. The restructured book too declined to 0.8 pct in Q4FY23.
- ITC reported healthy Q4FY23 results. Its cigarette volume growth of ~12 pct v/s expectation of 13 pct. The 3-year/4-year average volume growth stood at 9.3 pct/4.3 pct, indicating strong demand momentum. ITC’s Q4FY23 net revenue grew 5.6 pct YoY to Rs 164 bn, EBITDA grew 18.9 pct YoY to Rs 62.1 bn, and adj. PAT grew 19.6 pct YoY to Rs 50.1 bn. Net Cigarette sales grew 12.6 pct YoY to Rs 62.5 bn and net Cigarette EBIT margin expanded 90bp YoY to 75.1 pct. FMCG- Others sales grew 19.4 pct YoY to Rs 49.4 bn. EBIT more than doubled YoY to Rs 5 bn in Q4FY23. Hotels business sales doubled YoY to Rs 7.8 bn.
- Bharti Airtel reported in-line operational results with consolidated EBITDA/PAT of Rs 186.7 bn and Rs 30.1 bn. India mobile revenues were up 1 pct QoQ and EBITDA margins were stable at 53.8 pct. ARPU stood flat at Rs 193 despite impressive 7.4 mn high value 4G subscribers (overall net addition was 3.2mn). Africa mobile Revenue/EBITDA was down 0.7 pct QoQ each and Enterprise revenue
stayed largely flat, while EBIDTA grew by 3.3 pct QoQ. India mobile Q4 Revenue/ EBIDTA of Rs 195.5 bn (+1.0 pct QoQ) and Rs 105.3 bn (+1.1 pct QoQ).
- Va Tech Wabag has recorded a net loss of Rs 954.8 mn in Q4FY23 as against a net profit of Rs 321.4 mn YoY mainly due to an exceptional item of Rs 2.89 bn. The company’s profit before exceptional items and tax stood at Rs 1020 mn as against Rs 560 mn. Its consolidated revenue from operations was at Rs 9.27 bn when compared with Rs 8.92 bn. EBIDTA stood at 11.7 pct vs 8 pct YoY and 14 pct QoQ. The company has an order book position of over Rs 132.19 bn including framework contracts providing robust revenue visibility. This is the highest-ever order book size for the company.
- Nexus Select Trust was listed with a decent premium of 3 pct over the issue price of Rs 100 per unit on the National Stock Exchange on May 19. This is the fourth REIT listing on the bourses since 2019. The initial public offering of India’s leading consumption center platform with 17 best-in-class urban consumption centers across 14 cities received a healthy response from investors last week subscribing 5.45 times as the portion set aside for institutional investors was subscribed 4.81 times and that of non-institutional investors 6.23 times during May 9-11.
International News
- Bank of Japan Governor Kazuo Ueda said the central bank is unwavering in its stance of patiently maintaining ultraloose monetary policy as Japan has yet to see conditions fall in place for inflation to sustainably hit 2 pct.
- Eurostat data showed that the Eurozone economy grew marginally by 0.1 pct in the first quarter ending March 2023 supporting the statement from European Commission stating that Eurozone economic growth would be faster than the previous forecast this year and next.
- US housing starts jumped by 2.2 pct to an annual rate of 1.401 million in April after plunging by 4.5 pct to a revised rate of 1.371 million in March. Economists had expected housing starts to drop to an annual rate of 1.405 million from the 1.420 million originally reported for the previous month.
- US industrial production climbed by 0.5 pct in April, while revised data showed production was unchanged in each of the two previous months. Economists had expected industrial production to come in unchanged compared to the 0.4 pct increase originally reported for the previous month.
- US retail sales rose by 0.4 pct in April after falling by a revised 0.7 pct in March. Economists had expected retail sales to climb by 0.7 pct compared to the 1.0 pct slump originally reported for the previous month.
- Japan posted a merchandise trade deficit of 432.4 billion yen in April. That beat expectations for a shortfall of 613.8 billion yen following the 755.1-billion-yen deficit in March.
- Japan’s industrial production expanded more than initially estimated in March. Industrial production rose by a seasonally adjusted 1.1 percent month-on-month in March, slower than the strong rebound of 4.6 pct in February. In the flash report, the rate of increase was 0.8 pct.
- Japan’s gross domestic product for the first quarter ending March 2023 expanded 0.4 pct quarter on quarter on a real seasonally adjusted basis and 1.6 pct on an annualized basis, according to preliminary figures released by the Cabinet Office.
Mutual Funds Industry Update
- Sebi proposes big changes to mutual fund fees to bring down costs
The capital markets regulator has proposed sweeping changes to the way mutual funds charge fees to investors for managing their money. The SEBI said in a discussion paper late that mutual funds must make the total expense ratio – the annual fee that these asset managers collect from unitholders – a uniform for scheme categories such as equity or debt.
- SBI Mutual Fund launches SBI S&P BSE Sensex Index Fund
SBI Mutual Fund has announced the launch of the SBI S&P BSE Sensex Index Fund, an open-ended scheme tracking the S&P BSE Sensex Index. The new fund offer of the scheme is open for subscription and will close on May 24. The scheme will commence for sale/ repurchases within five business days from the date of allotment.
Outlook for the Week
For the coming week, markets are expected to carry on their positive trend despite the sudden move of the withdrawal of a Rs 2,000 note from circulation by the RBI. The overall impact on the stock markets will be minimal as unlike the last demonetization, Rs 2,000 banknotes account for only 10.8 pct of currency in circulation. Thus, it is expected to be less disruptive. In terms of impact on the economy. Also, the notes are legal tender and the public has been given a decent timeline to exchange them.
Markets will also track the developments surrounding the U.S. debt ceiling talks between the White House and House Republicans which have been paused. Markets will be volatile this week as derivatives contracts are set to expire on Thursday. Investors will continue to watch the Q4 earnings season with results from BPCL, Shree Cement, Ashok Leyland, Biocon, Hindalco, Zee Entertainment, BHEL, Grasim, ONGC, and Sun Pharma.
Technically, both Nifty and Nifty Bank look strong on the charts. Nifty is expected to catch up a fresh momentum towards 18500 levels once a decisive move is seen above 18300 in the coming week.
