Nifty settles near 18,500; Uptrend intact
Markets last week turned bullish, and the June series began on a positive note as the Nifty tested 18500 mark while Banking Index closed above the key psychological level of 44000 mark. Index heavyweights like RIL, TCS, ICICI Bank & HUL provided good support. Positive commentary from US Fed, consistent FII buying and healthy results from Index heavyweights supported the sentiments. Globally, investors remained cautious over the on-going US debt ceiling discussions. For the week, the Nifty ended higher by 1.6 pct to 18,499 levels while the Nifty Midcap 100 and Nifty Smallcap 100 index gained 2.7 pct and 1.2 pct respectively. On the institutional front, FIIs were net buyers to the tune of Rs 32.28 bn while DIIs were net sellers to the tune of Rs 34.79 bn.
Brent crude oil prices ended the week at USD 77.12 bn, up from the previous week close of USD 75.58 bn. The OPEC+ alliance agreed to a production increase of 648,000 barrels per day in July and August. Gold experienced its third consecutive weekly decline as progress in U.S. debt ceiling negotiations strengthened the dollar. Gold prices ended the week at USD 1,944 an ounce.
Stocks/Sector in Spotlight
- Bharat Electronics delivered a strong Q4FY2023 performance with a strong beat on margins and net profit. The company guided for 17 pct revenue growth in FY2024 and expects OPM to be 21-23 pct. Order backlog stands strong at ~Rs 606.90 bn (~3.5x revenue). FY24 order intake expectation is at least ~Rs 200 bn with the likelihood of beat if QRSAM or MRSAM orders kick in. Capex of Rs 7-8 bn in FY2024, R&D expenditure will be at 7 pct of revenue in the next 1-2 years.
- Biocon reported a strong 57 pct jump in sales to Rs 37.7 bn and 42 pct rise in adjusted PAT to Rs 3.4 bn with EBITDA margins expanding 180 bps to 26.4 pct largely due to full benefit of Viatris deal flowing in 4Q. Gross margin improved 180 bps 67.4 pct (versus 65.6 pct last year) despite raw material price inflation. EBITDA recorded strong growth of 69 pct YoY with EBITDA margins of 26.4 pct.
- Dixon gained 20.6 pct after strong Q4FY23 performance. Its sales growth stood at 4 pct YoY, EBITDA margin of 5.1 pct (vs 4 pct YoY) was the key positive, leading to EBITDA/PAT growth of 32 pct/28 pct YoY. Improvement in margin was supported by sales mix, operating leverage and strategic price hikes. Management did not guide for any specific sales for FY24, it gave assurance that the group will be aggressive, along with its growth rates clocking much ahead of the industry.
- Asset Management Company (AMC) stocks fell after the SEBI’s consultation paper on new fee caps on mutual funds. This can impact profits by 10-13 pct, though part of it will be passed on to distributors, brokers, RTA & other partners. This is part of SEBI’s plan to improve transparency & pass the benefit of larger scale to investors.
- 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 had 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
- Economic growth in the U.S. slowed less than previously estimated in the first three month of 2023. The Commerce Department said gross domestic product climbed by 1.3 pct in the first quarter compared to the previously estimated 1.1 pct increase. Economists had expected the pace of GDP growth to be unrevised.
- US initial jobless claims crept up to 229,000, an increase of 4,000 from the previous week’s downwardly revised level of 225,000. Economists had expected jobless claims to inch up to 245,000 from the 242,000 originally reported for the previous week.
- According to minutes of the May 2-3 meeting, Federal Reserve officials “generally agreed” last month that the need for further interest rate increases “had become less certain,” with several saying that the quarter-percentage-point increase they approved might be the last.
- US existing home sales plunged by 3.4 pct to an annual rate of 4.28 million in April after tumbling by 2.6 pct to a revised rate of 4.43 million in March. The extended pullback surprised economists, who had expected existing home sales to inch up by 0.1 pct compared to the 2.4 pct slump originally reported for the previous month.
- UK retail sales recovered in April driven by food and non-food turnover. The retail sales volume increased 0.5 pct month-on-month, in contrast to the 1.2 pct fall in March. Sales were forecast to grow more moderately by 0.3 pct.
Mutual Funds Industry Update
Kotak Mutual Fund launches Kotak NIFTY 200 Momentum 30 Index Fund
Kotak Mahindra Mutual Fund has launched Kotak NIFTY 200 Momentum 30 Index Fund, an open-ended scheme replicating/ tracking the Nifty 200 Momentum 30 Index. The new fund offer of the scheme is open for subscription and will close on June 8. The scheme will open for sale and repurchase within five business days from the date of allotment. The performance of the scheme will be benchmarked against the NIFTY 200 Momentum 30 Index (Total Return Index). The scheme will be managed by Devender Singhal, Satish Dondapati, and Abhishek Bisen. The scheme will follow a passive investment strategy with investments in stocks in the same proportion as in the Nifty 200 Momentum 30 Index.
Outlook for the Week
Global as well as domestic events will set the trend for the markets this week. Investors will eye data on eight core, fiscal deficit, GST numbers, monthly auto and PMI services and manufacturing data. Developments with regards to US debt ceiling negotiations deadline on June 1st will be key to watch. Meanwhile, India has reconfirmed its expectation of a normal monsoon this year, alleviating concerns regarding weather-related impacts on inflation.
Technically, both the indices can be seen trading higher and likely to continue their bullish moves in upcoming week as well. For Nifty 18650-18700 zone, it would act as immediate strong hurdle while 18300- 18200 zone would provide support in case of any downside. Nifty 50 which already remains in Sub wave (iii) of Wave (5) has an upper limit for the current up move to test around 19285 before we see some minor profit booking. Overall, upside target for Nifty is seen around 19800, which is expected to be completed before July end 2023.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
