Weekly Market Wrap For 16th To 20th January 2023

Table of Contents

Markets remains indecisive; Union Budget at Centre-Stage

Markets for the week ended with marginal gains to form back-to-back ‘Doji star’ on candlestick as Nifty struggled to sustain above 18130 showing signs of indecisiveness. Markets remained in a range as cautiousness prevailed ahead of the upcoming Union Budget. Global stock markets were cautious on concerns the Federal Reserve will continue its aggressive path of rate hikes that could lead the economy into a recession. For the week, the Nifty ended higher by 0.4 pct to 18,028 levels and the Nifty Midcap and Nifty Smallcap index fell 1.3 pct and 1.7 pct respectively. Sector-wise, the Nifty IT index gained 3.2 pct, the Nifty Metal index gained 1.2 pct, and the Nifty Energy index gained 1 pct. The Nifty PSU Bank index lost 2.1 pct and the Nifty Bank index was down 1.1 pct. FII were net sellers to the tune of Rs 24.61 bn and the DIIs were net buyers to the tune of Rs 33.81 bn.

On the commodity front, Gold prices saw a fifth consecutive weekly gain as hopes of slower U.S. interest rate hikes boosted bullion’s appeal. Gold is trading near recent highs at USD 1928 an oz. Crude oil witnessed a positive rally amid rising Chinese demand, while the market wrote off a second straight week of large builds in U.S. crude inventories. For the week, the Brent prices were up 2.7 pct to USD 87.63 bbl.

Stocks/Sector in Spotlight

Reliance Industries Q3FY23 consolidated net profit of Rs 157.92 bn declining by 14.8 pct from Rs 185.49 bn YoY. However, revenue from operations climbed by 15 pct to Rs 2.20 trln in Q3FY23 versus Rs 1.91 trln in the same period last year. Jio Platforms reported record consolidated revenue at Rs 291.95 bn, up 20.8 pct YoY, and a record EBITDA at Rs 125.19 bn, up 25.1 pct YoY. Jio Platform’s consolidated net profit for the quarter was Rs 48.81 bn, up 28.6 pct YoY. Reliance Jio’s Net subscriber addition was 5.3 mn, as gross adds remained strong at 34.2 mn in the quarter; the Total customer base as on 31st December 2022 was 432.9 mn. Reliance Jio’s ARPU during the quarter of Rs 178.2 per month saw a healthy 17.5 pct growth on a YoY basis. Reliance Retail consolidated quarterly revenue was a record Rs 676.23 bn, up 17.2 pct YoY. Reliance Retail posted record quarterly EBITDA at Rs 47.73 bn, up 24.9 pct YoY driven by operating leverage and efficiencies.
ICICI Bank Q3FY23 results were better than expectations with PAT up 34 pct YoY to Rs 83.12 bn. NII saw an increase of 34.6 pct YoY to Rs 164.65 bn while NIM stood at 4.65 pct in Q3 as against 3.96 pct a year ago. During the quarter, its fee income grew by 3.7 pct YoY to Rs 44.48 bn. Its NNPA declined to 0.55 pct in Q3 from 0.61 pct in Q2. The provisioning coverage ratio was at 82 pct. Its deposits grew by 10.3 pct YoY and its loan portfolio recorded a growth of 19.7 pct YoY.
Ultratech Cement Q3FY23 net profit dropped 38 pct YoY to Rs 10.58 bn and revenue grew by 19.5 pct to Rs 155.2 bn. The company’s operating margin dropped to 15 pct in Q3, down 400 bps from 19% YoY but was up 100 bps sequentially. Volume growth was strong during the quarter but cost pressures resulted in subdued margins.
Q3FY23 results of Kotak Mahindra Bank were better than expectations. The PAT grew by 31 pct YoY and 8.17 pct QoQ to Rs 27.91 bn. NII stood at Rs 56.53 bn, up 30.43 pct YoY. NIM expanded 4.62 pct YoY to 5.47 pct in Q3FY23. Its asset quality improved with gross NPA declining sharply, however, provisions increased during the quarter. GNPA stood at 1.9 pct, contracting 81 bps from 2.71 pct in Q3FY22 and down by 18 bps from 2.08 pct in Q2FY23. NNPA dipped steeply to 0.43 pct in Q3FY23 versus 0.79 pct in Q3FY22 and 0.55 pct in Q2FY23. Total advances climbed by 23 pct YoY and 6 pct QoQ to Rs 3107 bn as of December 31, 2022. Total deposits were at Rs 3447 bn up by 12.89 pct YoY and 5.98 pct QoQ.
HUL Q3FY23 net sales grew 16.3 pct YoY to Rs 152.3 bn in Q3FY23. EBITDA grew 7.9 pct YoY to Rs 35.4 bn (inline) and PAT was up 13 pct YoY at Rs 25.9 bn. Underlying volumes were up 5 pct in Q3FY23 which were in line with estimates. Management expects near-term revenue growth to be predominantly price-led, and volume growth should inch up from FY24 onwards. The markets were worried about the new royalty payment structure to the parent company Unilever and spoilt the sentiment despite decent earnings. HUL was paying 2.65 pct in royalties to Unilever which will increase to 3.45 pct under the new royalty agreement.
Asian Paints’ Q3FY2023 numbers were lackluster, with revenue growing by 1.3 pct YoY on a high base of 26 pct growth in Q3FY2022 coupled with flat volume growth due to extended monsoon in October, which affected festive season demand. The international business posted 13.4 pct YoY CC growth and performance was mixed across regions. Consolidated OPM improved by 57 bps YoY to 18.7 pct due to gross margin expansion coupled with better operating efficiencies. Operating profit/adjusted PAT grew by 4.5 pct/6.9 pct YoY. Sales volumes of the domestic decorative paints business were flat in Q3 affected by lower demand in October and November 2022.
Hindustan Zinc witnessed selling pressure after the Company decided to buy Zinc International (ZI) for USD 2.98bn. (80 pct payable post approvals and 20 pct over 18 months based on milestones). This acquisition will increase the total capacity to 2.0mn tpa by 2027. HZL will also start to pay a 2 pct royalty on sales to Vedanta Ltd for Brand name usage.
Yes Bank results saw a surprise drop of 80 pct in net profit for Q3FY23 to Rs 515 mn as provisions for bad loans increased. Markets had estimated a profit of Rs 3.36 bn. NII rose 11.7 pct to Rs 19.71 bn. Its NIM rose 10 bps 2.5 pct. Its asset quality improved as GNPA declined to 2.02 pct from 12.89 pct a year ago. NNPA declined to 1.03 pct from 3.6 pct. This was due to the transfer of NPAs to JC Flowers ARC in December. The AT1 Bonds controversy had come to the fore again with the Bombay High Court invalidating the write-off of these bonds on procedural grounds.
Jubilant FoodWorks aims to spend Rs 900 crore over the next 12-18 months on expansion plans. Of this, Rs 500-600 crore will be used for re-imaging and maintenance of stores and digital, and Rs 300 crore on commissaries. The company plans to open 3,000 Domino’s stores in the near to medium term, and of this, it is looking at opening 250 stores in the next 12-18 months.
HDFC Life Q3FY23 net profit rose 15 pct YoY and fell 4 pct QoQ to Rs 3160 mn as premiums increased, but the results missed analysts’ estimates. Of the gross premium earned, renewal premium grew the most by 30 pct while contributing around 50 pct, while the rest was new business premium. Revenue rose by 38 pct to Rs 197.18 bn.

Macro updates

India’s wholesale price index climbed 4.95 pct YoY in December, slower than the 5.85 rise in November. Economists had expected inflation to ease to 5.60 percent.
India’s consumer price inflation slowed slightly at the end of the year. Consumer prices advanced 5.72 pct YoY basis in December, slower than the 5.88 pct increase seen in November. In the same period last year, inflation was 5.66 pct.

International News

US housing starts slumped by 1.4 pct to an annual rate of 1.382 million in December after tumbling by 1.8 pct to a revised rate of 1.401 million in November. Economists had expected housing starts to plunge by 4.8 pct to an annual rate of 1.359 million from the 1.427 million originally reported for the previous month.
US initial jobless claims fell to 190,000, a decrease of 15,000 from the previous week’s unrevised level of 205,000. The dip surprised economists, who had expected jobless claims to rise to 214,000.
US business inventories rose by 0.4 pct in November following a revised 0.2 pct uptick in October. Economists had expected business inventories to climb by 0.4 pct compared to the 0.3 pct increase originally reported for the previous month.
US industrial production slid by 0.7 pct in December after falling by a revised 0.6 pct in November. Economists had expected industrial production to edge down by 0.1 pct compared to the 0.2 pct dip originally reported for the previous month.
US producer price index for final demand declined by 0.5 pct in December after inching up by a revised 0.2 pct in November. Economists had expected producer prices to edge down by 0.1 pct compared to the 0.3 pct increase originally reported for the previous month.

Mutual Funds Industry Update

WhiteOak Capital Mutual Fund launches Balanced Advantage Fund

The NFO will be open from January 20 to February 3rd. This is an open-ended dynamic asset allocation scheme investing in equities (65-100 pct), arbitrage (0-50 pct), and debt/cash in the range of 0-35 pct with a weight of net equities in the range of 30-80 pct. The scheme will be benchmarked against BSE Sensex TRI. According to the press release, the fund house’s proprietary model will provide broad guidance regarding the relative valuation levels and scope of the asset allocation opportunities in the market.

Baroda BNP Paribas Mutual Fund launches NIFTY SDL December 2026 Index Fund

Baroda BNP Paribas Mutual Fund has launched the Baroda BNP Paribas NIFTY SDL December 2026 Index Fund, an open-ended Target Maturity Index Fund tracking the NIFTY SDL December 2026 Index. The fund will be managed by Mayank Prakash and will be benchmarked against the NIFTY SDL December 2026 Index. The fund has no entry or exit load. The NFO is open and it will close for subscription on January 23. The scheme will have two Plans: Regular and Direct. Each Plan offers a growth option and an income distribution cum capital withdrawal (IDCW) option. The maturity of the scheme will be December 31, 2026. According to the press release, the fund will invest in a trio of fixed maturity, easy liquidity, and high-quality funds. It is suitable for investors who are looking to generate income, whose investment horizon matches the maturity date of the fund, and who have a moderate risk appetite.

Tata Mutual Fund launches Tata Multicap Fund

Tata Asset Management has launched the Tata Multicap Fund, an open-ended equity scheme investing across large-cap, mid-cap, and small-cap stocks. The New Fund Offer (NFO) opens for subscription on January 16 and closes on January 30. The scheme will be benchmarked against the Nifty 500 multi-cap 50:25:25 total returns index and will offer two plans – regular and direct. The fund will be managed by Rahul Singh (Equity), Tejas Gutka (Equity), Murthy Nagarajan (Debt) & Arvindkumar Chetty (Overseas). “Tata Multicap Fund focuses on combinations – across Market Caps, Strategies, Themes, and Sectors with Growth at Reasonable Price or GARP as the underlying philosophy aiming to improve the risk-adjusted returns of the overall portfolio and potentially provide a smoother journey to the investor.

Outlook Week Ahead

Markets will focus on the Union Budget expectations which are scheduled to be presented on February 1. The market expects the Budget 2023 to be growth-oriented by increasing spending on infrastructure, healthcare, and education. Volatility is also expected to continue as the derivatives contract is set to expire this week. Markets will also keep track of the global cues and movement of the rupee against the dollar along with FII flows for direction.

The lower non-institutional volumes below Rs 20,000 crores consistently in the past few days suggest that retail participation has seen a drastic reduction. This poses a risk of major turbulence in the equity markets with any sudden selling from FII. The commodities namely Brent Crude and Copper are on a verge of a major breakout which may see an upsurge of 10-15% in the coming weeks which may force central banks to tighten liquidity in the near term. We will continue to stay on the sidelines till Nifty closes above 18,130 on a spot basis.

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.