Nifty faces hurdles near 20K; Fed Meeting, Q1FY24 results season in focus
The benchmark indices gained for the fourth consecutive week despite a 1 pct decline on Friday which was mainly triggered by disappointing full-year guidance by Infosys. However, the sentiments were upbeat for the most part of the week on the demerger-led value unlocking of Reliance Industries and sustained FII inflows. For the week, the Nifty ended higher by 0.9 pct to 19,745 levels while the Nifty Midcap 100 and Nifty Smallcap 100 gained 0.7 pct 1.8 pct respectively. The Nifty IT index was the top loser, down 3.5 pct mainly led by a sharp decline in Infosys. FIIs were net buyers to the tune of Rs 47.25 bn and DIIs were net sellers to the tune of Rs net sellers to the tune of Rs 22.90 bn.
Crude oil prices saw positive gains over the course of the week, as market participants hoped for a potential pause in the US Federal Reserve’s interest rate hikes during its upcoming meeting. Brent crude oil futures jumped to USD 81 a barrel on Friday, rising 1.5 pct for the week./
Stocks/Sector in Spotlight
- Reliance Industries reported its Q1 net profit at Rs 160.1 bn, down 10.8 pct while revenue fell from Rs 2.19 trillion to Rs 2.07 trillion. The drop in revenue was primarily due to the weak performance of the oil-to-chemicals (O2C) business. Revenue from this segment plunged nearly 18 pct YoY to Rs 1.33 trillion. The EBITDA for O2C declined 23.2 pct YoY to Rs 152.71 bn. Retail business revenue grew 20 pct YoY to Rs 699.62 bn- this is the highest-ever quarterly revenue reported by the business, the net profit of the business grew 19 pct YoY to Rs 24.48 bn. Jio Platforms reported an 11.3 pct YoY rise in revenue to Rs 306.40 bn. EBITDA, which grew 15 pct to Rs 131.16 bn, was also the highest ever in a quarter. ARPU rose about 1 pct QoQ to Rs 180.5 in the June quarter.
- Infosys reported subdued Q1FY24 numbers mainly led by a slowdown in discretionary spending and ramp down in projects. It recorded revenue of USD 4,617mn recording growth of 1 pct/4.2 pct QoQ/YoY in CC terms. Infosys continues to witness headwinds across its client bucket mainly led by a slowdown in discretionary spending. Large deal signing during the quarter stood at USD 2.3 bn which was +10 pct/+35 pct QoQ/YoY (TTM avg of USD 2.6bn). Out of the total large deals signed, 56 pct were net new deals.
- The price of Jio Financial Services Ltd (JFSL) has been discovered at Rs 262. The formula for the cost of acquisition of shares states apportion of the de-merger cost of acquisition of equity shares of the RIL in the ratio of 4.68 for RSIL and 95.32 for RIL. Income Tax provisions state that the Cost of Acquisition in case of demerger will be the net worth of the Resulting Company (RSIL) divided by the net worth of the Demerged Company (RIL).
- HUL 1QFY24 volume growth was 3 pct for Q1 vs market expectations of 5.5 pct. Standalone turnover (including other operating income) grew by 6.1 pct YoY to Rs 151.5 bn. EBITDA grew by 8.4 pct YoY to Rs35.2 bn. While the EBITDA margin was just up 50bps YoY to 23.2 pct due to higher operating costs. Reported PAT grew by 8 pct YoY to Rs24.7bn.
- Standalone HDFC Bank reported a further decline in credit growth to 16 pct YoY vs 17 pct YoY (FY23) led by a slowdown in corporate book. Asset quality remains stable with GNPA at 1.17 pct vs 1.12 pct QoQ led by Agri slippages. NIMs remain stable at 4.3 pct QoQ as a rise in the cost of funds was equivalent to an increase in yields.
- IndusInd Bank’s Q1FY24 was better than estimated due to a strong core fee income. NIM was stable QoQ despite a sharp jump in the cost of funds. GNPA ratio marginally declined QoQ driven by a sharp reduction in corporate slippages. The management maintained its NIM target of 4.2–4.3 pct. The cost of funds is expected to peak in Q2 and taper in the latter half of FY24.
- Yes, Bank reported its weakest Net Interest Income growth in 9 quarters as loan growth remains subdued while RBL Bank delivers an operationally strong Q1, asset quality improves and return ratios are at a 16-quarter high.
- ICICI Bank reported a decent set of numbers for Q1FY24. The core operating profit grew by 35.2 pct YoY to Rs 138.87 bn Q1FY24 while PAT saw a substantial increase of 39.7 pct YoY, reaching Rs 96.48 bn in Q1. Gross NPA stood at Rs 318.22 bn vs Rs 311.83 bn QoQ, Net NPA was flat at 0.48 pct QoQ.
- Kotak Bank Q1FY24 consolidated PAT rose by 51 pct YoY to Rs 41.5 bn while it grew by 66.7 pct YoY to Rs 34.52 bn on a standalone basis. NII registered a 32.7 pct growth to Rs 62.34 bn. NIM stood at 5.57 pct for the quarter. Asset quality of the bank improved during the quarter with NNPA falling to 0.43 pct from 0.41 pct in the previous quarter. The Company expects margins to normalize over a period of time.
Mutual Funds Industry Update
Quant Mutual Fund files draft for Quant Retirement Fund
Quant Mutual Fund has filed the draft for a retirement fund. Quant Retirement Fund will be an open-ended retirement solution-oriented scheme with a lock-in of five years or till retirement age, whichever is earlier. The scheme will be benchmarked against 65% S&P BSE 200 TRI + 15% CRISIL Short Term Bond Fund Index + 20% iCOMDEX Composite Index. The scheme’s riskometer shows that the scheme will fall in the ‘very high risk’ category. The scheme will have a regular and direct plan with growth and IDCW options.
Bajaj Finserv Mutual Fund launches Bajaj Finserv Flexi Cap Fund
Bajaj Finserv Asset Management has announced the launch of its first equity scheme, the Bajaj Finserv Flexi Cap Fund, an open-ended equity scheme that will invest across market capitalizations, based on a ‘MEGATRENDS’ strategy. Rather than looking at past performance, the Bajaj Finserv AMC investment team looks at megatrends that are monetizable, and have a large scope and long-term impact, the fund house said. The scheme is being managed by Nimesh Chandan, Chief Investment Officer, Sorbh Gupta (Equity portion), and Siddharth Chaudhary (Debt portion). The fund will be benchmarked against S&P BSE 500 TRI. The stock selection can be based on multiple parameters such as company fundamentals, valuations, and most importantly MEGATRENDS across Technological, Regulatory, Economic, Nature, Demographic, and Social Change.
Outlook for the Week
The markets are expected to take cues from the ongoing quarterly results season as well as flows from institutional investors. Also, volatility is expected to remain high ahead of the monthly expiry of the derivatives contract which is due on Thursday. Some of the major results expected this week are Tata Steel, Asian Paints, Bajaj Auto, L&T, Tata Motors, Axis Bank, Bajaj Finance, BPCL, Cipla, Dr. Reddy’s, Shree Cement, Tech Mahindra, Bajaj Finserv and Bajaj Holdings. Developments of the monsoon session of the Parliament which commenced on July 20 will be closely watched.
Global cues will also be in focus. U.S. Fed, BoJ, and ECB will meet this week. The U.S. Fed will announce its interest rate decision on 26 July. Fed is expected to raise rates by 25 bps. The U.S. Fed will announce its interest rate decision on 26 July. The BoJ will announce its interest rate decision on 28 July and the ECB on 27 July.
Overall, we expect consolidation in the markets after the recent sharp rally. Technically, the weekly chart of the Sensex Top-9 stocks Index witnessed negative closing with the formation of a shooting star appearing near the upthrust of the rising wedge. This move indicates an immediate downside of 7% in the Sensex Top-9 stocks index which holds 65% weightage within the Sensex 30 Index and can trigger a major sell-off in the Indian markets. In Nifty terms, we expect an immediate reaction towards 19,100.
