Markets volatile; Q2 results, geopolitics in focus.
Markets gained for the second-straight week; however volatility was high following some negative global cues including the Israel-Palestine conflict amid selling by foreign institutional players. Global stock market was volatile as investors were cautious amid the ongoing conflict between Israel and Palestinian group Hamas in the Middle East. Escalation of the crisis can have an impact on crude oil prices. The US Federal Reserve minutes released on Wednesday suggested that all Fed policymakers agreed that the central bank should proceed carefully on rate decisions, and incoming data would help determine whether another hike was needed in coming months, said the minutes.
For the week, the Nifty ended up 0.5 pct to 19,751. The Nifty Midcap 100 and Nifty Smallcap 100 index gained 0.6 pct and 0.4 pct respectively. On the sectoral front, Nifty Realty index gained 4.3 pct and Nifty Auto index was up 2.8 pct which Nifty FMCG index gained 1.8 pct. On the losers’ side, Nifty IT lost 1.6 pct and Nifty Bank was down 0.2 pct.
Crude oil prices declined following the release of the weekly EIA report, which indicated various factors contributing to a loosening of the U.S. oil market and a subsequent drop in prices. Brent prices ended the week at USD 90.9 a bbl. Gold prices had a strong week, marking their most significant gain in seven months. This surge was driven by escalating tensions in the Middle East and the belief that U.S. interest rates might have reached their peak. The weekly gain for gold was 4.1 pct to USD 1,941.5 an oz.
India’s CPI posted an annual increase of 5.02 pct in September, slower than the 6.83 pct increase in August. In August 2023, IIP was 10.3 pct. In August 2022, factory output as measured by the IIP had decreased by 0.7 pct. Industrial output climbed by 9.3 pct in August 2023. The Election Commission of India has announced the schedule for elections in five states: Rajasthan, Madhya Pradesh, Telangana, Chhattisgarh and Mizoram. These elections are particularly significant as they will be the final assembly elections before the crucial General Elections in 2024. Counting for all states will take place on December 3.
Stocks/Sector in Spotlight
- TCS reported Q2FY24 sales of Rs. 596 bn up by 0.52 pct QoQ and 7.92 pct YoY. The company posted EBITDA of Rs.157 bn in this quarter which was increased by 8.47 pct YoY from EBITDA of Rs. 145 bn in Q2FY23. EBITDA margin of the company stood at 26 pct in Q2FY24 vs EBITDA margin of 26 pct in Q2FY23. The company profit rises by 8.74 pct YoY to Rs. 113 bn from profit of Rs. 108 bn in Q2FY23. TCS’ sales increased 2.8 pct YoY to USD 7.21 bn in July-September in constant currency terms. The company has announced Rs 170 bn of Buyback at Rs 4,150 per share. The company also declared 2nd interim dividend of Rs. 9 per share. The record date for the purpose is October 19, 2023 and dividend shall be paid on 7th November 2023.
- Infosys Ltd posted Q2FY24 sales at USD 4,718mn, which was rises by 2.3 pct QoQ and 2.5 pct YoY in constant currency (CC) terms while in USD terms, reported revenue was up 2.2 pct QoQ and 3.6 pct YoY. Indian Rupees sales for Q2FY24 stood at Rs. 389.9bn, up by 2.8 pct QoQ & 6.7 pct YoY. EBITDA of the company increased by 11.6 pct YoY and EITDA margins remains flat 24 pct in Q2FY24 as compared to EBITDA Margins of 24 pct in Q2FY23. Profit after tax for the quarter came at Rs. 62.1 bn which was up by 3.2 pct YoY. Q2FY24 order book remains strong at USD 7.7bn, rises by 185 pct YoY. The company also declared Rs. 18 per share interim dividend but trims sales guidance for FY24 to 1 pct – 2.5 pct from 1 pct – 3.5 pct.
- HCL Tech reported Q2FY24 sales of RS. 266.7 bn increased by 1.42 pct QoQ and 8.05 pct YoY. The EBITDA of the company in this quarter came at Rs. 59.2 bn which was up by 9.29 pct YoY as compared to EBITDA of Rs. 54.2 bn in Q2FY23. EBITDA margin of the company came at 22 pct in Q2FY24 in line with EBITDA margin of 22 pct in Q2FY23. During this quarter company posted profit of Rs. 38.3 bn rises by 10 pct YoY as compared to profit of Rs. 34.8 bn in Q2FY23. The board declared interim dividend of Rs.12 per Equity share and record date for the same is 20th Oct, 2023. On guidance side it is revised to 1.0 pct – 2.5 pct and operating margin guidance retained at 20 pct – 22 pct.
- HDFC AMC posted revenue of Rs. 6,430 mn which was increased by 18.06 pct YoY in Q2FY24 vs revenue of Rs. 5,447 mn in Q2FY23. EBITDA of the company grew by 19 pct YoY. EBITDA of the company came at Rs. 4,820 mn in this quarter as compared to EBITDA of Rs. 4,050 mn. EBITDA margin came at 75 pct in Q2FY24 vs EBITDA margin of 74 pct in Q2FY23. During Q2FY24 Company posted healthy profit of Rs. 4,365 mn which was up by 20 pct YoY as compared to profit of Rs. 3,638 mn in Q2FY23.
- Mazagaon Dock – Company has signed a Letter of Intent (LOI) with a European client for the construction of six firms and four optional units of 7500 DWT MultiPurpose Hybrid Power Vessels. The costs for which would be finalized at the time of contract signing. According to ICICI Securities, the contract for six vessels of Rs. 7000-8000 mn. The expected order backlog is over Rs 375,000 mn (4.8x TTM revenues).
- NMDC, GMDC, MOIL shares soared after the Indian cabinet approved royalty rates for mining key minerals – Lithium, Niobium, and rare earth elements, ranging from 1 pct to 3 pct of their selling price. Notably, these rates are lower than the 12 pct previously mentioned.
- Adani Group stocks fell on fresh allegations of business malpractice were reported by the UK-based Financial Times. The investigation revealed that Adani used offshore intermediaries in Taiwan, Dubai and Singapore to import USD 5 bn worth of coal at prices that were at times more than double the market price. The report also revealed that between January 2019 to August 2021, the group allegedly inflated imported coal prices by USD 73 mn across 30 shipments.
- Hero MotoCorp was in the limelight after a first information report was fied against Pawan Munjal, the chairman of Hero MotoCorp Ltd, on allegations of forgery and fraud. The complaint claims that the defendants conspired to cheat and falsify the books and manufactured fake month-by-month bills debited against the complainant totaling Rs 59.5 mn in 2009 and 2010.
- Larsen & Toubro continued to be in the news for securing large orders. Its Water & Effluent Treatment (WET) business has secured an Engineering, Procurement and Construction order from the Public Health Engineering Department, Rajasthan for consideration of Rs 10,000-25,000 mn to construct a Water Supply Project for 648 villages of the District of Chittorgarh from the Chambal River under the Jal Jeevan Mission (Package-I). The project also includes automation and SCADA work including Operation & Maintenance for 10 Years. The business has also secured an order from the Guwahati Water Supply and Sewerage Board, Assam for Construction & Commissioning of balance works of 107 MLD Capacity South Guwahati West Water Supply Project.
- Tata Motors gained on reports that it will sell 9.9 pct stake in IPO-bound Tata Technologies for Rs 16.14 bn. Tata Motors Ltd has entered into share purchase agreements to sell 9.9 pct stake in IPO-bound Tata Technologies Ltd for Rs 16.14 bn to private equity fund TPG Rise Climate SF and an endowment trust belonging to Tata Trusts Chairman Ratan Tata.
International Updates
- US consumer price index climbed by 0.4 pct in September after increasing by 0.6 pct in August. Economists had expected consumer prices to rise by 0.3 pct. Higher energy prices contributed to the bigger than expected monthly increase, jumping by 1.5 pct in September after soaring by 5.6 pct in August. Gasoline prices led the way higher, surging by 2.1 pct.
- US Initial jobless claims were flat at 209,000 in the week ended Oct. 12. Last week claims rose a revised 4,000 to 209,000. That compared with the initial estimate of an increase of 2,000 to 207,000.
- US producer price index for final demand climbed by 0.5 pct in September after advancing by 0.7 pct in August. Economists had expected prices to rise by 0.4 pct. The report also said the annual rate of producer price growth accelerated to 2.2 pct in September from a revised 2.0 pct in August.
- UK Gross domestic product grew 0.2 pct in August from July, when the economy contracted by revised 0.6 pct. The monthly growth matched expectations. In the three months to August, GDP posted a 0.3 pct expansion compared with the quarter to May.
- China’s exports declined less than expected in September. Exports registered a decrease of 6.2 pct in September compared to the previous year. This was slower than the expected decline of 7.6 pct and the 8.8 pct fall seen in August. At the same time, imports also decreased 6.2 pct annually, slower than the 7.3 pct fall in August. Imports were forecast to drop 6.0 pct.
Outlook Of The Week
For the coming week, corporate results, crude oil prices along institutional flows will determine the market direction. Some of the key corporates that will declare their Q2FY24 results are Bajaj Finance, L&T Technologies on 17 October while Bajaj Auto, IndusInd Bank, LTIMindtree, Wipro on 18 October. HUL, ITC, Nestle, Ultratech Cement will announce their quarterly results on 19 October.
The Nifty future premium suddenly disappeared on Friday trading session due to volume-based selling on Friday thus confirming a setup of Head & Shoulder Top. The escalation of war between Israel-Hamas may have serious impact on Oil prices if Iran enters war to support Palestine, which has risk of blocking supply of Oil from Strait of Hormuz forcing Brent Oil to trade beyond USD 200 a bbl. For Nifty futures, the neckline of Head & Shoulder is seen at 19,400 below which we immediately expect Nifty futures to test 18,366.
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