Nifty holds above 10,650; breadth remains weak

July 16,2020

Key indices were hovering in a narrow range with decent gains in afternoon trade. The Nifty hovered around 10,650 level. IT and pharma shares supported the indices while banks and FMCG shares dragged.

At 13:20 IST, the barometer index, the S&P BSE Sensex, added 171.07 points or 0.47% at 36,222.88. The Nifty 50 index was up 41.6 points or 0.39% at 10,659.80.

The broader market was mixed. The S&P BSE Mid-Cap index was up 0.02% while the S&P BSE Small-Cap index slipped 0.66%.

There were more sellers than buyers. On the BSE, 824 shares rose and 1631 shares fell. A total of 138 shares were unchanged. In Nifty 50 index, 18 stocks advanced while 32 stocks declined. a

Foreign portfolio investors (FPIs) sold shares worth Rs 221.70 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 899.37 crore in the Indian equity market on 15 July, provisional data showed.

COVID-19 Update:

India reported 3,31,146 active cases of COVID-19 infection and 24,915 deaths, according to the data from the Ministry of Health and Family Welfare, Government of India. Total coronavirus cases worldwide stood at 13,556,202 with 584,139 deaths so far, according to data from Johns Hopkins University.

Economy:

India's exports declined by 12.41% to $21.91 billion in June, mainly due to drop in shipments of petroleum, textiles, engineering goods, and gems and jewellery items. Imports too plunged 47.59% to $21.11 billion in June, leaving a trade surplus of $0.79 billion, compared to a deficit of $15.28 billion in the same month of the last year, according to the data released by the Commerce and Industry Ministry on Wednesday.

DoT withdraws AGR penalty:

Oil India (down 2.19%), GAIL India (down 0.88%) and Power Grid Corporation of India (down 0.89%) declined.

The Department of Telecommunications (DoT) has withdrawn its orders asking GAIL (India), Power Grid Corporation of India and Oil India to clear license fee including interest and penalty for the past financial years. GAIL received demand notices for 2001-02 to 2018-19 from DoT with AGR dues worth Rs 1.83 lakh crore. The amount stood at Rs 48,489 crore (FY08-FY19) for Oil India. In a revised order last month, DoT had sought Rs 13,613.66 crore from Power Grid on account of license fee for the FYs 2006-07 to 2009-10, interest, penalty and interest on penalty.

Last month, the Supreme Court ordered the DoT to withdraw its demands of payments from public-sector companies such as Power Grid, GAIL (India), Oil India and Gujarat Narmada Valley Fertilisers and Chemicals (GNFC) as these companies did not provide telecom services.

Earnings Impact:

Infosys jumped 9.27% after net profit rose 11.45% to Rs 4,233 crore on 8.54% increase in net sales to Rs 23,665 crore in Q1 June 2020 over Q1 June 2019. The IT major's consolidated net profit fell 2% to Rs 4,233 crore on 1.7% rise in revenues to Rs 23,665 crore in Q1 June 2020 (Q1FY21) over Q4 March 2020 (Q4FY20). Operating profit jumped 8.9% to 5,365 crore in Q1FY21 over Q4FY20. Operating margin stood at 22.7% in Q1FY21, higher than 21.2% in Q4FY20. For FY21, the company forecast a revenue growth in the range of 0%-2% in constant currency terms. Operating margin for FY21 is expected to be in the range of 21%-23%.

Larsen & Toubro Infotech rose 3.6%. The consolidated net profit fell 2.6% to Rs 416.40 crore on 2.08% decline in revenue from operations to Rs 2,949.20 crore in Q1 June 2020 over Q4 March 2020. EBITDA rose 2.38% to Rs 592 crore in Q1 FY21 as against Rs 578.20 crore in Q4 FY20. EBITDA margin stood at 20.1% in Q1 FY21 as against 19.2% in Q4 FY20 and 18.4% in Q1 FY20.

Minda Corporation slumped 4.44% after the company reported a consolidated net loss of Rs 299.77 crore in Q4 FY20 compared with net profit of Rs 41.92 crore in Q4 FY19. Net sales declined 9.5% year-on-year (YoY) to Rs 697.93 crore during the quarter. The company has recorded impairment charge of Rs 293.29 crore which has been presented as exceptional items in respect of goodwill relating to Minda KTSN Plastic Solutions GmbH Co. & KG, Germany (MKTSN) and reduction in carrying value of property, plant and equipment and other assets of MKTSN after it filed for insolvency. Pre-tax loss stood at 284.44 crore in Q4 March 2020 as against a pre-tax profit of Rs 58.09 crore in Q4 March 2019. Current tax expenses fell 5.2% YoY to Rs 15.33 crore in the March quarter.

Stocks in Spotlight:

SBI rose 0.11%. The bank in a regulatory filing said that its board approved raising fresh additional Tier I (AT 1) capital up to an amount of Rs 4000 crore subject to GoI concurrence. Furthermore, the bank said it will raise fresh capital of upto Rs 10,000 crore through Tier 2 capital. The bank's board also approved to redeem existing Tier II capital bonds of Rs 11,015 crore having call dates in FY21 and replacing the same by fresh Tier II capital bonds of the same amount.

IDBI Bank fell 3.76%. The bank on Wednesday (15 July 2020) said it will raise up to Rs 11,000 crore equity capital through various modes in about a year to strengthen its capital base. IDBI Bank said it will seek consent of shareholders in the AGM to offer, issue and allot such number of equity shares of the face value of Rs 10 each and aggregating up to Rs 11,000 crore, in one or more tranches.

Titan Company fell 0.72% after the company said it expects its businesses to be hit very substantially in the current financial year due to disruptions caused by COVID-19 pandemic. Customers can also be expected to be wary of stepping out of their homes for some time. With job losses expected to increase substantially and salaries expected to fall or stay flat at best, spends on discretionary products could get affected more, Titan said in its annual report for 2019-20.

Cadila Healthcare rose 0.89%. The drug manufacturer on Thursday (16 July) said it received supplemental Abbreviated New Drug Application (sANDA) approval from the US drug regulator for manufacturing of Doxycycline injection. The product will be manufactured at its injectable facility at Jarod, Vadodara in Gujarat. The group has 293 approvals and has filed over 390 ANDAs since the commencement of the filing process in FY 2003-04 so far. The announcement was made during market hours today, 16 July 2020.

Global Markets:

European markets opened with losses while Asian stocks were trading lower on Thursday. Ongoing spread of the disease and simmering US-China tensions weighed over optimism of Coronavirus vaccine.

China's economy rebounded from a painful contraction to grow by 3.2% over a year earlier in the latest quarter as anti-virus lockdowns were lifted and factories and stores reopened. The expansion reported on July 16 was a dramatic improvement over the previous quarter's 6.8% contraction.

In US, stocks ended sharply higher on Wednesday, following promising early data for a potential COVID-19 vaccine and a strong quarterly report from Goldman Sachs.

Moderna Inc rallied after a small-scale study showed its experimental COVID-19 vaccine produced high levels of virus-killing antibodies. Goldman Sachs rose after it said its trading revenue doubled in the second quarter, driven by big swings in stock and bond markets since March.

US industrial production soared by 5.4% in June after jumping by 1.4% in May, spiked, according to a report released by the Federal Reserve on Wednesday. Despite the substantial increase, the Fed noted industrial production remained 10.9% below its pre-pandemic February level.

The Federal Reserve's Beige Book survey showed U.S. businesses saw an uptick in activity into the beginning of July as states eased restrictions to contain the novel coronavirus pandemic.

Meanwhile, OPEC and allies such as Russia agreed to ease record supply curbs from August, though the drop was cushioned by hopes for a swift U.S. demand pick-up after a bigger-than-expected drawdown from the country's crude stocks.

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