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Market Commentary - End Session
Market crawls higher amid high volatility, Nifty settles above 15,800 mark
(14 Jun 2021, 17:08)

The domestic equity benchmarks ended a roller-coaster session with minor gains on Monday. After hitting the day's low of 15,606.50 in early trade, the Nifty managed to reverse losses and settle above the 15,800 mark. The recovery was led by gains in PSU banks, IT and FMCG stocks.

The barometer index, the S&P BSE Sensex, added 76.77 points or 0.15% to 52,551.53. The Nifty 50 index advanced 12.50 points or 0.08% to 15,811.85.

Reliance Industries (up 1.46%), Bajaj Finance (up 1.23%), Infosys (up 1.01%) and Larsen & Toubro (up 0.86) boosted the indices.

The broader market lagged the benchmark indices. The BSE Mid-Cap index fell 0.68% and the BSE Small-Cap index lost 0.16%.

The market breadth was negative. On the BSE, 1655 shares rose and 1663 shares fell. A total of 163 shares were unchanged.

COVID-19 Update:

Total COVID-19 confirmed cases worldwide stood at 17,59,65,522 with 38,04,217 deaths. India reported 9,73,158 active cases of COVID-19 infection and 3,74,305 deaths while 2,81,62,947 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India.

India, on Monday, 14 June 2021 recorded 70,421 new cases of coronavirus infections detected on Sunday, the lowest since the end of March 2021. However, only 14.92 lakh samples tested on Sunday as compared to a weekly average of about 19 lakh. Tamil Nadu remains the highest contributor with 14,016 new cases. The country also saw 3,936 deaths in the same period. Maharashtra contributed to over 2,800 of them, including about 2,300 uncounted deaths from previous days.

Economy:

India's annual rate of inflation, based on monthly Wholesale Price Index (WPI), was 12.94% in May 2021 compared to -3.37% in May 2020. The high rate of inflation in May 2021 is primarily due to low base effect and rise in prices of crude petroleum, mineral oils viz. petrol, diesel, naphtha, furnace oil etc. and manufactured products as compared the corresponding month of the previous year.

India's Index of Industrial Production (IIP) rose by a sharp 134.44% in April 2021, as per data from the National Statistical Office which stressed that the numbers are not strictly comparable with April 2020 when the country was in the midst of a national lockdown.

April's industrial output was just 0.08% higher than the pre-pandemic levels of April 2019. The manufacturing sector recorded a 197.1% uptick this April, though it was still 0.9% lower than April 2019 levels. Electricity output rose 38.5% in April 2021 from a year ago, and was 6.81% higher than the pre-COVID-19 levels of April 2019. Similarly, Mining output grew 37% year-on-year in April 2021, but was only 0.2% higher than the same month in 2019.

Numbers to Watch:

The yield on 10-year benchmark federal paper fell to 6.005% as compared with 6.006% at close in the previous trading session.

In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 73.29, compared with its close of 73.0750 during the previous trading session.

MCX Gold futures for 5 August 2021 settlement fell 1.01% to Rs 48,409.

The US Dollar index (DXY), which tracks the greenback's value against a basket of currencies, fell 0.05% to 90.51.

In the commodities market, Brent crude for August 2021 settlement rose 66 cents at $73.35 a barrel. The contract rose 17 cents, or 0.23% to settle at $72.69 a barrel in the previous trading session.

Foreign Markets:

Shares in Europe and Asia advanced on Monday, 14 June 2021. Markets in mainland China and Hong Kong were closed for public holidays.

U.S. stocks rose slightly on Friday with the S&P 500 adding to its new record. The S&P 500 climbed 0.2% to a fresh closing high of 4,247.44, a second record close in a row. The Nasdaq Composite advanced 0.4% to 14,069.42 with Apple, Microsoft and Netflix all registering gains. The Dow Jones Industrial Average gained 13.36 points to 34,479.60.

Meanwhile, leaders of the Group of Seven wealthy nations staked their claim Sunday to leading the world out of the coronavirus pandemic and crisis, pledging more than 1 billion coronavirus vaccine doses to poorer nations, vowing to help developing countries grow while fighting climate change and backing a minimum tax on multinational firms.

The G-7 also backed a minimum tax of at least 15% on large multinational companies to stop corporations from using tax havens to avoid taxes, a move championed by the United States.

Buzzing Segment:

Most shares of Adani Group companies slumped. Adani Ports and Special Economic Zone (down 8.36%), Adani Enterprises (down 6.26%), Adani Total Gas (down 5%), Adani Transmission (down 5%) and Adani Power (down 4.99%), Adani Green (down 4.13%) tumbled.

The media reported that National Securities Depository (NSDL) has frozen the accounts of three foreign funds that together own shares worth Rs 43,500 crore in four Adani Group companies. The accounts of Albula Investment Fund, Cresta Fund and APMS Investment Fund were frozen on or before May 31. An account freeze indicates that the funds would not be able to sell any of the existing securities or buy any new securities.

According to the media reports, the freeze on the three accounts could be because of insufficient disclosure of information regarding beneficial ownership under the Prevention of Money Laundering Act (PMLA). Custodians usually warn clients of such action but if the fund does not respond or fails to comply then the accounts can be frozen.

Offering a clarification on the same, Adani Group said: these reports are blatantly erroneous and is done to deliberately mislead the investing community. This is causing irreparable loss of economic value to the investors at large and reputation of the group.

The group companies requested the registrar and transfer agent, with respect to the status of the demat account of the aforesaid funds. The companies have received their written confirmation vide its e-mail dated 14 June 2021, clarifying that the demat account in which the aforesaid funds hold the shares of the companies are not frozen.

Earnings Impact:

Indian Overseas Bank gained 2.18%. The PSU bank's standalone net profit soared 143% to Rs 349.77 crore on 10.75% increase in total income to Rs 6,073.80 crore in Q4 FY21 over Q4 FY20. Net interest margin declined to 2.22% in Q4 FY21 from 2.6% in Q4 FY20.

On the asset quality side, the gross NPA ratio stood at 11.69% as on 31 March 2021, compared to 12.19% on 31 December 2020 and 14.78% as of 31 March 2020. The net NPA ratio stood at 3.58% as on 31 March 2021 from 3.13% as on 31 December 2020 and 5.44% as on 31 March 2020.

Total deposits increased to Rs 2,40,288 crore as on 31st March 2021 as against Rs 2,22,952 crore as on 31st March 2020. Gross advances stood of Rs 1,39,597 crore as on 31st March 2021 as against Rs 1,34,771 crore os on 31st March 2020.

Cochin Shipyard advanced 1.39%. The company's consolidated net profit surged 71.8% to Rs 236.22 crore on 32.3% jump in net sales to Rs 1,080.32 crore in Q4 March 2021 over Q4 March 2020. Profit before tax (PBT) soared 66.1% to Rs 304.47 crore in Q4 FY21 as against Rs 183.30 crore in Q4 FY20.

J K Cement lost 1.08%. On a consolidated basis, J K Cement's net profit surged 33.3% to Rs 214.31 crore on 38.1% jump in net sales to Rs 2,134.15 crore in Q4 March 2021 over Q4 March 2020. Profit before tax soared 41% to Rs 339.44 crore in Q4 FY21 as against Rs 240.72 crore in Q4 FY20.

Edelweiss Financial Services added 1.38%. The company reported a consolidated net profit of Rs 628.63 crore in Q4 FY21 as against a net loss of Rs 2,245.14 crore in Q4 FY20. Total income during the quarter increased 127.9% to Rs 4,480.95 crore compared with Rs 1,965.87 crore in the same period last year.

While the company's interest income declined 32.4% to Rs 928.45 crore, fee and commission income rose 6.35% to Rs 507.21 crore in Q4 FY21 over Q4 FY20. Premium from insurance business was at Rs 511.73 crore, registering 23.41% year-on-year (Y-o-Y) growth in the fourth quarter.

The company recorded a net gain of Rs 1,090.32 crore on fair value changes in Q4 FY21 as against a loss of Rs 456.29 crore in Q4 FY20. Provisions and write-offs declined by 54.2% YoY to Rs 932.88 crore in Q4 FY21.

DLF fell 3.50%. On a consolidated basis, the realty major posted a net profit of Rs 480.94 crore in Q4 FY21 as against net loss of Rs 1,857.76 crore in Q4 FY20. The realty major registered a 1.1% rise in net sales to Rs 1,712.57 crore in Q4 FY21 from Rs 1,694.20 crore in Q4 FY20.

DLF said demand in the residential business exhibited a strong comeback in the fiscal. New sales bookings for the fiscal stood at Rs 3,084 crore, reflecting a Y-o-Y growth of 24%. Optimized cost structures and efficient working capital management coupled with a steady ramp-up in collections led to positive cash flows in all quarters. Consequently, the company's net debt stood at Rs 4,885 crore, a reduction of Rs 382 crore.

BEML advanced 3.38%. The company's standalone net profit dropped 14.16% to Rs 159.94 crore on 66.33% increase in net sales to Rs 1,773.81 crore in Q4 March 2021 over Q4 March 2020.

Meanwhile, the Ministry of Defence (MoD) has informed that the Department of Investment and Public Asset Management (DIPAM) and NITI Aayog have concurred to the proposal of incorporation of wholly-owned subsidiary (WoS) of BEML for demerger of surplus land and asset as part of BEML's strategic divestment process undertaken by Government of India (GoI).

Bharat Heavy Electricals (BHEL) slumped 11.61%. On a consolidated basis, BHEL reported net loss of Rs 1,034.82 crore in Q4 FY21, lower than net loss of Rs 1,532.67 crore in Q4 FY20. Net sales rose 47% to Rs 6,751.88 crore in Q4 FY21 over Q4 FY20. As of 31 March 2021, the total order book stood at Rs 1,02,090 crore.

Sun TV Network slipped 3.02%. The broadcasting firm reported an 80% jump in standalone net profit to Rs 449.88 crore on 6.4% rise in net sales to Rs 781.99 crore in Q4 FY21 as compared to Q4 FY20.

The company's advertisement revenues grew by 8% YoY to Rs 314.87 crore while subscription revenues rose by 7% YoY to Rs 428.12 crore in Q4 FY21.

Stocks in Spotlight:

State-run Coal India fell 2.06% ahead of its Q4 results today.

Transformers and Rectifiers (India) rose 2.63% after the company said it bagged an order worth Rs 63 crore from Gujarat Energy Transmission Corporation (GETCO).

Reliance Power hit an upper circuit of 5% at Rs 13.37. The company's board has approved preferential issue of upto 59.50 crore equity shares and upto 73 crore warrants convertible into equivalent number of equity shares of the company at an issue price of Rs 10 each by conversion of existing debt, aggregating upto Rs 1,325 crore to Reliance Infrastructure, a listed promoter company.

Reliance Infrastructure and other promoter holding in Reliance Power will increase stake upto 25% after issue of equity shares and will further increase to over 38% on conversion of warrants.

The fundraising will reduce Reliance Power standalone debt by Rs 1,325 crore and along with planned debt reduction in subsidiaries. Reliance Power said its consolidated debt will reduce by Rs 3200 crore in FY22.

The board also approved seeking enabling authorisations of members for issuance of foreign currency convertible bonds (FCCBs); and securities through qualified institutions placement.

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