Last Leg Of Downfall To End Soon, Wait For 11400 For Confirmation

Our Analysis

Indian benchmark indices after a decisive close on last Friday had opened the doors for bears to drag the market lower. There was an absolute bloodbath on the D-street which was spread across all segment. Even the market leaders felt the heat owing to weak management commentary and dropped drastically.

Investor sentiments were hit by ongoing slowdown which has determined the lower than expected earnings growth. However, trend analysis shows that this could be the the last leg of fall in the d-street. After a year or more full of downfall in mid-&-small-caps, now large-caps also participating in the correction which would definitely ease the valuation of the frontline indices. The investors would find a greater value to add quality business in there portfolio incoming days.

The July series was one of the worse in last 9 month. Outflow of FIIs was the major concern in July series. FIIs almost sold more than 14,500 Cr from the Indian market in a single month. Besides this, during this week there was huge chaos with a surprise appointment of Atanu Chakraborty as the new DEA secretary. Along with which Moving SC Garg to the power ministry was other surprise for the investors.

Moving ahead, the derivatives roll-over data indicates the negativity in the sentiment for the august series. Earnings, Fed and RBI policy meet remains the key for market directions. Technically, 11108-11130 level remain crucial as its a meeting point of last months swing low and 200-DMA, so expect a soft bounce in the market at these levels, however any mark above 11400 could confirm the last leg of the downfall and a new journey to newer highs.

Earnings Update

Hindustan Unilever's (HUL) reported revenue growth of 6.6% YoY to Rs10,114cr driven by a 5% underlying volume growth (estimated 6% volume growth). Gross margin for the quarter settled flat led by weaker advertisement cost and other expenses. EBITDA grew by 17.6% YoY to Rs2,647cr. The EBITDA margin expanded 244bps YoY to 26.2%. Thus, the company reported a PAT growth of 14.8% YoY to Rs1,755cr.

Revenue/Growth drivers for TCS

• The company posted a 7% YoY domestic consumer growth. With a decent growth in Homecare and foods & refreshments segment. Personal care was subdued mainly on account of mass-end soaps.
• The home care part recorded a 10.1% YoY growth to Rs3,465cr with 129bps YoY increase in the EBIT margin to 20.2%. In detergents, Rin was re-launched nationally, while Sunlight liquid detergent was launched in select geographies.
• In household care (Vim, Domex), growth was led by central and southern markets. In purifiers, the focus is on the premium range, with a new go-to market strategy in place
• The beauty and skincare segment (earlier personal care) saw 4.1% YoY revenue growth to Rs4,589cr with 227bps YoY expansion in EBIT margin to 29.6%. Soaps continued to witness softness in the mass end Lux and Lifeboy. New launches include natural variants under Lux Botanicals, Pears Naturale range, Sunsilk variants, Fair & Lovelysoap, Elle 18 lasting glow compact, among others.
• The food and refreshment segment reported 9.2% YoY revenue growth to Rs1,950cr with EBIT margin expansion of 106bps YoY to 19.4%. Beverages clocked a reasonable quarter, and ice cream and frozen desserts witnessed a good season. New launches include Lipton Matcha green tea in the e-commerce channel.
• The advertisement spend was down 67bps YoY as a percentage of net sales to 11.5%, mainly due to lower competitive pressures, optimization of ad-spends and phasing of activities and innovations in-home care.
• The interest cost for the quarter stood at Rs24cr against Rs7cr in Q1FY19.
• Modern trade contributes 15-17% to HULs sales, whereas the contribution from e-commerce is now at 2-3%. Contribution from the rural channel stands at 30-35%.
• Management stated that a broad-based recovery is unlikely before 2HFY20. The drivers of recovery are likely to be a good monsoon and fiscal measures taken by the government such as actions on infusing liquidity, spending on infrastructure and health, and direct benefit transfers, among others.

Earnings Releases In Upcoming Week

This Weeks Market Highlights:

Benchmark Indices:

1) On Monday, the Indian equity market fell for the third-straight session, driven by losses in HDFC twins & Bajaj Finserv. the Sensex settled 305.88 points down at 38,031.13, while Nifty sank by 73.10 points at 11, 346.20. Among sector compiled by NSE closed lower, led by the Nifty Financial Services Index 2.57 percent fall. On the flip side, the Nifty Media Index was the top sectoral gainer, up 1.75 percent.

2) On Tuesday, Indian equity benchmarks witnessed a sharp fall in the last hour, Sensex, which grew 186 points throughout the day, closed down nearly 50 points, or 0.13 percent, at 37,982.74. while Nifty was down 15.20 points at 11,331. Among sectors, PSU banks dragged 3 percent followed by auto, metal, pharma, while buying was seen in the FMCG, energy, infra and IT.

3) Wednesday, Its was an Another day for Indian share market to record a brutal fall, indeed with unabated foreign fund outflows and tepid corporate earnings, IMF's downward revision of India's economic outlook further hit domestic investor sentiment in today's session. the Sensex declined by 135.09 points at 37,847.65, while Nifty fall by 60 points at 11,271. br>
4) On Thursday, Indian share market plunge for the 6th day in a row, closing the July series on a negative note. The reliance had been culprit once again, waning 2.19 percent in a day. the Sensex was down 16.67 points at 37830.98, while Nifty was down 9.50 points at 11261.80.

5) On Friday, Indian equity benchmarks opened lower, following their Asian peers.

Broader Index & Global Market:

- Globally, there was an optimism in us market on account of the budget and the debt ceiling deal have been reached and the positive development in the trade talk, the rate cut hopes has also been positive, as the fed meet is been scheduled on 31 July.

- In the broader market, The Mid & Small Cap has traded mixed with stock specific action continued. As the Q1 result are in progress, the stock is witnessing big swing as per the result stated.

Movers & Shakers

Shares of KRBL surged more than 25 percent after the clarification given by the company management over the Augusta matter and one of its independent director involvement.

Shares of M&MFIN dropped more than 18 percent in a week after it reported a sharp 75 percent year on year (YoY) decline in its standalone net profit at Rs 68 crore in the April-June quarter (Q1FY20), due to higher provisioning for stressed assets.

Key Market Drivers

• Oil gains as Gulf tanker seizure raise tensions.
• NSE will exclude nine stocks from the futures and options segment with effect from September 27.
• The International Monetary Fund (IMF) has lowered India's growth forecast for 2019-20 to 7% from its estimate in April of 7.3% on poor demand conditions.
• India's monsoon rains 35% beneath average this week: IMD

Event Watch

International:

• Japan Monetary Base YoY
• US Initial Jobless Claims

Domestic:

• Crude price
• INR Price
• Earning
• Markit India PMI Mfg

Stocks To Watch

POWERGRID & PIDILITIND On Upside while M&MFIN, VIPIND on Downside.