Maximum Pessimism Is On The Cards, Buy Your Best Stock Cart

IT, Pharma, Metal Stocks Push Markets to New Highs

Our Analysis

The imposition of higher tax surcharge for the super-rich, penned the blood bath during the whole month on D-street. With all noises going around the D-street for these taxation amendments, the government has still not managed to address them all.

The crashing sentiments among the FIIs leading the elongated selling. The record outflow from FPIs during the month reached to 16000 crores which dragged Nifty below 11000 levels. July 2019 will make an own a mark in the history as it remained the worst one since 2002.

Moreover, recent draft notifying an increase in the vehicle registration charge and the penal charges for the companies which fail to abide CSR rule added the fuel to fire. The slower eight core industries growth and the widened fiscal deficit would remain the worry points for the investors. Recent eight-core industrial data counted a growth of 0.2 percent and the fiscal deficit settled in the June quarter, widened to 4.32 trillion.

The last leg of the correction is in process with market leaders facing stiff selling where valuation once again looking in the favor of an investor. Its difficult to define the exact bottom however, this is the time where you can definitely shop best businesses and undoubtedly they are not going to disappoint you in the coming years.

The current scenario just support the John Templetons quote stating, Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria, he said. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.

In the near term, the market is likely to get relief to breathe on the expected rate cut by the RBI in the monetary policy. Other than that any positive commentary by the Finance minister will be on the watch.

Earnings Update

Axis Banks Q1FY20 NII grew by 13% YoY to Rs5,844cr vs Rs5,167cr. Net profit for the quarter came in at Rs1,370cr and against Rs701cr YoY. AXSBs reported profits were below expectations driven by higher provisioning on stressed exposures (non-funded BB & below exposures, SMA-2, NPAs) of Rs459cr. Its GNPA for Q1FY20 held at 5.25% vs 5.26% QoQ. NNPA at 2.04% vs 2.06% QoQ.

Revenue/Growth drivers for TCS

  • Margins expanded 11bps excluding the impact of an NCLT recovery in 1QFY19 (17bps). This was due to a higher YoY increase in yield on advances, driven by re-pricing of MCLR linked loans. This offset the higher cost of funds (up 50bps YoY) due to a decline in the CASA ratio. Excluding the impact of the NCLT recovery in 1QFY19 (Rs249cr), NII growth would be 19% YoY
  • Domestic loan growth remained strong at 19% YoY, while overseas loans declined 34% YoY, leading to moderate overall loan growth. Domestic loan growth was driven by retail loans (+23 YoY), particularly unsecured retail loans (+48% YoY) and domestic corporate loans (+19% YoY). SME and agriculture loans grew 8% YoY and 13% YoY respectively.
  • Fee income for Q1FY20 increased at 26% YoY.
  • Provisions included Rs.994cr on account of i) incremental provisions towards stressed exposures (non-funded BB & below exposures, SMA2, NPAs) of Rs459cr, ii) provisions towards land held as a non-banking asset of Rs535cr. AXSB holds Rs2,358crof provisions, over and above the specific provisions; including this, PCR would be 70.5%.
  • NIM for the quarter stood at 3.40%.
  • Operating profit for Q1FY20 rose y 35% YoY and reached at Rs5,893cr.
  • Gross slippages for the quarter stood at Rs4,798cr.

Earnings Releases In Upcoming Week

Result Date Company Name
05/08/2019 Berger, SRF, Nesco, Indian bank
06/08/2019 GSFC, Titan, Titan, Pidilite, Excel crop
07/08/2019 M&M, Cipla, Voltas, Tata Steel, Lupin, HCL Tech, Aurobindo, HPCL, KEC, Petronet LNG
08/08/2019 MGL, Greaves Cotton, Tata chem, GNFC, Godrej Properties, Page ind
09/08/2019 Shree Cement, TV Today, NRB Bearings, NCC, Sobha, BHEL, Hindalco, Natco Pharma, Cadila

This Weeks Market Highlights:

Benchmark Indices:

1) On Monday, The Indian share market had been a home for the bears from a couple of weeks, as once again the benchmark indices had fallen with severe punishment held in selected stock. The auto sector has been the worse in today's trading session amid an increase in the auto registration cost followed by the media and the metal sector. However, IT stock had witnessed some buying which has closed in green. On the closing bell, the Sensex declined by 196.42 points at 37,686.37, while Nifty was down by 95.10 points at 11,189.20.

2) On Tuesday, In the last hour of the trading session, D-street has witnessed the bloodbath which has dragged the Nifty below 11,100 marks. The banking stock was the worst hit, with metal, pharma & auto following the same, While IT was the only sector which had closed in green, backed by TCS, settled with the gain of 2.31 percent. Reliance was another heavyweight that leaned the market lowered. the Sensex at the end declined by 289.13 points at 37,397.24, while Nifty drop by 103.80 points at 11,085.40.

3) On Wednesday, The benchmark indices halted a two-day fall in today's trading session. The key positive take away from today's price action can be the fact that after a gap down opening the index not only managed to fill that intraday gap but also displayed a strong positive close. This kind of price behavior should instill some confidence among bulls .the Sensex was up 83.88 points at 37,481.12, while Nifty was up 28.40 points at 11,113.80.

4) On Thursday, the Indian market witnessed a sharp sell-off across the board on Thursday, with both domestic and global factors weighing on markets. Sensex slumped 462.80 points or 1.23 percent to 37,018.32 while the broader NSE Nifty index ended down 105.40 points or 1.24 percent at 10,980.

5) On Friday, the Indian share market had a weak start in the opening trade.

Broader Index & Global Market:

- Globally, The US fed cut the rates by 25 basis points but indicates unclear status on the further policy. Markets had priced in 25 bps and were looking for a more dovish language which saw sharp disappointment. Additionally, President Donald Trump put concerns about the US-China trade war back in the spotlight, tweeting that he would impose an additional 10% tariff on $300 billion in Chinese imports.

- 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 GUJARAT GAS surged more than 12 percent after the company reported a strong 92 percent jump in net profit at Rs 234 crore in June 2019 quarter (Q1FY19) on the back of the strong volume.

Shares of COFFEEDAY dropped more than 50 percent in a week, since the death of the company's MD and Chairman VG Siddhartha.

Key Market Drivers

  • Oil drops behind 'constructive' talks on Iran's nuclear agreement.
  • The RBI is anticipated to come out with a report next month on facilitating the development of a secondary market for corporate loans.
  • Sebi softens rules for new exchanges to give incentives under LES.
  • Sebi sets the minimum staggered delivery period of 5 days for commodity futures.
  • Japan factory output tumbles most in nearly 1-1/2-years: Industrial output sank 3.6% in June.
  • RBI eases ECB norms for corporates, NBFCs
  • Trump threatens China upon delaying trade deal.

Event Watch


  • Caixin China PMI Services
  • Markit US Services PMI
  • Japan GDP


  • Crude price
  • INR Price
  • Earning
  • RBI Credit Policy

Stocks To Watch

KRBL & PIDILITIND On Upside while INFY, ONGC on Downside.