Time To Go For Value Over Momentum, Market To Remain Rangebound

IT, Pharma, Metal Stocks Push Markets to New Highs

Our Analysis

Indian share market since the budget announcement has been in the trap of the bears, albeit the budget was more convincing for long term vision rather than a short term action. We believe the government had planted the seeds for future success in Union Budget yet its failed to excite the market instantly. At the beginning of the week, the d-street witnessed one of the biggest falls in the decade. Further, the gap between the 11591-11426 was been indecisive for the market participant throughout the week, as any electric move in any direction will decide the faith of trend for the coming days.

Despite, Bank recapitalization and addressing the NBFC issue had been positive, Mostly, these weeks the steering wheel was in the hand of the Bears as the quarrel of the high-rich tax for the people earning more than 3 or 5 Cr, additionally the tax on buyback & the proposal to raise the minimum public shareholding limit to 35 percent cursed the market sentiment. Besides this, companys with a healthy market cap and liquidity witnessed a wild swing in the stock price. Bajaj finance & Finserv haunted by the slowdown concern witnessed one of the sharpest fall in 5 months, Addition to the list is Titan ahead, indicating the muted growth and Indigo with the corporate issue also witnessed a plunging in the share price.

In the coming days the Q1 earning would pick up its pace with the lack of the trigger the market is likely to be driven by the earning and clues taken from the globe. At present market are trading near its support levels so any violation of this level can emerge one more wave of selling in the market.

Earnings Update

TCS posted its Q1 result with INR revenue rose by 0.4% QoQ and 11.4% YoY to Rs38,172cr, Constant currency (cc) revenue grew by 10.6% YoY and dollar revenue came in at USD5,485mn (+1.6% QoQ and +8.6% YoY). EBIT stood at Rs 9,220cr, down 3.3% QoQ but up 7.5% YoY. EBIT margin contracted by 94bps QoQ and 88bps YoY to 24.2%, pressure on EBIT margin impacted by INR appreciation and onsite workforce crunch. PAT grew by 0.1% QoQ and 10.8% YoY to Rs8,131cr.

Revenue/Growth drivers for TCS

  • Digital reached 32.2% of revenue and grew 42.1% YoY in CC terms.
  • BFSI (30.8% of rev) growth was soft at 1.3% QoQ, some challenges in NorthAm Capital markets and European Banks.
  • Retail grew 1% QoQ, mgmt positive on Retail in medium-term despite quarterly volatility (earlier impacted by retail bankruptcies).
  • Manufacturing posted 3.7% QoQ backed by strong demand from the US, offset by weak Auto sector in Europe.
  • Strong growth in Life sciences & Healthcare for the fourth consecutive quarter.
  • Europe has been strong growth contributor for TCS in FY19 (+17.3% YoY) but YoY growth rate in the UK and continental Europe is now normalizing , However, Large account performance was muted sequentially with no addition in >$ 100mn client bucket and 1 addition in >$ 50mn client bucket

Earnings Releases In Upcoming Week

Result Date Company Name
16/07/2019 Federal Bank, DCB bank
17/07/2019 Wipro, Yes Bank, Mindtree, Tataelxsi
18/07/2019 Cyient, L&T Infotech, Colgate, ACC.
19/07/2019 Dabur, Bandhan, Reliance Ind, HDFC Bank, Mahindra CIE

This Weeks Market Highlights:

Benchmark Indices:

1) On Monday, The Indian share market registered one of the worst trading session in a decade. On Friday, After presenting the budget, the market started to slips and the bears took control of the d-street. The tax on buyback, which is likely to hit badly as the companies will now avoid buybacks. Additionally, the proposal to raise the minimum public shareholding limit to 35 percent has been the concerning subject among the market participants. the Sensex fall by 792.82 points or 2.01 percent to 38,720.57 and the Nifty plunged 247.20 points or 2.09 percent to 11,564.

2) It was a muted ending for Indian share market in Tuesday's trade. The market breadth closed in favor of buyers. About 871 stocks advanced and 860 shares declined on NSE. There was an immense volatile action in a specific counter, which includes Titan, declined nearly 12.25 percent in a day, while, Sun pharma was among the top performer on NSE. The significant role was played by the Reliance Industries posting the gains of 2.47 percent, was the major contributor, for holding the indices higher. In closing, The Sensex rose 10.25 points to 38,730.82 while the Nifty50 fell 2.70 points to 11,555.90. 0.

3) On Wednesday, Indian equity benchmarks ended lower, dragged by Bajaj Fin twins and Larsen & Toubro Ltd. The BSE Sensex was down 173.78 points at 38,557.04 and the Nifty50 fell 57 points to 11,498.90. Meanwhile, shares of InterGlobe Aviation registered their steepest drop after the company's promoter Rakesh Gangwal has alleged questionable related-party transactions between the IndiGos parent and private entities.

4) On Thursday, Indian share market after four days of losing streak has closed positively. The Sensex was up 266.07 points at 38,823.11 and the Nifty rallied 84 points to 11,582.90.

5) On Friday, Indian equity benchmarks opened on the positive note.

Broader Index & Global Market:

- Globally, The US Market grew to record high as Trump administration dismissed a plan designed to rein in prescription drug prices, while financial shares rose with bond yields.

- In the broader market, The Mid & Small Cap has traded mixed with stock specific action countinued, The insurance, Infra stock with the company posting the earning will be the focus in coming weeks.

Movers & Shakers

Shares of Religare Enterprises surged nearly 65 percent after Company has entered into a binding term sheet with TCG Advisory Services Pvt Ltd for sale of its entire stake in its troubled NBFC arm, Religare Finvest (RFL) along with RFLs housing finance subsidiary, Religare Housing Development Finance Corporation (RHDFC).

Shares of IndiGO dropped more than 13 percent in a week after the company's promoter Rakesh Gangwal has alleged questionable related-party transactions between the IndiGos parent and private entities.

Key Market Drivers

  • China's June forex reserves rise to $3.119 trillion.
  • Govt plans to issue overseas bonds in the 2nd half of the current financial year.
  • US job creation soars 224,000 in June; unemployment rises to 3.7%.
  • RBI panel bats for elongated trading hours for forex.
  • Cabinet nod for the bill to ban unregulated deposit schemes

Event Watch

International:

  • China GDP YoY
  • Japan Trade Balance

Domestic:

  • Crude price
  • INR Price
  • Earning
  • India Trade Balance
  • India Industrial Prod YoY

Stocks To Watch

HDFCLIFE & KEC On Upside while BPCL & LT on Downside.

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ABOUT AUTHOR

Niveza Editorial Desk : We are a team of stock market nerds trying to stay ahead of the herd. We spend our grey cells everyday to a pave a smooth road for our clients in the shaky world of stock market. While tracking the mood swings of the market we bring our clients the most rewarding deals.

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