The Nifty ended almost flat on Wednesday, yet remained at a new high. Financials like Indiabulls Housing, HDFC, SBI and Bajaj Finserv propped up the index. The major loser in the Nifty was NTPC in the aftermath of the $2.6 billion sales of government stake in NHPC. Currency continued to see support around the 69/$ mark. The rupee strengthened by 23 basis points to close the day at 68.79/$. Apart from the RBI stoutly defending the INR at around the 69/$ mark, the pressure from banks and importers to cover dollar exposures also reduced. All eyes will now be on the Fed and the RBI.
The woes of two-wheeler companies continued a couple of days after Bajaj Auto also disappointed on the street. Hero Moto misses street estimates to report flat quarterly profits at Rs.909 crore. This is nearly 10% lower than the street estimates for quarterly profits. The EBITDA margin was impacted by commodity costs but bigger worry could a price war as indicated by Bajaj Auto. In fact, Bajaj has indicated that it may resort to price wars to increase its market share from 16.5% to above 20%. Bajaj, which was a leader for long, is now placed in 4th place in the domestic two-wheeler market.
Even as the HDFC MF IPO got a full subscription on day-1 itself, it is instructive to see how recent insurance and AMC IPOs have fared in the market post-listing. Four out of seven insurers / MF IPOs trade 22% below issue price. New India Assurance, GIC RE, Reliance Nippon and SBI Life are trading below their issue price while ICICI Pru Life has underperformed the Sensex. Only ICICI Lombard and HDFC Life have managed to outperform the Sensex since their listing. This is relevant in the light of the HDFC MF IPO, as well as the rich grey market premium that it is commanding.
The 10th BRICS (Brazil, Russia, India, China, and South Africa) Summit got underway in Johannesburg on 25th July. The summit called for trade cooperation to take on US bullying, especially considering that the US has been targeting China specifically with its import tariffs. China and the host, South Africa, have urged Brazil, India, and Russia to build closer cooperation on trade and commerce to reduce the dependence on the US for world trade in the light of tariff wars. India needs to look at that option seriously, with clear commitments from China on border issues and on terror support to Pakistan.
A decision that has been long pending may finally take shape very soon. The NSE has already sounded out brokers that they plan to extend trading timing in derivatives to 11.55 pm. Effectively; the end of trading at 3.30 pm will mark the conclusion of the first session of trading. The second session will commence at 5 pm after a break of 90 minutes and continue till 11.55 pm. However, all the trades of the second session will be aggregated with the next day’s first session trades and total settlement will be done next day evening. This is to avoid any late night settlements, which banks may not be equipped to handle. It is hard to say what will be the impact of this extension of trading but it is surely going to give a 24X7 trading experience like most global markets. The impact on volumes is hard to judge now!
If someone is looking at the first signs of a revival in the capital investment cycle then the latest results of L&T could be the place to look at. Larsen & Toubro flattered the street with better than expected quarterly profits in Q1. Profits were up by 36% in Q1 at Rs.1,215 crore, nearly 5% higher than the street estimates. Overall revenues were up by 18% in the quarter. Infrastructure revenues grew by 9% in the quarter. Apart from being a signal of improving capital cycle, the revival in L&T’s fortunes is also a signal that the oil and hydrocarbons segment is booming as that is a key business focus of L&T.
