The Nifty continued to be concentrated in a handful stocks driving the index up. A total of 7 out of 10 most valuable companies add Rs.76,227 crore wealth during the week. While Reliance Industries and Maruti lost value during the week, the value spurt came from HDFC Bank, TCS, HDFC, ITC, Infosys, Kotak Bank and SBI. The dichotomy between the big value stocks and the performance of next rung of stocks appears to be widening rapidly. The rally in the Nifty appears to be getting narrower by the day with stocks in the private banking and IT space really providing the big push to the index.
The first casualty of the Kerala floods was visible in the auto sales numbers for August. Maruti surprisingly saw a 3.4% fall in sales in August on the flood effect. The total number of units sold for August fell to 158,189 units with the floods in Kerala and incessant rains in other parts taking its toll. Maruti took a hit on domestic sales and on exports front. The second largest car player, Hyundai, also saw a drop in sales for the month of August. Most buyers were putting off their purchase decisions due to a delayed festival season and concerns over purchase power due to the floods.
The first signs of higher lending rates are coming from HDFC Bank and SBI. In fact, SBI has hiked lending rates across all tenures up to 3 years by 20 basis points. This takes the MCLR for 1 year retail loans up from 8.25% to 8.45%. This is in line with the rising bond yields with the 10-year yields hovering closer to 8% mark. Traders are also wary that the RBI may consider another rate hike to neutralize the impact of rapid rupee depreciation. While the RBI rate hike is still not being officially spoken about, the RBI may not really be left with too many choices with the forex reserves depleting below the $400 billion mark.
GDP growth for June quarter came in sharply higher at 8.2%. The GDP bounce was led by a 5.3% growth in agriculture as well as a 13.5% bounce in manufacturing. Services saw good traction across the board. Experts are of the view that this sharp increase in GDP growth in the June quarter could be largely explained by the base effect. While the base effect did play a role, the quarter definitely hinted at some green shoots of recovery visible across most of the manufacturing, agricultural and service sectors. The real agri impact may be known only after the MSP rate hike and the Kharif output numbers.
The order flows for the IT sector appears to be catching steam in the Indian IT space. Wipro also enters the big league with a $1.5 billion deal with Alight Solutions. Under the 10-year deal, Wipro will provide Alight Solutions a comprehensive suite of solutions which will include technology enabled health, wealth, HR and finance solutions. The deal will lead to a revenue accretion of $1.6 billion during the contract tenure. It will also cover cloud based solutions. This deal will position the company among the other big league companies which have been able to substantially leverage the digital opportunity in a big way. The big challenge for the IT sector is adding on to the billion dollar deals and it is this big ticket space that the leading IT companies are really focusing on.
Finally, there may be some good news trickling in for the Reliance ADAG group. Rating agencies may relook at Reliance Infra ratings after debt reduction. Brickworks took the lead by withdrawing the “Default” Rating on Reliance Infra debentures after the company managed to sell its Mumbai power business to Adani Transmission for Rs.18,800 crore. Other rating agencies are likely to take a look at their ratings during the week. This move will help Reliance Infra to reduce its outstanding debt burden to just around Rs.7,500 crore making its sustenance a lot more tenable.
