For the third day in a row, the Nifty and Sensex got a positive boost. FII selling tapered on Monday and that improved sentiments. Nifty ended 72 points up above the 10,580 mark on oil push. Oil pushed the markets higher as Brent crude fell below the $80/bbl mark reducing the necessity for any subsidy burden in the books of oil companies. The A/D ratio was closer to 3:2 and that marked an all-round rally in stocks. The stock markets also benefited from a tapering of the dollar and the bond yields falling below the 7.90% mark as panic in bond markets receded. Capital goods and banks also gained.
There is finally good news for Hero Moto on the rural demand front. Hero Moto second quarter showed a strong rural segment traction. Hero Moto reported an 8.6% rise in revenues and a 3.4% fall in profits and both the figures were better than street expectations. The volumes showed a 5.5% growth on the back of very strong rural volumes growth. Hero Moto showed 140 basis points contraction in EBITDA margins as higher costs and competitive pricing put some pressure on margins. Rural story was the key take-away with the higher MSP and better monsoon contributing to demand.
The stringent P-Note framework announced by SEBI seems to be working. Investment via Participatory Notes (P-Notes) touched a 9-year low of Rs.79,548 crore. P-Notes are issued by registered FPIs to global investors who do not want to register as FPIs in India. P-notes are a kind of derivative instrument and SEBI and the government have been wary about the colour of the money. SEBI had announced higher costs of P-Notes and stringent norms for last beneficiary disclosure. Both these factors have made P-Notes largely unattractive for many foreign investors, who prefer the FPI route.
Infosys Q2 results were largely in line with street expectations, although the net profit was at the upper end of the estimation band. Profit after tax was up by 10% on a YOY basis at Rs.4110 crore, even as revenues showed a growth of 17.3% during the same period. EBIT margin expanded by around 40 bps at 24.1%, but it still lags the EBIT margins of TCS by nearly 250 basis points. Infosys saw strong accretion of big deals and many of the additions were in emerging digital segments like IOT, cloud analytics and big data. Digital traction may be the big take-away for Infosys, as it had been falling short of TCS.
It was a day of positive cues from the rupee and the bond markets. INR strengthened by 47 bps to 73.474/$ while 10-year bond yields tapered to 7.87%. Rupee strengthened on lower crude prices and RBI support around the 74/$ mark. Bond yields were sharply lower at 7.87% as liquidity infusion by RBI and stability in bond markets helped. The lower crude prices also hint at lower inflation in the coming months. After hovering below the $80/bbl during the day, Brent closed above the $80/bbl mark. A sharp increase in shale production by the US and a rise in inventories put pressure on crude prices. US shale output is likely to rise by nearly 1 lakh bpd. The US is already producing a record 11.2 million bpd and could make up for any OPEC disruptions in oil supply or even the Iran embargo.
Even as the RBI deadline for data localization of Oct 15th was crossed, the US payment firms have sought another 12 months for Data Localization in India. Some of the largest global credit and debit card franchisees like Visa and MasterCard have sought additional 12 months for data localization. In April, RBI had asked all payment service providers to store Indian customer data locally effective October 15th. Considering the present infrastructure, Visa and MasterCard have sought more time to adhere to the guidelines as they also have critical security issues.
