Markets were up vertically on Monday

Markets were up vertically on Monday. Nifty and the Bank Nifty scaled new highs as banking heavyweights spurred the index. Banking heavy weights like ICICI Bank and SBI along with a clutch of PSU banks pushed the Nifty and the Bank Nifty to historic highs. Sensex is quoting at an all-time high for quite some time now. Markets are slightly nervous ahead of two key global macro announcements. The Fed policy meet and the RBI policy meet are scheduled on August 01st.  A section of the analysts are expecting the RBI to hike rates in line with higher inflation with real rates already at 1.25%.

There are days when lousy analyst expectations turn out to be a blessing in disguise. Axis Bank profits fall 46% to Rs.700 crore on high provisioning losses, but the good news was that analysts were expected it to fall a lot more. The Gross NPAs of Axis Bank marginally dropped from 6.77% to 6.52% in Q1. However, the sharp rise in provisioning may be indicative of a likely bottoming out of the NPA cycle for the bank. But the redeeming feature could be that the profits fell much lower than expected. Effectively, when trading commences on Tuesday, Axis Bank could actually surprise on the upside.

The IPO race appeared to have slightly slowed down in the second quarter ended June 2018. A total of 37 IPO raised an amount of $1.2 billion in the June quarter. This takes the total IPO collections in calendar year 2018 to $4 billion (Rs.27,000 crore). Industrials, materials and consumer staples were the major IPO fund raisers in the June quarter. However, there are major IPOs starting with HDFC MF (just closed) which are on the anvil. The 3rd quarter of the year is likely to see a sharp increase in collections via the IPO route as the macro concerns also start tapering in the second half.

Housing finance major, HDFC, put in a sterling show in the first quarter of the fiscal ended June 2018. HDFC reported a 54% rise in net profits on the back of 88% fall in NPAs. The fall in NPAs is commendable especially considering that it has the largest home finance portfolio in India. The improved profitability was driven by an 18% growth in the loan book. The net interest income (NII) of HDFC was up by 20% at Rs.2890 crore for the first quarter. Gross NPAs stood at 1.18%. The sharply better performance of HDFC is broadly indicative of the green shoots that we are already seeing in the real estate sector.

Oil prices are hitting India and it is especially hitting the aviation companies really hard. Despite growth in market share and top-line, aviation companies are struggling with their profitability. Add to that; Iran sanctions pose a fresh problem. India actually loaded 12% less Iranian oil on fears of US sanctions. India’s is Iran’s second largest client after China and Iran is a key supplier to India. US had re-imposed sanctions on Iran creating a tough spot for Indian oil refiners relying on Iranian oil. Interestingly, fuel and competition put immense pressure on Indigo quarterly number. Despite revenues rising by 13% to Rs.6512 crore in Q1, net profits fell by 97% to Rs.27.8 crore. The airline was hit by higher ATF prices and foreign exchange losses. Spreads between RASK and CASK also dropped in Q1.

All along you know that logistics is the missing link in the India growth story. Finally, Suresh Prabhu has put a numerical value to it. He expects logistics sector to attract $500 billion investments by 2025. According to Prabhu, the big challenge of improving India’s GDP growth can be achieved through logistics sector. In fact, GST itself is a big boost for the growth and development of logistics. GST was anyways supposed to give a big boost to the logistics sector by changing the business logic of distribution from state level taxes to a more calibrated business argument.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

12345

*