Midnight News Update – Jul 14th 2017
Despite the sharp fall in the CPI inflation for the month of June, the experts are not too confident of the RBI cutting rates in the August credit policy. With the government announcing higher MSP for select agri products, there is the distinct possibility of inflation going up in the coming months notwithstanding the higher Kharif output this year. RBI also could take a view that bank credit is not the core issue but it is insufficiency of demand. Credit demands of corporates are anyways being met by the commercial bond market and hence any rate cut may not have the required impact on commercial credit.
In what will go down as one of the most disappointing performances in recent memory, TCS reported 10% lower profits at Rs.5950 crore for the quarter ending June 2017. Revenues were flat at Rs.29,584 crore. While the top-line was largely along expected lines, the bottom-line came in below expectations. TCS continued to gain traction on the digital front but margins on its core businesses and the pricing power was weak in this quarter. TCS is a bellwether stock for the IT industry and it could have its overhang on the entire IT sector in trading on Friday.
One of the largest FPI investors in India, Citigroup, has cautioned that the revival in earnings may take a few quarters more and investors will have to be patient on that front. Citi Research is of the view that earnings could take a back-seat as the short term challenges pertaining to GST will have to be first addressed by corporates. In fact, Citi expects earnings to decline by 12% for the June quarter on a YOY basis. While oil companies will report weak earnings due to tepid Brent Crude prices, telecom and healthcare may also see their earnings come under pressure. Banking could be the key this quarter.
Recently listed stocks in the market like CDSL, HUDCO and AU Small Finance have given a stellar performance appreciating by over 40% in the last 3 days. While CDSL remains the only listed depository, HUDCO is seen as the most veritable play on the Indian low cost housing space. In the last budget, the government had accorded infrastructure status to low-cost housing and HUDCO is positioned to benefit from this move. AU Small Finance is a major player in the Northern MFI market and with the state of UP taking over the liability of loan waivers it spells good news for likes of AU Small Finance and Satin.
The BSE is seeing an opportunity to make a big splash in equity, derivatives and currencies as Nifty struggles to come to terms with its recent trading downtime fiasco as well as the uncertainty surrounding the yet unresolved algo issue. On the day of the NSE trading fiasco, BSE reported record volumes as most traders were forced to put trades only on the BSE. A few years back, BSE had adopted the entire technology platform of Deutsche Bourse which had given the exchange a transactional advantage in terms of speed and execution. The BSE trading system can handle nearly 500,000 orders per second which makes it among the fastest in the world. Interestingly, the stock of BSE which is currently listed on the NSE saw a 1200% spurt in volumes a day ahead of the NSE fiasco.
The world’s largest importer and exporter, China, has reported a sharp growth in trade for the month of June 2017. While exports for the month were up by 11.3%, imports were up by 17.2%. For the month of June, China reported a trade surplus of $42.8 billion. China continues to be the key to the global demand for commodities as more than 50% of the world demand for steel, aluminium, nickel and zinc comes from China. A pick up in Chinese trade means robust days ahead for most nations across Asia, Latin America and Africa which literally survive by exporting to China. Commodity prices could also get a fillip.
