Midnight News Update – Jul 26th 2017
In the midst of frenzy and optimism, the Nifty crossed the 10,000 mark on the 25th of July. The markets have rallied nearly 25% from the lows of January 2017. However, while the Nifty did scale the mark in early trades, it failed to sustain the momentum and closed below the 10,000 mark. Most market experts believe that for the market to meaningfully sustain above the 10,000 mark there is the need for earnings to also sustain above the mark. The rally in the Nifty has been largely led by heavyweights like Reliance Industries, Hindustan Unilever and HDFC Bank among others.
Even as the debate over the merits and demerits of demonetization are open, the one question that continues to haunt investors is whether it really led to a shift in savings from real assets to financial assets. At least, that is what Dr. Viral Acharya, Deputy Governor of RBI believes. One of the indicators is that nearly 60% of the deposits made during demonetization have stayed back in the system, much higher than what the government anticipated. However, with the pressure on using cash transactions, the investments are increasingly veering towards mutual funds and other capital market products.
Axis Bank registered a 16% fall in net profits for the quarter to Rs.1306 crore. Revenues for the quarter were marginally up for the quarter at Rs.14,052 crore. The big worry was on the gross NPAs front which doubled to 5.03% on a YOY basis. Net NPAs were also sharply up from 1.08% last year to 2.30% in the current year. In gross terms, there has been an addition of Rs.11,000 crore in their gross NPAs. The bank is also in the lookout for a new CEO after Shikha Sharma’s tenure ends next year. According to the grapevine, Shikha is expected to take over as the head of financial services at the Tata Group.
Vedanta flattered the street with net profits doubling to Rs. 1525 crore for the quarter ending June 2017. Its revenue for the quarter were also up by 27% at Rs.18,203 crore. With a ramp up in volumes of Zinc and aluminium and higher commodity prices, Vedanta has managed to grow its EBITDA by nearly 40%. Most metal and mineral companies in the India have benefited from a pick-up in demand as well as higher commodity prices on the back of higher demand from China. China accounts more than 50% of the demand for most metals and it has recently seen green-shoots of growth this quarter.
In what could be good news for the two-wheeler segment, Hero Motocorp has evidenced the first growth in profits in the last 3 quarters. Net profits for the quarter were up by 3.5% at Rs.914 crore. Since the month of November 2016 when the government launched its demonetization drive, the entry level two-wheeler segment has been under tremendous pressure as cash and liquidity got severely constrained. Hero Moto gets a chunk of its demand from the rural and semi-urban segments and that was the worst hit in the aftermath of demonetization. Unlike Bajaj Auto, which has a substantial export component to its sales, Hero Moto is predominantly a domestic player and had borne the brunt of the demonetization crunch. Additionally, the Honda has been growing rapidly and taking market share.
India’s largest shipbuilder, Cochin Shipyards, is likely to launch it sRs.1470 crore IPO on August 01st. Out of the total IPO size of Rs.1470 crore, Rs.979 crore will come through fresh issue of shares, while the balance Rs.489 crore will come through an offer for sale by the government of India. The indicative price range is likely to be Rs.424-432. The proceeds of the IPO will go towards setting up a new dry dock and for setting up an international ship repairing facility at the Cochin Port Trust area. The company is also likely to be a big beneficiary of the defence orders to be farmed out by the government.
