For the third quarter ending December 2016, TCS reported 1.5% growth in revenues at Rs.29,735 crore while net profits came in 2.9% higher at Rs.6778 crore. The strong growth in the digital business was the key driver of TCS for the third quarter. The overall numbers were broadly in line with market expectations and hence there is unlikely to be any market disappointment when trading commences tomorrow. Digital business grew by 30% for the quarter and now constitutes 16.8% of the overall revenues of TCS. This company has made the fastest strides in expanding its digital footprint, notwithstanding its size and complexity. Interestingly, the attrition rate for TCS was sharply down at 11.3%.
Apart from its quarterly results, TCS also announced a major management reshuffle. The current CEO, N Chandrasekharan has moved on to take over as the CEO of Tata Sons. The current CFO, Rajesh Gopinathan, will be taking over as the CEO of TCS effectively immediately. It was already reported that Chandra was a top contender for the post of CEO of Tata Sons after the board of Tata Sons decided to remove Cyrus Mistry from the board. Chandra is likely to add a lot of weight to the Tata perspective in the board as he been synonymous with the growth of TCS and its emergence as the most valuable asset in the Tata Sons portfolio.
CPI inflation for the month December 2016 came in lower at 3.41% compared to 3.63% in the previous month. This could be partly attributed to the impact of demonetization, which has constricted demand across customer facing segments. The sharp fall in CPI inflation was driven by food inflation falling below the 2% to mark to 1.98%. This was largely due to negative inflation in pulses and vegetables. Weak CPI inflation also makes a strong case for the RBI to cut rates further from current levels. However, core inflation continues to be on the way up and that is not great news. It holds the risk of inflation reverting back to higher levels in the coming months.
In a surprise move, Index of Industrial Production (IIP) for November 2016 came in at 5.7%, one of the best performances in recent months. This is contrary to the belief that IIP would have slowed down considerably due to the note ban. This is also contrary to the general view that one gets by looking at sales data which shows distinct signs of pressure. What is more gratifying is that the IIP measured in terms of user industries shows some distinct signs of improvement on the capital goods space. The manufacturing sector was actually responsible for the sharp upsurge in IIP for the month of November.
US stocks reacted negatively to the fairly lacklustre press conference conducted by Donald Trump. Even as banking shares fell sharply in the aftermath of the Trump press conference, bonds rallied. The rally in bonds has taken yields to the lowest level since November 2016. In fact, many traders who had taken Dollar and Equity trades expecting some drastic tax cuts plus infrastructure investments from Trump were left disappointed on Wednesday. A lot of unwinding of Trump trades was visible in the market on Thursday. Gold, which has long been seen as a safe haven asset, rallied above the $1200/oz mark as traders started accumulating gold on rising uncertainties about the future strategy of Donald Trump.
Airtel launched India’s first payment bank and has started offering 7.25% on deposits. This is an introductory offer and may not be a sustainable scenario. This payment bank will be part of Airtel’s all-India digital ecosystem which will integrate over 5 million merchants across India. Airtel has already added 1 million customers during its pilot phase and hopes to accelerate its customer additions with the official launch. Kotak Mahindra Bank holds a 19.9% stake in Airtel Payment Bank. While these payment banks will the primary task of facilitating digital transactions, they will also be permitted to accept deposits to the tune of Rs.1 lakh. Of course, payment banks cannot extend loans to customers and this can only be invested in government securities. The company has already committed Rs.3000 crore investments for the payment bank venture.
