The Sensex has gained more than 1000 points this week despite negative returns on Tuesday. Nifty bounced back sharply to the 10,400 levels as risks got alleviated. With the short term worries about differences between the RBI and Finance Ministry in the back burner, the markets celebrated. There was a sharp rise in the price of tech companies even as oil and metal companies came under pressure after reports of a Chinese slowdown. The A/D ratio of the Nifty remained sharply skewed in favour of the advances at 18:7. The next trigger will be the Iran sanctions on November 04th.
In a boost for the Modi government, India moves to 77th rank in Ease of Doing Business index. In the last four years, India has moved from 142nd position to 77th position on the index, which is a remarkable achievement. The growth has been very sharp in the last two years as the index has taken a very positive view of the implementation of GST as well as the aggressive resolution of stressed bank assets via the IBC. Overall, there has been a simplification of processes too and that has been part of the “Make in India” and the “Ease of Doing Business” initiatives of the Modi government.
As scheduled, the reconstituted IL&FS Board has submitted its plan on the 31st of October. The Board completed its review of IL&FS and laid out the broad restructuring plan. The board has identified nearly 347 group companies of IL&FS with total outstanding loans of close to Rs.1 trillion. The committee is clear on deleveraging as the most feasible solution but that will have to be done without asset value depletion. IL&FS owes banks nearly Rs.53,000 crore and that makes it a true systemic risk for the economy. The board of IL&FS is currently chaired by Uday Kotak.
Core sector growth for the month of September slowed to 4.3% compared to 5.5% in the corresponding period last year. This is the lowest level in the last four months and this number is critical because core sector accounts for 42% of the overall IIP. Hence it impacts IIP and GDP substantially. Out of the 8 core infrastructure sectors, the lower production impact came from crude oil and natural gas. The other sectors like coal, fertilizers, steel , cement and electricity managed to sustain their previous rates of growth. Core sector is an important lead indicator for IIP and for GDP also.
Vedanta Q2 net profits faltered, down by 47% to Rs.1135 crore even as L&T flattered with a sterling performance. The sharp fall in net profits of Vedanta was due to lower other income and higher financing costs. Vedanta is a global commodity giant straddling aluminium, copper, zinc and oil. The revenues were by 5.5% at Rs.22.705 crore but that includes the revenues of Electrosteel Lower demand on account of the China syndrome and closure of Tuticorin plant took its toll on Vedanta. L&T reported a 23% growth in net profits at Rs.2280 crore. The growth in profits was triggered by a 21% growth in total revenues at Rs.32,081 crore. L&T saw improved execution in projects business and strong growth in services business. The EPS for the quarter also went up to Rs.15.91 as against Rs.13 last year.
Lupin profits faltered but managed to meet street expectations at it reported a 41% fall in net profits at Rs.268 crore for Q2. Revenues for the quarter were almost flat at Rs.3890 crore in the second quarter even as the net profit was in line with expectations. The big worry for Lupin could be the sharp compression in the EBITDA margins which fell from 21.9% last year to 14.2% in the current year. Most frontline pharma companies have faced valuation pressures due to sharply lower operating margins. The overhang of Form 483 observations from the US FDA continues.
