Weekly Market Analysis: Dalal Street falls on inflation fears and rate hike; RIL, Tata Group Cos, Adani Group Cos and HDFC in news

Domestic markets fell due to fears of aggressive monetary tightening and high inflation levels along with lower-than-expected corporate earnings. The Sensex plummeted 3.9% to close at 54,835.58. The Nifty 50 index slumped 4.04% to end at 16,411.25.

The BSE Midcap index tanked 5.28% to settle at 23,129.61, while the BSE Smallcap index plunged 5.31% to close at 27,092.41

Top losers among Nifty sector indices were Realty [-8%], Media [-6%], Auto [-5.1%], Pharma [-4.8%], PSU Bank [-4.5%].

Nifty VIX, which indicates the volatility of the market jumped 9.4% in the week.

FIIs sold for Rs 12,061 crore in the cash segment during the week, while DIIs sold for Rs 1,529.7 crore.

Company News

Reliance Industries Limited (RIL): The oil-to-telecom conglomerate posted a 22.5% YoY growth in its consolidated net profit to Rs 16,203 crore for the quarter ended March 2022. It had posted a net profit of Rs 13,227 crore in the corresponding quarter. The consolidated revenue from operations surged 36.8% YoY to Rs 211,887 crore for the reported quarter.

Kotak Mahindra Bank: The private sector lender reported a 50 per cent year-on-year (YoY) jump in Q4FY22 consolidated net profit at Rs 3,892 crore. It had posted a net profit of Rs 2,589 crore in the same period last year. Net interest income (NII) increased 18 per cent YoY to Rs 4,521 crore, aided by a loan growth of 21 per cent. The net interest margin stood at 4.78 per cent in Q4FY22.

State Bank of India (SBI): The largest lender in India plans to raise long term funds up to $2 billion from international markets in the current financial year 2023. The executive committee of the Bank’s central board will meet on May 10 to examine the status and decide on long term fund raising in single/multiple tranches, the bank informed BSE.

HDFC Ltd: The company reported a standalone net profit of Rs 3,700 crore for the Jan-Mar quarter 2022, up 16% from Rs 3,180 crore in the year-ago period. The net interest income (NII) for the March quarter came at Rs 4,601 crore compared to Rs 4,027 crore in the previous year — a growth of 14 per cent. The company said demand for home loans and pipeline of loan applications continues to remain strong. The HDFC Ltd board has recommended a dividend for the year ended March 31, 2022 of Rs 30 per equity share.

Canara Bank: The state-owned lender reported a 65 per cent jump in its standalone net profit at Rs 1,666.22 crore for fourth quarter ended March 2022. It had posted a net profit of Rs 1,010.87 crore in the same quarter a year ago. Total income of the bank in the reported quarter rose to Rs 22,323.11 crore, from Rs 21,040.63 crore in the year-ago period. Net NPA improved to 2.65 per cent in the quarter under review, from 3.82 per cent in the corresponding period last year.

Federal Bank: The lender’s consolidated net profit rose 12.72% to Rs 587.54 crore in Q4FY22 as against Rs 521.24 crore in the same quarter of FY21. Its consolidated total operating income rose 4.85% to Rs 3686.30 crore in the quarter ended March 2022 as against Rs 3515.86 crore during the previous quarter ended March 2021.

Central Bank of India: The state-owned commercial bank plans to shut 13% of its branches to improve its financial health, which has been under pressure for several years, according to sources and a document seen by Reuters. The bank is looking to reduce the number of branches by 600 by either shutting down or merging loss-making branches by the end of March 2023.

Hero MotoCorp: The two-wheeler manufacturer’s standalone net profit declined 27.51% to Rs 627.05 crore and net sales fell 14.55% YoY to Rs 7,421.73 crore in Q4 March 2022 compared to year-ago period. EBITDA margin for the fourth quarter stood at 11.2% in the quarter under review. The company sold 11.9 lakh units of motorcycles and scooters sold in Q4 FY22.

TVS Motor: The two-wheeler company reported a 5% year-on-year decline in standalone profit after tax at Rs 275 crore as compared to a profit of Rs 289 crore. Revenues for the automobile company registered a YoY growth of 4% to Rs 5,530 crore as compared to Rs 5,322 crore registered during the same period a year ago.

Britannia Industries: The biscuit maker reported an increase of 4.96 per cent in consolidated net profit at Rs 377.95 crore for the fourth quarter of FY22, compared with a net profit of Rs 360.07 crore in the year-ago period. Its total revenue from operations climbed 13.40 per cent to Rs 3,550.45 crore during the quarter under review, as against Rs 3,130.75 crore in the year-ago period.

Dabur: The company’s consolidated revenue rose 8% YoY to Rs 2517.8 crore in Q4FY22, compared with Rs 2,336.8 crore in the year-ago period. Its net profit fell 22% to Rs 294.22 crore from Rs 377.82 crore. EBITDA was up 2% to Rs 453.57 crore in the reported quarter, from Rs 444.93 crore in the same quarter last fiscal.

Marico: The company reported an increase of 13.2% YoY in its consolidated net profit to Rs 257 crore for the fourth quarter of FY22. Its revenue from operations during the quarter under review rose 7% to Rs 2,161 crore, compared with Rs 2012 crore in the year-ago period.

Larsen & Toubro Ltd: The construction and engineering company in an exchange filing said that it has won a ‘large’ contract in the Mumbai-Ahmedabad High-Speed Rail Project (Bullet Train Project). L&T Construction’s railways division has secured a·contract from the National High-Speed Rail Corporation Ltd. to construct 116 kilometers of high-speed ballastless trackwork on the route.

Airtel, Reliance Jio and Vodafone Idea: Telecom service providers’ gross revenue declined by 2.64% to Rs 69,695 crore in December 2021 quarter, according to TRAI data. The gross revenue of the telecom service providers (TSPs) was Rs 71,588 crore in the same period a year ago. Reliance Jio registered the highest AGR of Rs 19,063.75 crore in the December 2022 quarter. It was followed by Bharti Airtel with Rs 4,484.48 crore and Vodafone Idea with Rs 6,541.83 crore.

Adani Group Companies

Adani Enterprises Ltd (AEL): The company posted a consolidated net profit attributable to owners at Rs 304.32 crore for the quarter ended March 2022, up 30 per cent on a year-on-year (YoY) from Rs 233.95 crore in the year-ago period. AEL’s consolidated revenue grew by 83.66 per cent in Q4FY22 at Rs 25,141.56 crore, from Rs 13,688.95 crore in Q4FY21.

Adani Wilmar: The edible oil major reported a 26 per cent decline in consolidated net profit at Rs 234.29 crore for the quarter ended March 2022. The company had posted a net profit of Rs 315 crore in the year-ago period. Adani Wilmar reported that its total income increased to Rs 15,022.94 crore during the January-March period of last fiscal from Rs 10,698.51 crore in the corresponding period of FY21.

Adani Total Gas: The Adani Group company reported a 44% year-on-year decline in consolidated profit at Rs 81 crore in quarter ended March 2022 impacted by higher cost of natural gas prices. However, revenue grew by 73% YoY to Rs 1,065.5 crore during the quarter on higher volume coupled with increase in sales price.

Adani Green Energy: The company’s net profit rose 15.24% to Rs 121.00 crore in the quarter ended March 2022 as against Rs 105.00 crore during the same quarter of FY21. Sales rose 45.25% to Rs 1422.00 crore in the reported quarter as against Rs 979.00 crore in the year-ago period.

Adani Power: Adani Power’s consolidated net profit jumped to Rs 4,645.47 crore in the Jan-Mar quarter of FY22 from Rs 13.13 crore in the year-ago period. Total revenue of the company rose to Rs 13,307.92 crore in the reported quarter from Rs 6,902.01 crore in the same period a year ago.

Adani Transmission: The company said it has received shareholders’ approval for issuance of 1.56 crore shares worth around Rs 3,850 crore on a preferential basis to Green Transmission Investment Holding RSC Ltd.

Tata Group Companies

Voltas: Shares of the company fell more than 9.7% in intraday trading after it posted weak earnings. Its consolidated revenue inched up 0.56% to Rs 2,666.58 crore in Q4FY22 compared with Rs 2,651.66 crore in the year-ago period. Its net profit fell 23.15% to Rs 182.7 crore in the reported quarter from Rs 237.73 crore in the same period last year. The company’s board recommended a dividend of Rs 5.5 per share of face value of Rs 1 each.

Tata Power: The company’s subsidiary, Tata Power Solar Systems, has won India’s largest single solar EPC order of 1 Giga Watt for approximately Rs 5,500 crore from SJVN. The order will be completed with 24 months and will aim to reduce 22.87 lakh kg of carbon emission over 5,000+ acres of land in Rajasthan.

Tata Steel: The company posted a 37 per cent jump in consolidated net profit at Rs 9,835.12 crore for the quarter ended March 2022, on account of higher income and robust business in Europe. The steel major had reported a net profit of Rs 7,161.91 crore in the year-ago quarter. During January-March 2022, Tata Steel’s total income jumped to Rs 69,615.70 crore from Rs 50,300.55 crore earlier.

Titan Company: The jewellery-to-watch retailer registered a 7.2 percent year-on-year fall in standalone profit at Rs 491 crore in the quarter ended March 2022 with revenue rising 2 per cent to Rs 7,276 crore during the same period on the back of partial lockdowns, volatility in gold prices and uncertainty in a fragile geopolitical situation. Its EBITDA fell 1.6 per cent to Rs 782 crore and margin declined by 40 bps to 10.7 per cent compared to the year-ago period.

Tata Consumer Products: The company registered 304% year-on-year growth in consolidated profit at Rs 217.54 crore in the quarter ended March 2022 driven by growth in underlying profitability and lower exceptional costs. Revenue grew by 4.5% YoY to Rs 3,175.4 crore during the quarter. Sivakumar Sivasankaran has been appointed as Chief Financial Officer, India and as key managerial personnel of the company, in place of John Jacob, who is retiring from the services of the company.

Economy News

Domestic markets were taken by surprise by the timing and degree of rate hike as the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) held an off-cycle meeting on May 2-4, 2022 to evaluate the country’s macroeconomic situation. The Reserve Bank of India announced a surprise increase in its key policy rate to curb inflation.

The MPC on Wednesday (May 4, 2022) voted unanimously to increase the policy repo rate by 40 basis points to 4.40%, with immediate effect. The MPC said that it expects inflation to remain at elevated levels, adding, the MPC will remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward amid supporting growth. In addition, the Cash Reserve Ratio (CRR) was hiked by 50 bps to 4%.

In the economic front, the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose at 54.7 in April, from 54 in March. Meanwhile, the seasonally adjusted S&P Global India Services PMI Business Activity Index rose to 57.9 in April, up from 53.6 in March. The rise in output was boosted by higher bookings, easing of COVID-19 restrictions and favourable demand conditions.

Global Markets

In the US markets, major benchmarks declined for the fifth consecutive week as interest rate hike and inflation fears continued to weigh on investors’ sentiments. For the week, the S&P 500 edged down 0.20%, the Dow declined 0.23%, and the Nasdaq lost 1.54%.

On Wednesday, Fed policymakers announced a 50 basis point interest rate hike, to a range of 0.75% to 1.00%. The interest rate increase was the steepest increment since 2000 and decided to start shrinking its massive balance sheet. The FOMC announced that the US central bank would begin allowing its holdings of Treasuries and agency mortgage-backed securities to decline in June at an initial combined monthly pace of $47.5 billion.

Japanese equities rose modestly with the Nikkei 225 index gaining 0.58%, and the broader Topix index rising 0.86%, amid volatility due to the U.S. Federal Reserve’s monetary policy decision. The Japanese yen ended slightly weaker, at about JPY 130.51 against the U.S. dollar. On the economic data front, the Tokyo core consumer price index (CPI) rose 1.9% year on year in April compared with 0.8% in March.

In China, markets fell as the government continued its zero-tolerance policy toward coronavirus, dampening sentiments of market participants over the country’s economic growth. The Shanghai Composite Index fell 1.5%, the blue-chip CSI 300 index tanked 2.67%, and Hang Seng sank 5.16%. 

In economic news, China’s services sector activity contracted in April, due to tighter COVID curbs leading to sharper reductions in new business and employment, according to a private-sector survey. The Caixin services purchasing managers’ index (PMI) fell to 36.2 in April, from 42 in March.