Indian Stock Market News | BSE/NSE Sensex Updates | Equity Market Highlights

Market Highlights

Get the latest Indian stock / share market highlights, BSE/NSE stock news, business research reports & details - updated daily by Money Times.

May 15, 2023

*IT Sector update*
*Weak sector dynamics to keep IT stocks volatile*
Macro headwinds, high costs, slowdown in BFSI segment and high valuations keep stocks out of favour.
The IT sector reported weak numbers in the fourth quarter of 2022-23 with revenues of all major companies falling below expectations. Infosys, HCL Technologies and Wipro reported a dismal 3. 2%, 1. 2% and 0. 6% q-o-q decline in revenues respectively.
On the other hand, TCS and Tech Mahindra reported a muted 0. 6% and 0. 3% q-o-q increase in revenues.
Among tier-2 companies, Mphasis reported a 4% q-o-q decline in revenue whereas LTIMindtree, Persistent Systems and Coforge reported 0. 7%, 3. 5% and 4. 7% revenue growth on a sequential basis. The revenue growth is in constant currency terms.
The fourth quarter performance led to earnings estimates downgrades for the full year 2023-24. The eight companies mentioned saw downgrades in their net profit estimates between 0. 6-6. 3% in the last one month, according to data compiled from Reuters-Refinitiv.
The sector’s muted performance also dragged the Nifty IT index which has lost 2. 7% in 2023-24 so far. Comparatively, the Nifty 50 index gained 5. 2% during the same period. The data is based on 8 May 2023 prices. Though the sector valuations have corrected from the peak, it remains elevated compared to long-term averages.
India to see a revenue growth decline of 700-900 basis points in 2023-24 amid global macroeconomic and financial sector headwinds in key markets. “BFSI segment revenue growth is expected to halve to the mid-single digit in 2023-24. Lower growth will be marginally offset by 12-14% growth in the manufacturing segment and 9-11% growth in other segments. Net-net, there would be moderation in overall revenue growth,” says the note.
*Management commentaries*
Due to the headwinds, the management guidance for large IT companies has turned conservative. Infosys and HCL Technologies have guided 4-7% and 6-8% revenue growth in constant currency terms respectively for 2023-24. However, the companies will continue to see high EBIT margins with Mphasis, Coforge and HCL Technologies expecting over 15% margins in 2023-24.
A Kotak Securities report believes that the guidance seems aggressive and the confidence of companies about a growth revival is based on a strong deal pipeline and hope of some macro revival in the second half of 2023-24. Such macro revival will be the key to achieving such guidance. “The hurdle rate to achieve the top-end of the guidance seems a bit unrealistic unless backed by mega deals,” adds the report.
*Growth drivers*
Cost reduction measures such as application rationalisation, optimising costs of cloud and SaaS consumption coupled with other levers such as easing of supplyside constraints, digitalisation theme, balanced on-offshore employee mix, improved operational efficiency through manpower training/utilisation and benefits of rupee depreciation will keep the sector prospects firm in the medium term.
*Vaibhav Dusad, Fund Manager ICICI Prudential Mutual Fund*, believes the sector is seeing technological upgradation and the Indian IT companies have gradually transformed themselves to deliver in the new digital era (automation, data gathering and analysis, big data analytics and cloud-native applications). Also, global competitive advantage and cost competitiveness in customer delivery will help Indian IT companies expand their marketshare globally.
Further, healthy cash generation, strong balance sheets and sizeable cash surpluses will lead to stable asset quality of IT companies in the future.
*When to expect recovery*
Market experts believe that the sector may see green shoots in the second half of 2023-24. “If the crisis in US regional banking sector is contained, there is a possibility of recovery in the quarter over quarter growth rates from the second or third quarter of 2023-24,” says Neeraj Gaurh, Director & Head of Research, Equirus.
Sreeram Ramdas, Vice President at Green Portfolio PMS, expects it to take at least three to six months for a solid recovery. “The interest rates have peaked and we expect Fed to cut interest rates later this year, which will create strong positive sentiments towards the IT sector,” he adds.
*What it means for you*
Barring Coforge and Persistent Systems, analysts compiled by Refinitiv have revised down the target prices of other six companies by 1. 2-12% in the last one month with Infosys witnessing the highest target price downgrade.
Most of the companies are currently offering single-digit share price potential between 2-9% over the next one year. However, despite a significant target price cut and close to an 11% price correction in the last one month, Infosys is the only stock (among the eight stocks mentioned) that is currently offering a double-digit (over 19%) price potential.
“Infosys did have a bad March quarter and could have handled expectations better. Nonetheless, the fundamental underpinnings of Infosys are extremely strong. We believe there are reasonable upsides in Infosys and the current valuations assume some level of margin expansion in 2024-25,” says the Kotak Securities report.
Overall, analysts expect the IT sector to remain subdued in 2023-24. They expect investors to invest with a medium-term time horizon. “Investors taking a two to three year view can continue to remain invested as the long-term structural growth story remains intact. For new investors, selective stock picking strategy should work,” says Parvati Rai, Vice President Research at Research & Ranking. Companies with balanced regional and vertical exposure and healthy deal wins should do well, adds Rai.
*Dusad from ICICI Prudential Mutual Fund* also believes that it is a good time for investors to enter the sector. But one should invest from a two to four year perspective.
Considering the sector’s excellent corporate governance, consistent dividend payout and buyback policies and strong balance sheets, Sunil Damania, Chief Investment Officer, MarketsMojo, recommends that the IT sector should constitute a minimum of 10% of the overall investment portfolio.
*Where do IT funds stand?*
The headwinds impacting the IT sector have hit the performance of IT sector funds. There are five IT sector funds (nonETFs) and these funds have delivered an average return of -2. 9% in the past one year. Comparatively, the equity diversified funds category average was 11. 9%, according to data compiled from the ACE MF database.
The IT sector funds have also exhibited higher risk in the last one year with an average standard deviation of 5. 4 compared to 4. 4 for equity diversified funds.
Infosys, TCS and HCL Technologies were among the top three stocks held by five IT sector funds in March 2023. The combined AUM of such funds grew at 10. 5% y-o-y to ₹23,697. 7 crore at the end of March 2023.
The funds outperformed equity diversified funds in the past three years as online mode gained prominence during the pandemic. However, IT stocks started losing favour among equity-diversified funds as global macro headwinds clouded their prospects. The exposure of these funds to Nifty IT index stocks has gone down considerably in the past one year.
These funds are suited for investors with a long-term investment horizon with a high risk appetite. “As the sector’s outlook remains uncertain in the short term, it is crucial for investors to consider their risk appetite, investment horizon and financial goals when selecting IT sector mutual funds,” says Sonam Srivastava, Founder at Wright Research,a Sebi registered investment adviser.
Ayushi Agarwal, Senior research analyst at Turtle Wealth believes that given the sector’s past performance of delivering an annualised return of 15-20% over a five-year period, investors should stay invested in such funds for long-term wealth creation and diversification benefits.
Experts also suggest that only investors who are willing to tolerate high volatility in the near term should invest in IT sector funds. “These funds are ideal if someone is looking strictly for sectoral exposure as they will provide diversification among top IT names,” adds Ramdas from Green Portfolio. Also, it is best to consider such funds only in the second half of 2023-24.
Some analysts suggest that those looking for exposure to IT stocks should look for equity diversified funds instead. “Indian indices have more than 10% weight in the IT sector and investors would have exposure to it if they were holding large cap or flexi cap funds,” adds Gaurh from Equirus.
*Sunidhi-Himanshu*
Good Morning
News Headline from Leading Financial News Papers,
Monday, 15 May, 2023
• JSW Infrastructure to invest Rs 152 crore to increase container capacity at NMPT
• Enough growth opportunities within facilities to take capacity to 40 MT in India: Tata Steel CEO
• Pidilite expects better margin and volume-driven growth in FY24: MD Bharat Puri
• Aakash Healthcare lines up Rs 100 crore to set up specialised orthopaedics facilities
• Ramkrishna-Titagarh consortium scouting for 'optimal' sites for train wheel plant
• Centre's skills training to include AI courses
• Power ministry panel outlines roadmap to develop electricity market
•INOX Air plans Rs 3,000 crore investment by 2025 to meet rising demand
• Creditors’ recovery via IBC surges to 36% of admitted claims in FY23
• Asset reconstruction companies seek easier settlement guidelines for small loans
•‘Road map on auto regulations needed: Bosch
• Hedge fund trade with a history of blowups is back again
• 'Promoter dispute threatens Hikal's performance'
• Hero Moto to step up premium play with a dozen launches this fiscal
• Government to roll out system to block, track lost phones
• Filling fast: Rival flights are slotting into Go First-sized vacuum
• low inflation, slow growth might become the new normal
• Airtel, Reliance Jio use divergent strategies to catch eyeballs in IPL
• ONGC arm raises $500m in foreign currency loan
•Recession? Corporate America’s earnings say it’s already arrived
• US drug companies minting billions on unproven treatments with FDA shortcut
• Sebi proposes voluntary delisting for non-convertible debt securities
• 'ABB India makes rapid strides to new highs, but analysts see little room for fresh rally
•Sebi weighs rules to regulate portals offering fractional ownership of realty assets
• Asian shares braced for China data, Fed speakers
• Today's poll promises, tomorrow's economic problems: 2024 poll campaigns could hurt India
• Shriram Life Insurance posts Rs 156 crore net profit in FY22-23
STOCKS IN ACTION 15 MAY
Birla Corporation: Wholly owned subsidiary RCCPL Pvt. Ltd. acquired limestone mining rights over 889.76 hectares in Katni, Madhya Pradesh in a tripartite agreement with the Madhya Pradesh government and Sanghi Infrastructure, for a consideration of Rs 5,155.49 crore
Hindustan Petroleum: The company will incorporate a wholly owned subsidiary to consolidate all green and emerging business opportunities under one umbrella. The company is also exploring options to unlock value in lubricant business, including carving out.
Rail Vikas Nigam: A Rail Vikas Nigam-SCC Infrastructure joint venture received the letter of award for a project worth Rs 2,248.94 crore to plan, design and construction of main canal and structures to provide Irrigation facility to 41,903 hectares for Upper High-Level Canal of Mahi Bajaj Sagar Project in Banswara, Rajasthan. RVNL has 51% share in the joint venture.
Vedanta: The company approved capex of $296 million in Cairn Oil and Gas operations. It appointed Sonal Shrivastava as the chief financial officer, effective June 1, 2023. It also reappointed Navin Agarwal as whole-time director from Aug. 01, 2023 to July 31, 2028, and Priya Agarwal as non-executive director from May 17, 2023 to May 16, 2028.
Mahindra CIE Automotive: The company invested Rs 4.16 crore into associate Clean Max Deneb Power LLP to source green energy on captive basis. The company has invested 8.36 crore in Clean Max Deneb, representing 26% of the latter’s total capital.
Canara Bank: The Reserve Bank of India imposed a penalty of Rs 2.92 crore penalty on Canara Bank on regulatory violations.
Adani Green Energy: The board meeting to consider a proposal for raising funds, scheduled on May 13 has been postponed to May 24.
Sun Pharmaceuticals: The company received tentative approval from U.S. FDA for its linagliptin tablets
Indian Railways Finance Corporation: The company will consider and approve market borrowing programme for the financial year 2022-23 on May 24.
Punjab National Bank: The lender will consider on May 19 raising equity capital through issue of equity shares to eligible employees under employee stock purchase scheme.
Glenmark Pharma: Incorporates new WOS Glenmark Healthcare Arm will do manufacturing and trading of Pharmaceutical products.
Dr Reddy's: Andhra Pradesh plant gets 4 observations from US FDA
Titagarh Wagons, Ramkrishna Forgings: The formation of a new arm Ramkrishna Titagarh Rail Wheels has been approved by the board
Zomato Hyperpure Private Limited's auditor B&B Associates has resigned
Genus Power signs a commitment letter with the United States International Development Finance Corporation for a loan
Vardhman Special Steel to hold a meeting with MOSL and BP Wealth on Monday
Shyam Metalics' associate arm declared as the preferred bidder for Iron Ore block in Maharashtra; here's what the co said about it
Bajaj Electricals board receives EGM approval for Rs 500 cr investment in arm Bajel Projects
Adani Group Cos to raise Rs 21,000cr
Board approves raising funds via QIP or other modes
Adani Enterprises-Board approves raising Rs 12,500cr
Adani Transmission-Board approves raising Rs 8,500cr
Adani Green Energy’s BM for fundraising deferred from May 13 to May 24
RAINBOW CHILDREN'S MEDICARE LTD: CO RE-APPOINTMENT OF DR. ANIL DHAWAN AS AN INDEPENDENT DIRECTOR FOR ANOTHER TERM OF 5 CONSECUTIVE YEARS
*Good Morning*
• Slowest India Inflation in 18 Months Boosts Rate Hold Calls
• Das Says Confident India’s FY24 Growth Will Be Close to 6.5%
• India Supreme Court Will Next Hear Adani Rout Case on May 15
• RBI Asks Banks to Ensure Full Transition From LIBOR Starting July 1
• India March Industrial Production Rises 1.1% Y/y, Est. +3.2%
• India April Consumer Prices Rise 4.70% Y/y, Est. +4.76%
• Adani Group’s Flagship, Utility Firm Seek to Raise $2.6 Billion
• Court Probe of Adani Shortseller Saga Tests India’s Institutions
• India Supreme Court Will Next Hear Adani Rout Case on May 15
• Jaguar Owner Tata Returns to Profit as Chip Supply Improves
o JLR to miss goal of turning net-debt zero by fiscal 2024
• Agarwal’s Vedanta Misses Profit Estimates to Report a 68% Drop
• India Private Sector Investment Rising Cautiously, L&T CFO Says
• India Forex reserves Rise $7.2b to $596b in a week to May 5
o India Official Reserves Rise to Highest Since June 2022
• Global Funds Buy Net INR10.1B of India Stocks on May 12: NSE
o Domestic funds sell net 9.22b rupees of stocks
• Byju’s Raises $250m, on Track to Close Another $700m: TechCrunch
• 12pm: India April Wholesale Price Inflation Y/y, est. -0.35%, prior 1.34%
• 5pm: India April Trade Balance, est. -$19.6b, prior - $19.7b
o India April Exports Y/y; prior -13.9%
o India April Imports Y/y; prior -7.9%
• Adani Enterprises (ADE): Board approves raising upto INR125b via shares, securities in QIP or other modes
• Adani Green Energy (ADANIGR): Says May 13 Board Meeting Deferred to May 24
• Avenue Supermarts (DMART): 4Q net income +8% Y/y to 5.05b rupees, revenue up 20% to 103.6b
• Canara Bank (CBK): RBI imposes INR29.2m monetary penalty on CBK
• Cipla (CIPLA): 4Q net income +45% Y/y to 5.26b rupees, misses est. 7.51b; revenue +9.1% to 57.4b
• Colgate- Palmolive India (CLGT): 4Q net income -2.5% Y/y to 3.16b rupees, beats est. 2.81b; revenue +4% to 13.4b; Dividend 21 rupees/share
• Dish TV India (DITV): 4Q net loss 17.2b rupees, revenue -21 y/y to 5.05b
• DLF (DLFU): DLF 4Q net income +41% Y/y to 5.7b rupees, +41% y/y, est. 5.65b; revenue -6% to 14.6b
• Great Eastern Shipping (GESCO): 4Q profit 7.22b rupees vs. 1.89b Y/y; total income +58% to 15.5b; to pay 9 rupees/share dividend
• Hindustan Petroleum (HPCL): 4Q net income +79% Y/y to 32.2b rupees, beats est. 24.93b; revenue +9% to 1.14 trillion
• Indian Overseas Bank (IOB): 4Q net income 6.5b rupees Vs. 5.52b Y/y, Provisions +1.6% q/q to 9.96b; goss NPA 7.44% vs. 8.19% q/q
• Indraprastha Gas (IGL): 4Q net income -9% Y/y to 3.3b, misses est. 3.62b; revenue +53% to 40.6b
• Manappuram Finance (MGFL): 4Q net income +58% Y/y to 4.13b rupees, misses est. 4.6b; revenue +20% to 17.7b
• Navin Fluorine (NFIL): 4Q net income 1.36b rupees, est. 1.24b; revenue 7b
• Rail Vikas Nigam (RVNL): Say its 51%-49% Jv with SCC Infrastructure gets LoA for INR22.5b irrigation work of Mahi Bajaj Sagar Project, Banswara
• Reliance Industries (RIL): Says its unit to acquire entire issued share capital of Columbus Centre Corporation
• Sun Pharmaceuticals (SUNP): Gets tentative U.S. FDA ANDA approval for Linagliptin, Metformin Hydrochloride tablets
• Vedanta (VEDL): 4Q Net Income -68% Y/y to 18.8b rupees, misses est. 29.11b; revenue -5.4% to 372.3b
*

493