Previous Day Market
Sensex closed at 51,934.88 down by 2.56 points
Nifty closed at 15,574.85 down by 7.95 points
ITC reported -2.6% lower net profits at Rs.3,755 crore for the Mar-21 quarter as the margins of non-cigarette FMCG business came under pressure. The hotel vertical also made losses on an EBITDA basis due to weak occupancy in the midst of the pandemic. The top line was higher by 22.6% on a YoY basis at Rs.15,404 crore. Profits were up 6% on a sequential basis. The board has recommended a final dividend of Rs 5.75 per share taking the total dividend for FY21 to Rs.10.75 per share. Paper and Agri did fairly well.
There are 2 positions on the board of Tata Sons falling vacant shortly and the two most likely candidates are Noel Tata of Trent and former Citi head honcho, Pramit Jhaveri. The final decision is expected in a few weeks. Pramit Jhaveri is already a trustee in Tata Trusts so he is largely an insider. Noel is Ratan Tata’s half-brother. Tata Sons wield a lot of power as the principal investment holding company of Tata Group. Around 66% of the equity of Tata Sons is held by philanthropic trusts with larger social development goals.
Come June 2021 and SEBI’s new peak margin norms of 75% to curb speculative trading is effective. Under the new margin rules, not less than 75% of the required margin for any equity or derivatives positions will be collected upfront by the broking house. SEBI has graduated this peak margin norms gradually from 25% in Feb-21 to 75% in Jun-21. From 01-Sep, 100% of the applicable margins have to be collected upfront by the broker and any breach will attract penalties. This is expected to impact intraday trading volumes.
PMI manufacturing, the barometer of factory activity in the Indian economy, contracted to a 10-month low of 50.8 for the month of May. This was at 55.5 in Apr-21. The 50-level is the cut-off between expansion and contraction in manufacturing. That means; output is still expanding but on a sequential basis, the growth momentum is waning. This sharp fall is largely attributable to the resurgence of COVID and its lag effect. Key variables like sales, output, raw material purchases, new orders, and jobs came under pressure.
Defense stocks rallied on Tuesday after the Ministry of Defence announced a List of 108 defense items that had to be compulsorily sourced domestically. Among defense plays, HAL surged 5%, Bharat Dynamics 4.5%, BEML 1.7%, and Mazagon 1.6%. Out of this list of 108 items, 49 items will be banned for import from Dec-21, another 21 items from Dec-22, another 17 items from Dec-23, and the rest after that. This is in continuation of the focus on localizing defense procurement to create local jobs and self-sufficiency.
Nomura appears to be gung-ho on Asian markets with a specific focus on India. In fact, Nomura maintained an overweight rating on India’s ex-Japan Asian portfolio. Nomura’s preferred picks in India include Reliance Industries, Infosys, ICICI Bank, M&M, and Reddy Labs. However, Nomura has not changed its Nifty target of 15,340 by Mar-22. According to Nomura, the macro view will continue to favor equities due to ultra-low yields on the debt. Nomura prefers North Asia over South Asia and South East Asia due to fiscal buffers.
The former promoter of Dewan Housing, Kapil Wadhawan, filed a plea in Supreme Court challenging the stay on the NCLT Mumbai bench order, directing lenders to consider Wadhawan’s settlement offer. The said order of NCLT had been stayed by the NCLAT after the banks and the RBI had challenged the NCLT order. The insolvency law prohibits promoters of the bankrupt company from re-acquiring it. The deal has already been sealed with Piramal Enterprises. Wadhawan is under investigation for money laundering.
Tata Motors and M&M reported a sharp fall in dispatches during May on the back of a surge in COVID cases. Both companies have faced disruption since April. Tata Motors’ monthly dispatches fell 40% month on month to 15181 units in the PV segment. In the CV segment, Tata Motors reported a 35% fall in numbers to 9371 units. M&M reported a 56.22% MOM drop in PV dispatches to 8,004 units and surprisingly, even tractor dispatches dropped 12.5% to 22,843 units. Both are working at lower capacity on weak demand.
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