Daily Market Update – 29july

unnamed Daily Market Update   29july


Two leading institutional brokers, CLSA and Edelweiss, have downgraded Reliance Industries. Edelweiss has noted that some of the major triggers for the stock like deleveraging, asset monetization and digital foray have already played out. Edelweiss has downgraded the stock from Buy to Hold. On the other hand, CLSA has also downgraded the stock from Outperform to Buy with a valuation outer limit of $220 billion. However, it must be said that hardly any analyst on the street was able to predict the full impact of Reliance’s efforts over the last four years even as RIL continued to baffle the consensus estimates.

Nestle India reported 11% growth in net profits for the Jun-20 quarter at Rs.487 crore even as the total revenues for the quarter were up 2% at Rs.3041 crore. While domestic sales were up by 2.6%, the export sales were lower by 9.3%, with COVID-19 impacting sales across the board. Nestle also reported that its factories operated at 75% capacity leading to lower than potential sales. Suresh Narayanan, the CEO of Nestle India, conceded that June had shown good traction compared to April and May. Nestle makes some marquee products in India like Maggi noodles, Nescafe and Everyday Dairy whitener.

According to a report brought out by ICRA, fertilizer companies are expected to announce healthy profit figures for FY21. This is on the back of improved off-take by farmers as rural incomes have done a lot better than urban incomes in India. Urea fertilizer volumes saw 69% volume growth in the first quarter despite disruption in April and May. With government transferring funds under various schemes, the purchasing power of farmers remained intact. With robust monsoons reported, sales of fertilizers are expected to be strong through the year. However, timely payment of subsidies will be critical.

IndusInd Bank reported 64.3% fall in net profits to Rs.510 crore for the Jun quarter, which is better than the consensus estimates. The net interest income for the quarter or NII was nearly 14% higher at Rs.3309 crore. Even the provisions for the Jun-20 quarter were marginally lower on a sequential basis at Rs.2259 crore. However, the gross NPAs saw a spike to 2.53% in the Jun-20 quarter even through the net NPAs were lower at 0.86%. The bank board has also approved the infusion of Rs.500 crore by a leading FPI, Route One Capital. The Hindujas are also looking to increase their stake in the bank.

It is reported that Reliance Industries will pay Rs.27,000 crore to take a controlling stake in Future Group. Both the parties are yet to confirm the contours of the deal. The Reliance group is flush with funds after having monetized 33% stake in Jio Platforms for $20 billion. In addition, RIL also successfully concluded its rights issue of $7.3 billion. It looks like five of the entities of Future group including Future Retail will be merged into Future Enterprises before the deal. If the deal goes through, then Reliance will be able to add 12,000 stores across 6700 Indian towns including a robust cash-and-carry business. Future group already owns marquee brands like Big Bazaar, Foodhall and Brand Factory. This becomes a major brick-and-mortar extension for Jio Mart to assist in more effective fulfilment of orders.

Ultratech Cements reported a 36% drop in net profits at Rs.806 crore even as the total revenues for the Jun-20 quarter fell 32% to Rs.7290 crore. Ultratech is already India’s largest cement manufacturer by a margin. During the quarter, the plants operated only for 68 days resulting in overall capacity utilization of 60% across its network. Better control of cash flows enabled the company to reduce its debt by Rs.2209 crore during the quarter. Construction activity has shown good traction in rural and semi-urban pockets and that is expected to keep the demand for cement buoyant in the second quarter.

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