Daily Market Update – Aug 12th

unnamed Daily Market Update   Aug 12th

 

IIP for the month of June continued to contract for the fourth month in success. However, the Jun-20 IIP contraction of -16.6% was a major improvement over April and May. The good news was on the manufacturing IIP front, where the momentum appeared to be improving. Since manufacturing accounts for 77.6% of IIP, it makes a huge impact. In terms of user industries, the consumer non-durables space showed positive growth after a long gap. However, deep cuts in infrastructure and capital goods limit the multiplier effect. IIP has been hampered by capacity utilisation at just 68%.

Auto ancillary manufacturer, Bosch, slipped to a net loss of Rs.120 crore for the Jun-20 quarter. It had reported a net profit of Rs.282 crore in the Jun-19 quarter and clearly the pressure in the automotive OEM markets was taking a huge toll on the performance of Bosch. Total revenues also slipped by 64% at Rs.992 crore on the back of prolonged shutdowns in their plants and a virtual drying up of demand. Bosch estimates that the automobile sector will take a long time to get back to normal levels and hence the focus will now be more on the agricultural sector and the FMCG space.

Adani Port and SEZ reported a sharp 26% fall in net profits for the Jun-20 quarter at Rs.758 crore. Overall revenues also fell by 17% at Rs.2293 crore for the Jun-20 quarter on the back of weak cargo volumes on account of limited trade and commerce activity in the midst of the pandemic. However, during the quarter, Adani Ports managed to handle more of containerized cargo beating JNPT in the process. Cargo volumes fell by 27% to 41.41 MMT during the quarter. With expected pick up trade activity, the coming quarter is expected to be better for Adani SEZ in terms of port volumes and revenues.

In a surprisingly positive development, Central Bank of India reported 21% growth in net profits to Rs.147 crore for the Jun-20 quarter. The total income of the bank was also up by 4% at Rs.6752 crore in the midst of tough banking conditions for the bank. The gross NPAs of the bank showed a marginal improvement from 19.93% last year to 18.10%. However, the absolutely NPA ratio still remains too high to be sustainable for the bank in the long run. The net NPA of the bank came down from 7.98% to 6.76% on a YOY basis. This resulted in a fall in provisions, boosting profits in the quarter.

According to a research report prepared by Kantar, household consumption of FMCG products in the Jun-20 quarter was at a 2 year high, despite the COVID-19 related conditions. The FMCG segment overall raked up volume growth of 4.5% and a growth of 8.5% in value terms hinting that the companies still retain the pricing power with respect to customers. The personal care segment including cosmetic and personal sanitation products saw a 11.1% growth while the home care segment consisting of detergents and surface cleaners showed 4.6% growth in the Jun-20 quarter. The food and beverages segment posted minor growth of 3.7% in the Jun-20 quarter despite restrictions on sale and consumption of food products during this period. Most FMCG companies saw rural and semi-urban markets driving sales.

Ahead of the CPI inflation announcement on 12 August, a poll by Reuters has hinted that inflation could actually trend higher for July 2020. According to Reuters, due to higher food prices, CPI inflation for July may end up above the RBI’s 4% mark for the tenth month in succession. Reuters had taken the opinion of over 45 economists and the consensus estimate is that CPI inflation could go up to 6.15% in July compared to 6.09% in June. Any sharp spike in the inflation could restrict the hands of the Monetary Policy Committee of the RBI with respect to further rate cuts in the future.

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