Losses for TCS and Hindustan Unilever (HUL) after the announcement of second quarter earnings pulled key benchmark indices lower. The barometer index, the S&P BSE Sensex, fell 69.31 points or 0.26% to 26,777.22, as per the provisional closing data. The 50-unit CNX Nifty dropped 23.80 points or 0.29% at 8,107.90, as per the provisional closing data. Key benchmark indices declined for the third straight trading session.
TCS dropped after the company's top management indicated at a post Q2 result conference call that the company continues to face issues in its UK based business process outsourcing subsidiary Diligenta and in the Japan region and expects it to continue over the next two quarters at least. HUL dropped after reporting a muted growth in bottom line after adjusting for exceptional items.
The market breadth indicating overall health of the market was positive. On BSE, 1,504 shares rose and 1,265 shares fell. A total of 134 shares were unchanged. The BSE Mid-Cap index was provisionally down 0.34%. The decline in this index was higher than Sensex's decline in percentage terms. The BSE Small-Cap index was provisionally up 0.35%, outperforming the Sensex.
The total turnover on BSE amounted to Rs 3189 crore, higher than turnover of Rs 2779.08 crore registered during the previous trading session.
TCS lost 4.48% at Rs 2,481 after the company's top management indicated at a post Q2 result conference call that the company continues to face issues in its UK based business process outsourcing subsidiary Diligenta and in the Japan region (on account of the ITS integration) and expects it to continue over the next two quarters at least. TCS has been citing stress in three areas -- Diligenta, Japan and Latin America. These areas have drawn overall performance lower despite strong growth in other areas. In September 2015 quarter, the situation in Latin America saw stabilization, as revenue from this geography grew by 6.2% on sequential basis in constant currency terms.
TCS' consolidated net profit rose 6.5% to Rs 6085 crore 5.8% growth in revenue to Rs 27165 crore in Q2 September 2015 over Q1 June 2015. The result was announced after market hours yesterday, 13 October 2015. In a conference call, TCS said that similar to the trend seen in the previous years, Q3 December 2015 is expected to be weak on account of fewer working days and furloughs. The extent of the impact of furloughs will be known fully by mid-November, TCS said.
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Other IT stocks witnessed a mixed trend. Tech Mahindra (down 1.93%), Wipro (down 0.55%), MindTree (down 0.28%) and Infosys (down 0.16%) declined. Oracle Financial Services Software (up 0.43%) and HCL Technologies (up 0.3%) gained.
Shares of state-run coal mining giant Coal India (CIL) were off 1.72% at Rs 334.65 after the Union Cabinet approved the recommendations of the Committee of Secretaries to regularize the 2007 pay revision implemented by CIL with effect from 1 January 2007 in the loss making subsidiaries. This is being allowed as a special dispensation to CIL. The Cabinet also approved the payment of performance related pay (PRP) to executives and non-unionised supervisors of CIL and its subsidiaries. The payment would be out of the corpus created by pooling the profits of CIL subsidiary companies, duly setting off the losses of the loss making subsidiaries and stand-alone profits of CIL, excluding dividends received from its subsidiary companies.
HUL dropped after reporting a muted growth in bottom line after adjusting for exceptional items. The stock lost 2.26% to Rs 794. HUL's net profit before exceptional item rose 1.4% to Rs 970.31 crore in Q2 September 2015 over Q2 September 2014. HUL said that the the phasing out of excise duty incentives and fall in product prices adversely impacted the company's performance in Q2 September 2015. The company reduced product prices in a bid to pass on the benefit of lower commodity costs to consumers.
HUL Chairman Harish Manwani said that the deflationary commodity cost environment is likely to continue in the near term and the company's strategy of delivering consistent and competitive growth with sustainable improvement in operating margin remains unchanged.
Zee Entertainment Enterprises (Zee) fell 3.17% at Rs 388.45. The consolidated net profit rose 8.7% to Rs 247.40 crore on 23.9% rise in net sales to Rs 1384.90 crore in Q2 September 2015 over Q2 September 2014. The result was announced during market hours today, 14 October 2015.
Zee's bottom line in Q2 September 2015 was adversely affected by a write off of investment of Rs 33.10 crore. This pertains to write-off of an investment made by Asia Today Limited, a wholly owned overseas subsidiary of the company made in 2013 for acquiring minority stake in MirriAD Ltd., UK. This write-off was on account of continuing losses and consequent capital reduction/restructuring in MirriAD Ltd., UK.
On the macro front, the latest data showed that the annual rate of inflation based on monthly wholesale price index (WPI) stood at negative 4.54% (provisional) for September 2015 as compared to negative 4.95% (provisional) in August 2015. The Reserve Bank of India's (RBI) main inflation gauge which is the consumer price index accelerated last month, as per data released by the government early this week.
In overseas stock markets, Asian and European stocks dropped as China's inflation data for September 2015 added to concerns about the health of the world's second-biggest economy. US stocks closed lower yesterday, 13 October 2015, with the Dow Jones snapping its 7-day winning streak ahead of a series of earnings reports.
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