Key barometer indices ended with steep losses on Wednesday, dragged by correction in index heavyweight Reliance Industries. Profit selling in auto and IT stocks negated strength in pharma stocks.
The barometer index, the S&P BSE Sensex dropped 421.82 points or 1.10% at 38,071.13. The Nifty 50 index lost 97.70 points or 0.86% at 11,202.85.
Reliance Industries (down 3.75%), HDFC Bank (down 1.94%), TCS (down 1.48%) and Infosys (down 0.92%) were major index shakers.
In the broader market, the BSE Mid-Cap index rose 0.68% and the BSE Small-Cap index gained 0.43%. Both these indices outperformed the Sensex.
The market breadth was almost even. On the BSE, 1371 shares rose and 1328 shares fell. A total of 132 shares were unchanged.
COVID-19 update:
Total COVID-19 confirmed cases worldwide stood at 16,670,063 with 659,077 deaths. India reported 5,09,447 active cases of COVID-19 infection and 34,193 deaths while 9,88,029 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India.
Numbers to Watch:
The yield on 10-year benchmark federal paper fell to 5.834% as compared with 5.85% at close in the previous trading session.
In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 74.80, compared with its close of 74.8450 during the previous trading session.
In the commodities market, Brent crude for September 2020 settlement rose 57 cents at $43.79 a barrel. The contract fell 19 cents, or 0.44% to settle at $43.22 a barrel in the previous trading session.
Foreign Markets:
European markets were mildly higher while Asian shares ended mixed on Wednesday as rising global coronavirus cases weighed on investor sentiment, while the new U.S. relief package unveiled by Republicans hit an impasse in Washington.
Hong Kong Chief Executive Carrie Lam has reportedly warned that the city faces an outbreak that could lead to the "collapse" of its hospital system, with 106 new cases reported Tuesday. In France, confirmed cases rose to 1,83,804 from 1,83,079 on Monday.
In US, stocks indexes closed lower Tuesday, as tech shares were under pressure and lawmakers continued their debate over the next coronavirus relief package. Shares of Amazon slipped 1.8% and Netflix declined by 1.4%. Alphabet shares fell 1.7%. Facebook shares dipped 1.5% and Apple closed 1.6% lower.
US Senate Majority Leader Mitch McConnell unveiled Senate Republicans' proposed $1 trillion coronavirus aid bill on Monday, but Democrats have criticized the package's limitations compared to a $3 trillion proposal that passed the House of Representatives in May. Complicating matters further, President Donald Trump on Tuesday voiced disagreement with some aspects of the bill, though talks are continuing.
On the vaccine front, Moderna Inc. kicked off its late-stage trial while Pfizer Inc and BioNTech entered late-stage trials of their candidates also.
The Federal Reserve began a two-day policy meeting on Tuesday that is expected to see Chairman Jerome Powell underline a willingness to take further action to support the economy and maintain easy financial conditions. The Fed on Tuesday announced that its board of governors had decided to extend until the end of the year several emergency loan programs that had been set to expire on Sept. 30.
In US economic data, the Conference Board's consumer-confidence index fell to 92.6 in July from a revised 98.3 reading in June. The measure of how consumers feel about the economy right now actually rose to 94.2 in July from 86.7, but the subindex that gauges expectations about the future fell to a four-month low 91.5 from 106.1 in June.
Buzzing Indian Segment:
The Nifty Pharma index rose 3.09% to 10,441.15. The index is up 3.77% in two sessions.
Alkem Laboratories (up 4.04%), Strides Pharma Science (up 3.66%), Divi's Laboratories (up 3.43%), Cipla (up 2.8%), Aurobindo Pharma (up 2.6%) and Lupin (up 2.07%) surged.
Sun Pharmaceutical Industries rose 2.18%. The drug major on Wednesday said a subsidiary of its American arm Taro Pharmaceutical will acquire Canada's Aquinox Pharmaceutical for $8.2 million in cash. Aquinox Pharmaceuticals is a corporation organised and existing under the laws of the Province of British Columbia that carries on the business of research and development of pharmaceutical products for purposes of their commercialisation.
Dr. Reddy's Laboratories jumped 6.17%. The drug major's consolidated net profit skid 12.59% to Rs 579.30 crore on 14.93% jump in revenue from operations to Rs 4,417.50 crore in Q1 June 2020 over Q1 June 2019. Consolidated profit before tax (PBT) gained 3.39% to Rs 878.90 crore in Q1 June 2020 as against Rs 850 crore in Q1 June 2019. Current tax expenses for the quarter jumped 60.04% at Rs 299.60 crore as against Rs 187.20 crore in Q1 June 2019. The effective tax rate is around 34% for the quarter. The higher tax rate was primarily due to discontinuation of weighted deduction on R&D and completion of tax holiday for one of the plants. The company's gross margin for the quarter stood at 56% as against 51.7% in Q1 June 2019 and 51.5% in Q4 March 2020. EBITDA for the quarter stood at Rs 1,162 crore, registering a 2% Y-o-Y (year-on-year) growth and 16% Q-o-Q (quarter-on-quarter) jump.
Earnings Impact:
Maruti Suzuki India fell 1.62% after the car major reported net loss of Rs 249.4 crore in Q1 June 2020 as against net profit of Rs 1435.5 crore in Q1 June 2019. The result was impacted by significantly lower sales volume due to COVID-19 pandemic related disruptions. The impact was partially off-set by lower operating expenses and higher fair-value gain on the invested surplus. Net sales tumbled 80.4% on a year-on-year basis to Rs 3,677.50 crore during the quarter. Sales volume declined 81% to 76,599 units in Q1 FY21 from 402,594 units in Q1 FY20.
Among other auto stocks, Mahindra & Mahindra (down 2.55%) and Hero MotoCorp (down 2.23%) declined.
Colgate-Palmolive (India) gained 4.10% after net profit jumped 17.18% to Rs 198.18 crore on 3.93% decrease in revenue from operations to Rs 1,033.60 crore in Q1 June 2020 over Q1 June 2019. The company's gross margins grew by 30 bps while EBITDA for the quarter was up 190 bps.
InterGlobe Aviation fell 0.45%. The air carrier reported a consolidated net loss of Rs 2,844.3 crore in Q1 June 2020 as against a net profit of Rs 1,203.1 posted in Q1 June 2019. Revenue from operations fell 91.9% on a year-on-year (YoY) basis to Rs 766.7 crore during the quarter, due to a 90.9% reduction in capacity compared to same period last year.
The low cost carrier said that closure of scheduled operations till 24 May 2020 and lower capacity deployment thereafter on account of COVID-19 had significantly impacted the quarterly results. RASK (revenue per available seat kilometre) rose by 2.2% YoY to Rs 4.19 while the CASK (cost per available seat-kilometre) surged 412.3% to Rs 17.69 in Q1 FY21 over Q1 FY20.
Spicejet rose 1.15%. The low-cost air carrier reported consolidated net loss of Rs 816.24 crore in Q4 March 2020 compared with net profit of Rs 72.51 crore in Q4 March 2019. The company said that the business was adversely impacted due to the COVID-19 pandemic and the nation-wide lockdown that resulted in suspension of flight operations.
Total revenue from operations jumped 13.11% to Rs 2,867.02 crore in Q4 March 2020 over Rs 2,534.69 crore in Q4 March 2019. Spicejet's capacity (in terms of seat kilometre) grew 23%. The company recorded an operating loss of Rs 333.70 crore. Revenue from cargo surged 94%. The company registered industry's highest domestic load factor of 90%.
Manappuram Finance fell 0.30%. The NBFC reported 39.2% rise in consolidated net profit to Rs 368.11 crore on 26.3% increase in total income to Rs 1,516.47 crore in Q1 FY21 over Q1 FY20. On the segmental front, revenue from the gold loan business stood at Rs 1,250.31 crore (up 28.6% YoY) while the microfinance business revenue was reported at Rs 266.16 crore (up 16.4% YoY) during the quarter.
IDFC First Bank rose 1.26% after net profit of Rs 93.55 crore in Q1 June 2020 compared with net loss of Rs 617.36 crore in Q1 June 2019. The bank's provisions and contingencies declined 40.34% to Rs 764.08 crore in Q1 FY21 over Rs 1280.75 crore in Q1 FY20. During Q1 FY21, the bank has created additional COVID-19 related provision of Rs 375 crore to further strengthen the balance sheet.
IDBI Bank hit an upper circuit of 5% at Rs 40.15 after the bank reported net profit of Rs 144.43 crore in Q1 June 2020 compared with net loss of Rs 3,800.84 crore in Q1 June 2019. Net Interest Income (NII) for Q1 FY2021 jumped 22% to Rs 1,773 crore from Rs 1,458 crore for Q1 FY2020. Net Interest Margin (NIM) during the quarter improved by 68 bps to 2.81% as compared to 2.13% in the corresponding quarter last year. The bank's provisions and contingencies slumped 86% to Rs 888.05 crore in Q1 FY21 over Rs 6,332.05 crore in Q1 FY20. Provision coverage ratio (including technical write-offs) improved to 94.71% as on 30 June 2020 from 87.79% as on 30 June 2019 and 93.74% as on 31 March 2020.
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