Month: November 2023

US equity fund see biggest weekly outflow in 12 weeks

Posted on by

U.S. equity funds recorded heavy capital outflows in the week to Sept. 7 as a stronger-than-expected U.S. services industry report solidified expectations that the Federal Reserve would keep hiking interest rates to control price pressures.

Some investors had expected that the Fed might temper its rate increases to avert an economic slowdown, which in turn would boost risk assets.

Also Read: US Stocks: Tech stocks drive gains in futures

Investors offloaded $4.21 billion worth of U.S. growth funds in a fourth straight week of net selling, while value funds recorded outflows at $2.79 billion after a week of net purchases.

Sectoral funds’ data showed that financials, consumer discretionary and tech, all booked outflows, amounting to a net $957 million, $849 million, and $400 million, respectively.

However, U.S. bond funds drew a net $1.51 billion in inflows after witnessing two straight weeks of outflows.

Taxable bond funds recorded net inflows at $2.73 billion, though municipal funds had a fifth weekly outgo, worth $1.25 billion.

Investors bought short/intermediate government & treasury funds of $5.14 billion, but high yield and loan participation funds witnessed $2.26 billion and $808 million worth of net selling.

Meanwhile, selling in money market funds continued for a second successive week as investors withdrew a net $5.22 billion.

Oil minister hints against hike in fuel prices

Posted on by

State-run oil marketing companies (OMCs) have the capacity to absorb the global crude price shocks as they have made large profits (in the previous quarters) due to low prices, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri told FE on Thursday.

Though it has been widely felt that OMCs whose bottom lines are seen to have already taken a hit in Q2FY24 and looking at losses from auto fuels marketing in the current quarter would still not hike retail fuel prices anytime soon, the minister’s statement gives further credence to such perception.

“OMCs can absorb high prices and not (opt for) pass-through to retail consumers, as they have the capacity to do so…they made large profits in the past quarters when prices were lower” Puri said on the sidelines of an event here.

Consumers shouldn’t worry about a risk of pass-through of rising crude oil prices to retail prices as the government has already cut the excise duty, the minister added.

In Q4FY23 and Q1FY24, OMCs posted large profits on the back of lower crude prices. However, crude prices started rising again by late September. In September, crude prices reached their highest level at $97 a barrel since November 2022, causing OMCs to face under-recoveries to the tune of Rs 7/litre on the sale of petrol and diesel, said analysts.

The three OMCs – Indian Oil Corp Ltd (IOCL), Hindustan Petroleum Corp Ltd (HPCL), Bharat Petroleum Corp Ltd (BPCL) – recorded a cumulative profit-after-tax (PAT) of approx Rs 30,568 crore in Q1FY24 and Rs 19,759 crore in Q4FY23.

In Q3FY23, the cumulative PAT of the three OMCs was Rs 2,580 crore. Whereas, in the two quarters prior to that, the OMCs posted a net loss in their earnings.

The price of India’s crude oil basket had averaged $109.50/bbl in Q1FY23, and $97.87/bbl in Q2FY23. In Q3 and Q4 of the previous fiscal, it had averaged $85.78/bbl and $80.58/bbl.

In Q1FY24, India’s crude oil basket’s price averaged $77.89/bbl and 86.78/bbl in Q2. The composition of India’s crude basket represents the average of Oman & Dubai for sour grades and Brent (Dated) for sweet grade in the ratio of 76:24, according to the Petroleum Planning and Analysis Cell (PPAC) website. However, the share of Russian crude oil imports – which is largely Urals – in India’s crude oil basket has increased sharply to about 80% in the recent months, which is not reflected on the PPAC website.

Analysts expect the three OMCs to post a weaker performance in Q2FY24 due to lower marketing margins on the back of high crude oil prices. Price of crude oil could rise even further amid the possibility of escalating war between Israel and Gaza in the Middle East.

In Q2FY24, the gross marketing margin of OMCs in diesel has shown a decline and is currently at Rs 0.3/litre, analysts said. In the first quarter, it was Rs 9.5/litre. In the case of petrol sales, current under recoveries are seen at Rs 5/litre.

Petrol and diesel prices are to be revised daily based on the 15-day rolling average, as per the pricing methodology followed by the OMCs. However, prices have not been revised since April 2022.

Experts believe that a rise in prices of petrol and diesel is unlikely, given the upcoming assembly polls and general elections in 2024.

SBI, ICICI, BoB hit 52-week highs

Posted on by

With demand for credit showing good growth, banking stocks continue to do well. Private sector lender ICICI Bank closed Friday’s session at Rs 901.55, up 0.29%, hitting Rs 911.75 in intra-day trading, a 52-week high. The Bank of Baroda (BoB) stock also hit a 52-week high of Rs 557 on Friday – it ended at Rs 553.45, up 1.6%. State Bank of India also hit a 52-week high of Rs 557 before closing at Rs 553.45, up 1.61%.

On Friday, the Bank Nifty closed at 40,415.7, up 0.5%. Since mid-June, the gauge has added nearly 24%.

Also Read: Share Market HIGHLIGHTS: Sensex ends 105 pts up, Nifty at 17833 amid volatility; Infosys, TCS, SBI stocks jump

The worry for banks would be more on the deposits front, given these have been growing at a much slower pace. For instance, between April and August, aggregate deposits increased by Rs 5.3 trillion, compared with Rs 4.03 trillion in the comparable period of 2021.

Lenders have been raising funds via AT-1 bonds. SBI has mopped up money via an AT-1 tranche at the lowest rate for any bank so far this year. The issuance was for bonds worth Rs 6,900 crore at 7.75%.

Morgan Stanley believes that strong balance sheets, decreasing macro concerns and improving capacity utilisation set the stage for a capex up-cycle in F24-F25. The brokerage believes this could drive a second leg of re-rating at Indian banks. The brokerage has raised loan growth estimates by two percentage points to 16% for F24 and 3 percentage points to 17% for F25. This, coupled with lower credit costs, drives earnings estimate upgrades. The firm said it was penciling in a 2-percentage-point upgrade in pre-provisioning profit growth and higher RoE (return on equity) assumptions.

Sensex ends at nearly 1-month high, Nifty near-term support at 17807; Will Nifty hit 18100 soon?

Posted on by

On the back of positive global markets, Indian stock market benchmarks BSE Sensex and NSE Nifty 50 settled more than a half a per cent up on Monday. India’s August CPI inflation, and July’s IIP data is scheduled to release later in the evening today. BSE Sensex gained 322 points or 0.5 per cent to settle at 60,115, while NSE Nifty 50 added 0.6 per cent or 103 points to finish trade at 17,936.35. Index heavyweights such as Reliance Industries, Infosys, Axis Bank, ICICI Bank, and Bajaj Finance, among others, contributed the most to the indices’ gain. Broader markets outperformed the equity frontliners. S&P BSE MidCap soared 1 per cent or 230 points to end at 26,167. S&P BSE SmallCap index added 1 per cent or 295 points to settle at 29,824.

Deepak Jasani, Head of Retail Research, HDFC Securities

Also read: CPI inflation may see marginal uptick to 6.75-6.9% on fall in crude oil prices, IIP may at come in at 5.7-5.9%

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities

Firm global market cues triggered an upsurge in local benchmark indices as Sensex closed above the crucial 60,000 mark on buying in IT and realty stocks. In recent sessions, falling global crude oil prices and sliding US Dollar index have encouraged domestic investors to increase their equity exposure. Technically, the Nifty has formed a shooting star kind of candle formation near the important resistance level. A trend reversal is possible only after the dismissal of 17850. Above the same, the index could touch the level of 18000-18100. On the flip side, below 17850 selling pressure is likely to increase and could retest the level of 17750-17700.

Om Mehra, Technical Associate, Choice Broking

The index formed a bullish candlestick pattern on the daily chart. The broader markets also gained momentum after a mixed trade in the previous session. India VIX ended the session at 17.94 levels as VIX below 18 suggests the market seems to be enjoying stability. OI Data indicates, on the call side the highest OI is witnessed at 18000 followed by18200 strike prices while on the put side, the highest OI was at 17800 followed by 17700 strike price. Bank nifty has support at 40000 levels while resistance is placed at 41200. We suggest riding the positive rally for the next couple of days. Sectors like IT and Realty look attractive for the short to medium term.

Also read: MCX gold price to trade sideways to weak this week, investors await US CPI inflation data; check support level

Vinod Nair, Head of Research, Geojit Financial Services

Domestic economy is witnessing strong vigour and the same is assisting a steady growth in Indian equities. A 15.5% on-year increase in bank credits during August suggests that the economy is recovering rapidly. Due to rising food prices, domestic inflation figures are predicted to show a gradual rise from 6.7% in July which could add volatility in the short-term. Meanwhile, the world equity market is ignoring the fact that the Fed will retain its aggressive rate hike strategy given high levels of inflation assuming that much is factored in.

Mohit Nigam, Head – PMS, Hem Securities

On the technical front, the key resistance level for NSE Nifty 50 index is 18,100 and on the downside 17,700 can act as strong support. Key resistance and support levels for Bank Nifty are 40,900 and 40,000 respectively.

Wall Street hits more than two-week high on energy, tech gains

Posted on by

Energy and technology shares powered U.S. stock indexes to their highest in more than two weeks on Monday ahead of a crucial inflation reading this week that could determine the pace of interest rate hikes by the Federal Reserve.

The three major indexes have gained for four consecutive sessions as investors took advantage of a sharp drop in stock prices since mid-August that was triggered by concerns over soaring inflation and the impact of tighter monetary policy to curb it.

All eyes are on consumer prices data on Tuesday for any signs that price pressures may be easing. Headline inflation is expected to rise at an 8.1% pace over the year in August, compared with 8.5% in July. Core CPI, which strips out volatile factors such as energy and food, is expected to increase to 6.1% from 5.9% in the previous month.

A recent retreat in commodity prices, especially oil, has boosted hopes that the worst of price pressures is over, with the New York Fed’s monthly consumer expectations survey on Monday showing U.S. consumers’ inflation expectations over the next 12 months slid further in August.

“It’s possible that we see the headline (inflation) number flattish, maybe even negative. The equity market is of the belief that the Fed will blink in the face of weaker economic data because of the rate hiking that they’ve been doing from the beginning of the year,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

“I don’t think they’re going to dial back anytime soon … the issue right now is that even with a good inflation number, it is still going to be well above the Fed’s target of 2%.” Policymakers last week downplayed the importance of any single data point, and emphasized their determination to keep raising rates until there is a sustained drop in inflation, which has been running at 40-year highs.

Also Read| MCX gold price to trade sideways to weak this week, investors await US CPI inflation data; check support level

Money markets are pricing in a 91% chance of a third straight 75 basis point increase by the U.S. central bank on Sept. 21. At 11:50 a.m. ET, the Dow Jones Industrial Average was up 221.67 points, or 0.69%, at 32,373.38, the S&P 500 was up 36.68 points, or 0.90%, at 4,104.04, and the Nasdaq Composite was up 112.19 points, or 0.93%, at 12,224.49.

Analysts also noted the recent rally in the S&P 500 came after the benchmark index tested and held the 3,900 level, seen as a significant technical support level, on several occasions over the past two weeks. All of the S&P 500 sectoral indexes rose, led by a 2.2% jump in energy shares. Oil prices climbed as supply concerns mounted amidst uncertainty over Iranian nuclear talks.

Rate-sensitive technology and growth stocks such as Microsoft Corp, Amazon.com, Tesla Inc and Apple Inc added between 0.7% and 3%, providing the biggest boost to S&P 500 and the Nasdaq. Bristol-Myers Squibb Co gained 5.5% after the U.S. Food and Drug Administration approved the company’s oral treatment for adults with plaque psoriasis.

Shares of Amgen, which makes psoriasis drug Otezla, fell 3.5%.

Carvana Co jumped 8.2% as Piper Sandler upgraded the online used-car seller’s stock to “overweight” from “neutral”, saying it is grossly undervalued.

Twitter Inc slipped 1.7% after the social media company said it did not breach any agreement for paying a whistleblower and that Elon Musk’s attempt to terminate his $44 billion deal was invalid.

Advancing issues outnumbered decliners by a 4.14-to-1 ratio on the NYSE and by a 1.81-to-1 ratio on the Nasdaq.

The S&P index recorded 11 new 52-week highs and no new low, while the Nasdaq recorded 29 new highs and 36 new lows.

Accenture: Revenue rises 15% in fourth quarter

Posted on by

By Nomura research

Accenture recoreded $15.42 bn of revenue in Q4FY22 (+22% y-o-y in constant currency or cc terms), near the top end of its guided band of $15.0-15.5bn. Growth was strong in both consulting (54% of the revenue, which grew 22% y-o-y in cc) and outsourcing (23% y-o-y growth in cc) for Q4FY22. Ebit margin at 14.7% was up 10bp y-o-y. EPS at $2.60 was up 18% y-o-y.

o Order booking remains strong, led by outsourcing: New bookings at $18.4 bn rose 23% y-o-y. While consulting order book growth was slow at 5.4% y-o-y (first single digit y-y growth since Q4FY20), outsourcing bookings at $9.9bn were up 40.4% y-o-y. Accenture noted that the demand pipeline is strong and the book-to-bill ratio increased to 1.2x at the end of Q4FY22, from 1.1x in Q3FY22.

Also Read: Power Grid Rating: Buy| A power-packed deal on the cards

o FY23E guidance indicates demand moderation, yet above pre-covid levels:Accenture has guided revenue growth for FY23E to be at 8-11% in cc terms and expects 6% cross-currency impact in reported numbers. Revenue growth guidance includes 2.5% inorganic contribution in FY23E vs 5% in FY22. Q1FY23E revenue growth guidance stood at 11-14% in cc. On the Ebit margin front, Accenture has guided for 15.3-15.5% in FY23E, representing 10-30bp y-y improvement. We note that guidance of FY23E is still above pre-covid levels of 5-8% for FY17-20.

o ACN’s guidance of 8-11% revenue growth in cc terms indicates softening of demand for IT services. ACN noted that certain industries are facing higher impact from inflation and are re-prioritising spends towards cost initiatives. In our recent report — more evidence for revenue growth slowdown — we had highlighted the impact of high inflation on tech spends by various industries, based on our channel checks. We reiterate our cautious stance on the demand outlook and believe consensus’ revenue growth estimates for FY24E will likely see downward revisions.

o Cross currency will likely continue to be a material headwind to the reported growth of Indian IT companies in FY23F. Higher depreciation of European currencies will likely negate benefit of INR’s depreciation against USD to Indian IT companies, in our view.

o Attrition remains high and sticky. Accenture reported sequentially flat attrition number of 20% (+100bp y-o-y) in Q4FY22. Net employee addition for Accenture remained low at ~12k, despite high and sticky attrition rates due mainly to supply-side headwinds. We expect attrition to remain elevated over the next few quarters for Indian IT companies.

Retain our cautious stance on the sector; prefer large-caps over mid-caps: We remain concerned on the demand outlook for Indian IT services — refer to our detailed downgrade report published in May. Recently we highlighted signs of a further weakening demand outlook.

More evidence for revenue growth slowdown . We continue to believe that investors are likely to get disappointed on margins in FY23F and on growth in FY24F. We prefer large-caps over mid-caps in the current environment. Our preferred Buy ideas are Infosys and TechM (in large caps), in that order, and Persistent (in mid-caps). Our preferred Reduce ideas are TCS (in large cap) and LTI (in mid-caps).

Blackstone sells 77 m Embassy REIT shares for $325 million

Posted on by

Global fund Blackstone fund is understood to have sold 77 million shares of Embassy REIT for $325 million (about Rs 2,650 crore) to monetise investments, by selling its shares in Embassy Office Parks REIT, according to sources.

Embassy Office Parks REIT is the country’s first real estate investment trust (REIT), which was launched last year by realty firm Embassy Group and global investment firm Blackstone, to raise nearly Rs 5,000 crore. The REIT is listed on the stock exchange. The sale of units of the REIT to institutional investors was done through block deals at Rs 345 per share.

ICICI Prudential, HDFC Life and Kotak Mutual Fund are among other buyers.

Also read: India defers govt bond index inclusion to next year; $30 bln opportunity pushed back due to operational issues

The Embassy Group has around a 15% stake in the REIT. This is the third time Blackstone is monetising its investment in Embassy REIT.

Blackstone is the largest office owner in India with an office portfolio of around 100 million sq ft, across 38 assets in seven cities. Of this, around 13 million sq ft of offices are under construction and 16 million sq ft are for future development.

Blackstone has launched two REITs in the country — Embassy REIT and Mindspace REIT. It has already exited from Mindspace REIT.

Embassy REIT is India’s first publicly listed REIT. It owns and operates a 42.8-million square feet portfolio of eight infrastructure-like office parks and four city-centre office buildings in India’s best-performing office markets of Bengaluru, Mumbai, Pune and the National Capital Region (NCR).

Also read: Bank of Baroda hikes FD rates by up to 20bps

Its portfolio comprises 33.8 million square feet of completed operating area. The portfolio also comprises strategic amenities, including four operational business hotels, two under-construction hotels and a 100-MW solar park supplying renewable energy to tenants.