26th October 2020 Highlights: Markets down by 1.3%, Q2 results corner, Amazon-Reliance tussle, & more.
-26th October 2020-
Sensex 40,145.50 ▼ 1.33%
Nifty 11,767.75 ▼ 1.36%
The markets ended down by over 1.3% today. The fall today is most likely a result of a global sell-off witnessed today. Auto and metal stocks were the main losers.
It is not very difficult to gauge what would happen to the markets if heavyweights such as Reliance Industries (-3.7%), ICICI Bank (-2.7%), HDFC Bank (-1.5%) and Infosys (-0.7%) decline on the same day. Reliance, in particular, was weighed down by the deal with Future Group being put on hold for now. All major indices felt the heat and closed lower, with Nifty Metal (-3.5%) and Nifty Auto (-3.2%) being the worst hit. In all, 39 of the Nifty50 stocks ended in the red, indicating that the selling was broad-based.
Top Gainers (Nifty)
HDFC Life Rs 580.40 ▲ 2.90%
Nestle India Rs 16259.35 ▲ 2.48%
Kotak Mahindra Bank Rs 1416.90 ▲ 2.45%
IndusInd Bank Rs 616.65 ▲ 1.40%
Power Grid Rs 172.10 ▲ 1.15%
Top Losers (Nifty)
Hero MotoCorp Rs 2897.95 ▼ 6.85%
Bajaj Auto Rs 2895.00 ▼ 6.10%
Hindalco Ind. Rs 172.45 ▼ 5.35%
M&M Rs 597.15 ▼ 4.48%
JSW Steel Rs 308.30 ▼ 4.03%
Here are the top stories of the day.
Q2 Results: Kotak Mahindra Bank, SBI Life
Kotak Mahindra Bank
The net profit of the bank was reported at Rs 2,184.48 crores in the July to September quarter. This is a 26.67% increase from the same quarter last year.
The bank’s total interest earned rose 1.1% to Rs 6,836.05 crores during the same time frame.
The bank's asset quality improved in net terms. Net non-performing assets (Net NPA) improved to 0.64% of the net advances in the previous quarter from 0.87% in the April to June quarter.
Gross NPA too improved from the previous quarter. It was reported at 2.55% in the quarter under review and 2.7% in the previous quarter.
Provisions for bad loans and contingencies came down to Rs 368.59 crores for the reported quarter, from Rs 407.93 crores parked aside in the same quarter last year.
The shares of the bank ended 2.45% higher at Rs 1,416.9 per share.
What are GNPA and NNPA?
Gross NPA is the total of all assets that are classified as non-performing as per RBI guidelines.
Net NPA is the total of all non-performing assets minus the provision left aside. Provisions are the amount a bank sets aside from its profits to cover for losses that a bank may or has incurred.
So, net NPA is the amount we get after adjusting GNPA with provisions.
SBI Life Insurance
The net profit of SBI Life rose almost 130.8% to Rs 299.73 crores.
Net premium income increased 22% to Rs 12,857.95 crores during the quarter under review from Rs 10,111.51 crores a year ago.
The shares of SBI Life rose 1.06% to Rs 778.85 per share.
What is the net premium income?
Net premium income is the revenue earned by the insurer from periodic premium payments by policyholders.
Auto stocks witness broad sell-off
Until last week, the markets were upbeat about the auto volumes during the festive season. However, this week started with sharp selling in auto stocks, especially two-wheeler makers such as Hero Moto (-6.6%) and Bajaj Auto (-6.1%). Automakers have been building inventory at dealerships ahead of the festive season in anticipation of robust sales. However, whether or not retail sales will clear the inventories remains to be seen. The picture will be clearer only after the festive season, around mid-November. One could expect the action in auto stocks to continue as large auto companies will declare results this week (Tata Motors on Tuesday, Hero Moto on Wednesday, Maruti and TVS on Thursday). The markets would particularly watch out for the management commentary on the expectation of sales in the festive season and beyond. Further, monthly volume numbers for October will be out starting early next week, which are also likely to move stock prices. Shares of large auto companies that were down today include M&M (-4.6%), Eicher (-3.2%), Tata Motors (-2.4%) and Maruti (-0.6%).
Polycab surges as profitability improves
India’s largest manufacturer of wires and cables reported a 14.8% jump in net profit over Q2 of last year. This spike in profits comes despite a 6% drop in revenues during the same period. The dip in revenue growth was mainly due to a 7% fall in the wires and cables segment, which contributes nearly 85% of the revenues. However, margin improvement was seen across business segments, including wires and cables, fast-moving electrical goods (FMEG) and engineering procurement and construction (EPC). Control over fixed costs, better product pricing and premiumization of FMEG products helped to increase operating margins to 14.8% (versus 12.0% last year). The stock gained 7.4% today in an otherwise weak market.
Vedanta Approves Dividend After Failed Delisting
Vedanta’s board approved an interim dividend of Rs 9.5 per share. This will amount to a total of Rs 3,500 crores.
The record date for the dividend is October 31. The payment date has not been specified yet.
This comes days after the company’s delisting bid failed on October 10.
To be eligible for the dividend, one needs to be a shareholder of the company as on the record date.
The shares of Vedanta fell 0.86% to Rs 103.85 per share.
Amazon Gets Favourable Ruling in Future Group-RIL Deal
Amazon received a favourable ruling in Singapore with regards to the Future Group-Reliance Industries deal.
Future Retail has been told by the arbitration panel in Singapore to not proceed with the deal with Reliance Retail.
Amazon had approached the Singapore International Arbitration Centre (SIAC) earlier this month against the deal between Reliance Industries and Future Group.
What had happened?
Reliance Retail Ventures Ltd. (RRVL), a subsidiary of Reliance Industries Ltd. (RIL) had announced the acquisition of the retail, wholesale, logistics, and warehouse businesses from the Future Group. The deal was worth Rs 24,713 crores.
However, Amazon had picked up a 5% stake in Future Retail in 2019; and according to the agreement between Amazon and Future Retail, Amazon has the first right to buy the group.
It had also reportedly said that Future Retail must seek consent from Amazon before selling any stake to a third party.
Tech Mahindra dips on profit-booking
In line with what was seen in other IT stocks recently, Tech Mahindra too witnessed profit booking despite better-than-expected results. The stock fell 3.3% today, after having risen nearly 50% since July 2020. The company reported net profit of ₹1,065 crore for Q2, beating the expectation of ₹999 crore. Its revenue grew 2.9% over the last quarter on constant currency terms, which was a tad lower than other IT majors, which grew around 4.0% during the same period. The management emphasised that customers are focusing on digital transformation and that it has seen demand revival across multiple segments.
Reports of Kotak Mahindra Acquiring IndusInd Bank
Some reports in the media are stating the Kotak Mahindra bank might be exploring acquiring IndusInd Bank. Some reports go even as far as writing that talks for the same are ongoing right now.
Kotak Mahindra Bank has declined to comment on the matter while promoters of IndusInd Bank have denied this move.
Closing bell
The markets didn’t find any saviour today as several major stocks saw selling pressure. Further, the India VIX (the measure of market volatility) shot up 4.6% to 22.8 today (up ~17% this month). In the run-up to the US Presidential Election, volatility is expected to rise as the week progresses. In fact, the week’s close could be a nail-biter with Reliance declaring its Q2 results on Friday.
Daily Change: 1-Day Change
🥇 Gold: Rs 51,019 ▼ 0.02% at 6 PM
🥈 Silver: Rs 61,951 ▼ 1.71% at 6 PM
🔀 USD-INR: Rs 73.85/USD ▲ 0.31%
Dow Jones: 28,331.62 ▼ 0.11 - Oct 23
Nasdaq: 11,547.14 ▲ 0.36% - Oct 23
Long Term: 20-Year Returns
Sensex: 12.59%
Nifty: 12.16%
Dow Jones: 5.14%
Nasdaq: 6.50%
HAPPY INVESTING!
SEE YOU TOMORROW
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