Stock Market Investment Shot, 17th May 2023

The southwest monsoon is likely to arrive late over Kerala coast this year. The IMD is projecting touch down on 04th June. However, SKYMET has pegged monsoon arrival on 07th June. The IMD estimate hints at 3 day delay. The IMD has had a good track record in its operational forecast, being correct in 17 of the last 18 years. However, the Kharif cropping is also a function of the distribution of rainfall and the timely arrival. IMD has predicted normal monsoons this year at 96% of LPA, while SKYMET pegs a deficient year.

Bharti Airtel reported 49% growth in net profits at Rs3,006 crore for Q4FY23. It also had exceptional gains of Rs413 crore in the quarter. Revenues were up 14.3% yoy at Rs36,009 crore in Q4FY23. Bharti Airtel has reported average revenue per user (ARPU) at Rs193; up 8.4% yoy but flat sequentially. It showed good growth in top line and operating profits in the India mobile business and also in the Africa mobile business. In Q4FY23, Airtel added 12,500 towers to augment its coverage. Capex for the quarter was Rs11,436 crore.

In a recent report, Morgan Stanley expects an amalgam of cyclical and structural tailwinds to benefit the Indian economy. As per the report, for FY24, India is expected to contribute 16% of the incremental global GDP for the period, which is the highest it has ever been. The manufacturing PMI is already at a 11-year high and in March the economy had seen record GST collections. While merchandise exports are likely to get hit in FY24, that is likely to get more than offset by the robust domestic demand and services exports.

Bank of Baroda reported 168% higher net profits for Q4FY23 at Rs4,775 crore on the back of lower provisions and sharp 33.8% growth in net interest income (NII). The NIMs expanded by 45 bps to 3.53% in Q4FY23. Provisions and contingencies fell by 62% to Rs1,421 crore. While advances grew 18.5%, deposit growth was 15.1%. Gross NPAs fell to 3.79% in March 2023 while the net NPAs fell to 0.89%. The provision coverage ratio (PCR) improved from 88.71% to 92.43% yoy. Most PSU banks reported stellar Q4 numbers.

Berkshire Hathaway has restructured its financial sector bets amidst the US banking turmoil. It has exited US Bancorp and Bank of New York Mellon, while buying Capital One Financial. Bank failures this year had raised concerns about liquidity among the mid-sized banks. It also cut positions in its old favourite bank stock, Wells Fargo. In the March 2023 quarter, the Warren Buffett company was a net seller of equities and pocketed $10.4 billion from net stock sales. Buffett also exited TSMC of Taiwan on geopolitical risks.

It is now exactly one year since the LIC IPO and the shareholders are far from happy. The stock of LIC is still down close to 34% from the listing price and 40% from the IPO price of the stock. With individuals moving to the new tax regime, demand for LIC policies is likely to be severely hit. The new tax regime came as a big blow to the insurance sector. However, fundamental analysts continue to be positive on the stock purely on the back of the massive opportunity matrix in India due to a large uninsured population.

The latest NFO to hit the market is the HDFC Defence Fund NFO, the first of its kind in India. As the name suggests, the fund will invest in defence and allied sectors. It will follow a bottom-up approach to portfolio construction within the defence ecosystem. Initiatives like Make in India had been conducive to growth of defence sector in India. The fund will invest in companies with good quality management and having a demonstrated track record. The NFO opens for subscription on 19th May and closes on 02nd June 2023.

MakeMyTrip, the online travel company, has posted net profits of $5.4 million for the March 2023 quarter. This compares favourably with a net loss of $4.1 million during the same period last year. Gross bookings stood at $1,674 million, up 65.4% yoy on the back of a sharp revival in travel in India. In fact, gross booking grew 80.7% in constant currency terms. The company benefited from robust recovery in travel demand and improved consumer sentiments. Apart from boosting revenues, the company optimized costs too.

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