Stock Market Investment Shot, 8th August 2023

As the results announcement for Q1FY24 reach the last stage, SBI emerged as the most profitable Indian company, beating Reliance Industries in the quarter. For the trailing 12 months, net profits of SBI stood at Rs66,860 crore compared to Rs64,758 crore for Reliance Industries. Even in Q1FY24, the net profits of SBI stood at Rs18,537 crore compared to Rs16,011 crore for Reliance, which took a hit on its O2C vertical. On the other hand, SBI saw a sharp gain in profits due to higher NII, improved NIMs and lower provisions.

SEBI laid out its reforms agenda for FY24, giving broad guidance of the direction it is moving. The proposed measures pertain to digital assurance of financial statements, more accessible e-voting and limiting risks in derivatives. SEBI will also focus on new price discovery mechanism for delisting and greater disclosures for unlisted entities affiliated to large business houses. SEBI chairperson, Madhabi Puri Buch, also pointed to some serious governance lapses among listed companies concerning related-party transactions (RPTs).

The auto component industry turnover grew at 33% in FY23 to touch Rs5.59 trillion, the best growth in recent years. This was aided by pent-up demand, better supply chain flows, and growing demand for SUVs in India. EV related business accounted for 2.7% of sales. The exports of auto components were up 5% yoy at $20 billion, but input imports from China also spiked. Auto components industry saw 3% growth in exports to Europe and an 8% growth in exports to the US, despite recession fears in both the economies.

HDFC Bank is likely to see an allocation upgrade by FTSE Russell, one among the key index-related service providers globally. The revised free float of HDFC Bank post-merger, will be implemented in 3 tranches starting Sep-23, with the second and third tranche in Dec-23 and Mar-24. FTSE Russel has decided to do the shift in 3 tranches to avoid the impact of the projected upweight on foreign headroom. It may be recollected that post the merger with HDFC Ltd, HDFC Bank is among the 5 most valuable banks globally.

Indian banks wrote off Rs34,428 crore in Q1FY24in terms of provisions for doubtful debts. This has allowed them to bring the gross NPAs lower. However, this is lower than the Rs44,898 crore written off in the year ago quarter. Most banks have seen their gross NPAs falling to 3.5% and their net NPAs to below 1%. State owned banks accounted for bulk of the write-offs at Rs27,303 crore. The biggest write-offs were done by PSBs like Central Bank, PNB, BOI, BOB, Indian Bank, and Union Bank. YES Bank led private bank write-offs.

In an aggressively positive move, the central government has set a target to undertake budgetary capital expenditure (capex) of Rs6 trillion (60% of Budget Estimates for FY24) in H1FY24 itself. This is also intended to minimise the adverse effect of the global demand slump on India. This will also prevent disruptions in project implementation across states. That would be 76% higher compared to H1FY23. Union Budget 2024 had already upped the capex target by 36% to Rs10 trillion to trigger a capex led recovery in GDP growth.

After five consecutive months of net inflows into equities, FPIs have turned net sellers in August, till date. However, there are still 3 weeks to go in August, so things could change. Between May and July, FPIs had infused nearly $17 billion into Indian equities. However, August has seen tepid FPI flows on account of Nifty touching 20,000 levels. Also, the US rating downgrade by Fitch has resulted in risk-off flows. A key indicator, FPI long positions in index futures, has also dipped from the 30-day average of 63.8% to 43.9%.

India Cements reported a loss of Rs73.58 crore in Q1FY24, compared to a net profit of Rs83.83 crore in Q1FY23. Even net sales were down 5.1% at Rs1514 crore, while a surge in operating costs led to the EBITDA falling 83.7%. Even in the sequential quarter, India Cements had posted a net loss of Rs218 crore, due to higher costs and lower sales volumes. Last quarter, India Cements had also taken a one-time hit of Rs114 crore against certain investments and advances. Cost of fuel and power were sharply up in Q1FY24.

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