▲ Nifty: 12,263 (+1.18%) ▲ Sensex: 41,893 (+1.34%)
The Indian markets had a gap-up opening today and were able to maintain the upward momentum till the end of the day. The positive move was supported by Reliance Industries (+3.5%) and financial institutions such as HDFC Bank (+3.0%), Kotak Mahindra Bank (+2.3%) and HDFC (+1.7%). Meanwhile, Maruti (-2.8%), Gail (-1.8%) and Bharti Airtel (-1.5%) were among the top losers in the Nifty50. Overall, this week has been positive for the markets, and the Nifty50 gained of over 5%.
Here are the top stories of the day.
Voltas hits lifetime high on impressive results
India’s leading AC maker Voltas reported Q2 revenue from operations of ₹1,612 crore, significantly higher than street estimates of around ₹1,300 crore. It’s room-AC business contributed nearly 35% of the revenue and grew by 9% on a year-on-year basis. The room-AC segment saw a 60% drop in sales in Q1 when the country was reeling under the lockdown. In Q2, the company not only saw revival in sales, but also marginally increased its market share to 26.8% in August 2020 versus 26.2% in Q1. Its projects business (which contributes nearly 58% of revenues) posted a 15% revenue growth. It has an order book of ₹6,852 crore, more than double the sales of last year. Although the company’s Q2 consolidated net profit fell 26% over the same period last year on account of provisions made in the projects business, the numbers were above street expectations. Voltas’ shares gained 1.0% today and hit a new lifetime high. The recent ban on AC imports augurs well for the company and its peers.
MRF zips ahead on improved margins
MRF’s Q2 consolidated revenues from operations rose 6% on a year-on-year basis to ₹4,244 crore. Crucially, the Chennai-based tyre maker witnessed a near 80% growth net profits. Lower raw material costs and tight control on operating costs allowed the company to expand its operating margin from 8% last year to around 14% in Q2. Today, the stock was up 2% intraday but ended negative (-0.5%). It has gained nearly 4.9% this month. Most tyre makers are seeing growth in the replacement market. However, recent reports suggest that dealer-level sales in the festive season so far are not as encouraging as the manufacturers’ volumes. While the exact picture would be clear after Diwali, sluggish dealer-level sales could lead to an inventory pile-up. In such a scenario, the outlook for automakers and ancillary manufacturers, such as tyre companies, could weaken.
India Cements makes a comeback
India Cements saw a sharp rise in its net profits in Q2 to ₹71.4 crore as compared to ₹16.9 crore in Q1 this year and ₹8.7 crore in Q2 last year. The jump in profits is attributed to lower raw material cost and cost control across the board. However, its revenues were down 14% versus the same period last year. The stock rose almost 6% intraday, but saw profit booking and closed nearly flat (-0.1%).
In October 2020, shares of most cement makers, such as ACC (+18.3%), Ambuja Cement (+19.6%) and JK Cement (+22.8%), have outperformed the Nifty50 (3.5%) by a wide margin.
Closing bell
The US Fed has kept the interest rates unchanged, which is favourable for the markets. Meanwhile, the outcome of the US presidential election seems nearly certain. It remains to be seen whether the above developments are already factored in and the market will witness a reality check now. Further, the US unemployment data will be released today, and upbeat numbers could provide a further boost to an already rising market. However, any shock may not be received well. Back home, the Nifty50 is just a whisker away from its all-time high and the mood is bullish. At this point, what is almost forgotten is the ongoing India-China border tensions, which could pose a risk to the markets.
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Investment in securities markets are subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by RKSV group. Investors should consult their investment advisor before making any investment decision.
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