Market Recap for 8 June 2021

Nifty50: 15,740 ▼-11 (-0.0%)
Sensex:  52,275 ▼ -52 (-0.1%)

Today, the markets opened with a gap-up, but soon slipped into the red. While they remained in negative territory, they steadily inched up through the day to close nearly flat.

The market breadth was positive, though, with 27 of the Nifty50 stocks closing in the green. Among the Nifty sectoral indices, IT and Pharma were the top gainers, while Metal and Bank were top losers.

Here are the top stories of the day.

Auto sales expected to recover soon

• As per news reports, automobile sales could recover in the next two months as several states have started easing lockdown restrictions. Around 40-45% of the total 26,000 automobile dealerships opened this Monday after being shut for over a month. The Nifty Auto index has already gained about 3.6% this month. 
• The street believes that two-wheeler sales could take longer to bounce back given their higher dependence on rural demand, which was hit hard by the second wave. However, a normal monsoon could boost prospects. Meanwhile, shares of major two-wheeler companies such as Hero Moto (1.6%), Bajaj Auto (1.8%) and TVS Motor (5.1%) have gained so far this month.

JSPL steps up steel production 

• Jindal Steel and Power (JSPL) has ramped up its steel production in the current financial year. The company’s steel production has gone up 31% year-on-year to 13.7 lakh tonnes in April and May. 
• However, the sales are lagging behind the production and have increased by a mere 7% YoY to 10.5 lakh tonnes. The reason for subdued sales growth is the slowdown in domestic construction due to the second wave and logistical challenges. The stock was down almost 1% today. 

Mrs Bectors posts strong profit growth

• The recently listed bakery products maker posted a robust 41% profit growth in the March quarter. During the same period, revenue from operations rose 15% to ₹224 crore. The revenue growth was driven by higher export of biscuits and better growth witnessed in the bread and bakery segments. 
• During FY21, the company reduced its net debt by 55% to ₹33 crore. It says that while retail sales increased, sales to QSRs and other institutions were impacted due to the pandemic. However, growth was seen even in these segments in the second half of FY21. The stock closed 1.8% higher today and has gained over 52% from its issue price of ₹288.

Fairchem Organics soars as profits jump

• Shares of specialty chemicals maker Fairchem Organics were locked in the 20% upper circuit today. This comes after it reported a 67% YoY growth in its Q4 profit to ₹18.8 crore. The strong growth in profit was aided by a 79% YoY rise in revenue from operations. 
• The stock has risen by 50% in the current financial year. Meanwhile, the company also announced a dividend of ₹3.50 per share.

Closing bell

Performance of the benchmark indices was impacted today by weakness in the index heavyweights such as Reliance Industries and the HDFC twins. Further, major international markets were also trading in the red. The US Treasury secretary stated that higher interest rates would be a ‘plus’. She hinted that interest rates, which have been low for a decade now, may rise in the future. These comments took the markets by surprise.

Good to know

What is net debt?

Net debt is a company’s total borrowing minus the cash reserves it holds. This reveals whether a company will be able to meet its debt obligation if it becomes due immediately. Similarly, the debt-to-equity ratio (D/E) is also an important metric to understand how leveraged and stable a company is. Basically, it’s the ratio of owed to owned funds. High D/E ratio means the company is financing its growth by borrowing heavily. However, it’s also important to note that the D/E ratio should be seen in the context of the industry. For instance, asset-heavy sectors including power and utility usually have a high leverage ratio but offset this risk with steady or consistent income. 

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Investment in securities markets is 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.