Smoother ride ahead for auto cos?

Nifty50: 15,721 ▼ -26 (-0.1%)
Sensex: 52,482 ▼ -66 (-0.1%)

After staying in the green most of the day, the markets succumbed to selling pressure in the last hour of trade. In all, 33 of the Nifty50 stocks closed lower today. 

Among the Nifty sectoral indices, IT (0.6%) stood as the lone gainer. Meanwhile, the Media (-0.7%) and Bank (-0.6%) indices were the top losers. 

Here are the top stories of the day.

Auto sales expected to normalise soon

• According to reports, the street expects auto sales to completely recover during the second half of FY22. This recovery is likely to be led by the improving economic conditions, pent up demand and easing of restrictions. 
• Passenger vehicle segment is expected to recover faster because of a preference for personal mobility. Tractor sales are also estimated to rebound much quicker than other segments led by normal monsoons and a good Rabi harvest season. Notably, the Nifty Auto Index has risen by 1.3% in June. Meanwhile, auto majors are expected to announce their monthly volumes tomorrow. 

GIC Re posts modest profit growth

• The state-owned reinsurance company reported a 6% year-on-year growth in Q4 net profit to ₹1,260 crore. The profit growth was aided by an increase in investment income and a fall in incurred claims (claims for which an insurer has to make payment). However, the company net premium fell by 2.5% YoY to ₹8,240 crore. 
• The management has warned that the pandemic has created significant uncertainties for future growth. It added that there could be some shrinkage in the purchase of insurance, which can have a cascading effect on reinsurance. Nonetheless, shares of GIC Re were up 1.9% today. 

Uflex surges on robust Q4

• Shares of the flexible packaging material manufacturer rose 20% today to hit a fresh lifetime high after the company posted strong results for the March quarter. Its consolidated net profit jumped 163% year-on-year to ₹265 crore, aided by healthy operational performance. Similarly, consolidated revenue from operations grew 45% to ₹2,564 crore.
• The company said it witnessed a rise in demand for packaging materials and added newer clients. Uflex has announced capital expenditure of ₹120 crore to meet the growing demand for aseptic packaging used in food and pharma sectors. It will finance the capex through owned and borrowed funds. 

EID Parry’s Q4 profit shrinks

• Shares of the Chennai-based sugar and nutraceutical company fell 4% today after it reported a 75% year-on-year drop in its consolidated net profit for the March quarter. Its profits stood at ₹61 crore for Q4. 
• Its sales declined by 8% to ₹3,907 crore, mainly because of a 27% drop in the sugar business, which contributes a fifth of the total revenues. Notwithstanding a weak Q4, its shares have risen over 33% in this fiscal.

Closing bell

The markets have declined for three straight days this week. However, on a broader basis, the benchmark indices have been flattish for most of this month. Performance of the sectoral indices suggests that banks were out of favour this month, with an overall fall of 2%. On the other hand, the IT index rose over 7%, which indicates that investors are confident about its growth prospects owing to the recovery in developed countries and rising digital transformation. Further, despite the weakness in the Nifty50, the Midcap100 and Smallcap100 indices closed positively, suggesting that investors are preferring to select individual stocks rather than a sector-specific strategy. 

Good to know

What are alpha and beta in investing?

Alpha refers to the returns generated by an asset in excess to its benchmark index’s returns. For instance, if shares of an auto company rise by 10% in a month against an 8% rise in the benchmark Nifty Auto Index, it means the stock has generated an alpha of 2%. The higher the alpha of an asset, the better it is, and anything more than zero is considered to be a good alpha. On the other hand, beta is a parameter to evaluate an asset’s volatility compared to its benchmark index. A beta of more than 1 means that the asset is more volatile than its benchmark. Conversely, if it’s lower than 1, then it is less volatile than the benchmark. Together, these two metrics help an investor to understand the risk (volatility) and reward (higher returns) related to an asset. 

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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.