Friday fever

Nifty50: 17,185 ▲ 171 (+1.0%)
Sensex: 57,919 ▲ 684 (+1.2%)

Hello, folks!

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• After a strong gap-up opening, benchmark indices closed higher amid positive global cues.
• In all, 30 of the Nifty50 stocks closed in the green. 
• India’s wholesale inflation for September eased to 10.7% from 12.4% in August.

Among the Nifty sectoral indices, Financial Services (+1.8%) and Bank (+1.7%) saw the most gains, while Oil and Gas (-1.0%) and Realty (-0.8%) were the top losers.

What’s trending

⭐ IRDAI approves HDFC Life-Exide Life merger

HDFCLIFE (NSE): 522 ▲ 2 (+0.3%), EXIDEIND (NSE): 154 ▼ 0.5 (-0.3%)

Insurance industry regulator IRDAI has given its final approval for the merger of Exide Life into HDFC Life. In January 2022, HDFC Life had fully acquired Exide Life Insurance from its parent firm Exide Industries in a cash and stock deal aggregating to ₹6,687 crore. After the merger, Exide Industries will acquire a 4.12% stake in HDFC Life.

⭐ Bajaj Auto’s profit jumps

BAJAJ-AUTO (NSE): 3,564 ▼ 40 (-1.1.%)

Bajaj Auto reported a 20% YoY rise in its Q2 net profit at ₹1,530 crore. Meanwhile, total revenue from operations rose by 16.4% to ₹10,202 crore, surpassing the ₹10,000 crore milestone for the first time. Domestic volumes nearly doubled over the last quarter across both two-wheelers and three-wheelers. Continued improvement in semiconductor supplies have enabled the company to build its inventory ahead of the festive season.

⭐ BHEL to set up coal gasification plants

BHEL (NSE): 61 ▲ 0.8 (+1.4%)

Shares of public sector company BHEL rose nearly 3% intraday after it announced that it has entered into a non-binding MoU with Coal India and NLC India (NLCIL) for setting up coal gasification plants in the country. As part of this, BHEL intends to set up a coal-to-ammonium nitrate project with CIL based on gasification of high ash Indian coal and a lignite-based gasification pilot plant with NLCIL for power generation.

⭐ Cyient’s profit takes a dip

CYIENT (NSE): 762 ▼ 10 (-1.3%)

IT firm Cyient reported a 9% year-on-year (YoY) fall in its Q2 net profit at ₹110 crore. However, its revenue from operations rose by 25% YoY to ₹1,396 crore. The company has also announced an interim dividend of ₹10 per share for its investors. The management expects margins to improve during the rest of the year. It is confident about delivering modest growth aided by large deals in the pipeline and growth in key accounts.

In Focus

IT firms continue on growth track

IT companies have kicked off the Q2 results season, and they’ve mostly come out with flying colours. Despite slowdown concerns in key markets like US and Europe, tech firms seem to have weathered the impact as sequential growth numbers continue to remain strong. Let’s take a closer look.

⭐ Revenue & profitability

All the major IT firms reported sequential growth in revenue and net profit. TCS reported a 4.8% QoQ rise in revenue, while its net profit rose by 9.9%. Meanwhile, Infosys’s revenue rose by 5.9% sequentially and its net profit rose by 12.3%, the highest among peers. Similarly, HCL Tech and Wipro also reported 5.2% and 4.9% rise in revenues, respectively.  

⭐ Revenue guidance 

Revenue guidance, which gives a glimpse of the future outlook, remains intact for most firms. Infosys raised its constant-currency revenue guidance for FY23 to 15-16% from 14-16%, while HCL Tech raised its guidance to 13.5-14.5%. Wipro expects 0.5-2% revenue growth in the December quarter.

⭐ Attrition rate

All the companies saw a moderation in employee attrition, which had been elevated in the last few quarters. TCS has the lowest attrition rate at 21.5%, while other firms reported attrition rates in the range of 23 to 27%. Normalisation of attrition rate might offer some support to margins in the coming quarters.

⭐ Dividend payout 

Backed by buoyant quarterly results, 3 out of the 4 firms announced dividends for their shareholders. TCS declared an interim dividend of ₹8 per share, while HCL Tech announced a ₹10 per share dividend. Infosys announced share buyback worth ₹9,300 crore and dividend payout of ₹16.5 per share. Wipro has not declared an interim dividend this quarter.

Overall, the quarterly numbers suggest that short-term demand is still intact for IT firms. However, they are keeping a close eye on the economic situation in Western countries, which are their major markets.

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Good to know

What are retained earnings?

Retained earnings or reserves refer to the surplus profits that a company is left with after paying dividends. A growth-oriented company doesn’t usually pay a dividend and uses these retained earnings to expand its business. Higher retained earnings either indicate that a company has a strong financial record or it is struggling to find opportunities to invest for the growth of the business. 

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