YES Bank has decided to sell its mutual fund business as the private lender plans to focus on its core businesses. The bank has received proposals from six entities expressing interest to takeover YES Mutual Fund, which had assets under management of Rs 57 crore as of June 2020, down from Rs 2,000 crore in March 2019. The net losses of YES Mutual widened from Rs 4.5 crore in FY18 to Rs 16 crore in FY19. YES Bank, led by former SBI chief financial officer Prashant Kumar, decided to sell the mutual fund to cut losses and free up capital.
BSE Sensex and Nifty50 rallied over 7% each in July but the real action was in select mid & small-cap space. The S&P BSE Small-cap index and the S&P BSE Mid-cap index closed with gains of over 5% each. As many as 126 stocks in the BSE500 index rallied 10-80% in July that include names like Cadila Healthcare, PVR, Bank of Maharashtra, M&M, Dr Lal Pathlabs, L&T Infotech, and Laurus Labs, among others. A staggered buying strategy through SIPs in fundamentally strong small and mid-cap stocks is the right approach, especially when they are trading at decent valuations, experts suggest.
The market is at extremely overbought levels. Rollover data in frontline stocks suggests majority of the long positions have been carried forward to the next series, Jimeet Modi CEO, Samco Securities & StockNote said. Such extremely high optimism may lead to short-term corrections. LIC, whose public offer is expected to be the largest ever in the history of the domestic capital market, may take away precious liquidity from the market by Diwali 2020. A lot of other IPOs, too, are lined up for the next 2-3 months, a trend that historically signals capping of upside potential for the broader market.
Motilal Oswal expects Reliance Industries to report gross refining margin (GRM) at $9.0 per barrel for the June 2020 quarter against $8.1 a barrel in Q1FY20 and $8.9 a barrel in Q4FY20. The GRM is the difference between the total value of the refined petroleum products coming out of an oil refinery (output) and the price of the raw material, (input) which is crude oil. The margins are calculated on a per-barrel basis. GRM is typically expressed in US dollars per barrel. Typically, gross margin does not account for other costs such as energy, chemicals/catalysts, labor, materials, or fixed costs.
The Indian market has rallied about 50% from the March lows but there are as many as 18 stocks in BSE500 index that are trading below Price-to-Book (P/B) of less than 1, including Dish TV, Canara Bank, Union Bank of India, Bank of India, BHEL, Mahindra Lifespace, Indiabulls Real Estate and UCO Bank. But beware! The maximum number of stocks that look cheap on valuations could turn out to be a value trap. Investors should carefully analyze companies that are trading at cheap valuations, and avoid those with bleak future, weak fundamentals and having very poor growth visibility, suggest experts.
Dr Reddy's Laboratories share price touched a 52-week high of Rs 4,447.80, rising more than 3% in the morning trade on July 30, a day after the company reported a 12.6% YoY drop in consolidated net profit at Rs 579 crore for Q1FY21 compared with Rs 662.8 crore in Q1FY20. Revenue from operations during Q1FY21 stood at Rs 4,418 crore, up 15% YoY. The company continues to be one of the best companies in largecap pharma space structurally, though there is limited headroom for a further upgrade in earnings estimate and PE expansion. Motilal Oswal has kept the rating 'neutral'.
Market regulator Securities and Exchange Board of India (SEBI) has extended the timeline for submission of financial results for the quarter, half year and financial year ended June 30 by a month to September 15. As per SEBI rules, a listed company is required to submit its quarterly, half year and annual financial results within 45 days or sixty days as applicable from the end of each quarter or half year or financial year. Accordingly, listed entities were required to submit the financial results for the quarter or half year ended June 30, 2020, on or before August 14, 2020.
SGX Nifty traded 19 points lower at 11,215, signalling that Indian indices are headed for a tepid start on Thursday. Reliance Industries (RIL), HDFC, Dabur India, Piramal Enterprises, Cholamandalam Investments & Finance, JM Financial, Laurus Labs, Max Financial Services and Tata Communications are scheduled to announce their June quarter earnings on Thursday. Telecom major Bharti Airtel reported a consolidated net loss of Rs 15,933 crore in the April-June quarter. SpiceJet reported a net loss of Rs 807.1 crore in the fourth quarter of FY20. Tyres maker Ceat reported a loss for the April-June period as revenue contracted by over 36%.
Bharti-AXA General is likely to merge with ICICI Lombard in Rs 2,600 crore, all-stock transaction. The two firms are in talks for a merger deal, which is expected to be sealed soon subject to regulatory approvals. The valuation of Bharti-AXA has been pegged at Rs 2,600-2,800 crore. AXA, the French insurance and asset management major, which holds a 49 per cent stake in the company, may exit the general insurance business once the deal goes through. ICICI Lombard, one among the three listed general insurance companies, commands a market share of 8.4 per cent, as per the June 2020 figures.
Raymond Ltd., one of the world’s biggest producers of worsted wool fabric used to make quality suits, is cutting costs as people continue to work from home during the coronavirus outbreak which has slammed demand for business clothing worldwide. The Mumbai-based company is reducing jobs, rents, and marketing costs to decrease expenses by 35% for the current financial year, Chairman Gautam Hari Singhania said. It has also sought to freeze loan repayments under a one-time moratorium program offered by the RBI. Raymond has seen its shares suffer the biggest loss among global peers this year as the virus outbreak intensified.
Sensex has rallied by 49% in 4 months from the lows of 25,638 recorded on March 24 to 38,128 on July 24. However, rising COVID-19 cases still remains the biggest stumbling block. Secondly, FY20 turned out to be a year with flat Nifty EPS at 444. Prabhudas Lilladher had cut their FY21 and FY22 Nifty EPS by 14.4% and 12.1%. Thirdly, US presidential elections which will start in November 2020 could mark an important event for equity markets, suggest experts. Fourthly, the RBI macro stress test indicated that the Gross NPA ratio of banks could escalate to 12.5% for FY21.
IDBI Bank share price jumped 5% at open on July 29, hitting upper circuit of Rs 40.15 per share on BSE after the company declared its June quarter numbers. IDBI Bank on July 28 reported a standalone net profit of Rs 144.43 crore for the June quarter of FY21. The private sector bank posted a net loss of Rs 3,800.84 crore for April-June 2019-20. The bank's asset quality improved with Gross NPAs falling to 26.81% of the gross advances as at June 30, 2020 from 29.12% by June 2019. Net NPAs or bad loans came down to 3.55% from 8.02%.
IndusInd Bank will raise Rs 3,288 crore by selling shares through a preferential issue at Rs 524 apiece to a set of institutional investors as it shores up its capital buffer amid Covid-linked uncertainties. US-based hedge fund Route One, which received RBI approval to raise its stake in the bank to 10%, will invest Rs 935 crore, followed by Rs 850 crore from ICICI Prudential Life Insurance. Promoter group companies Hinduja Capital and IndusInd International will together invest Rs 792 crore to maintain their 15% stake. Tata Investment Corp, the investment arm of Tata Group, will invest Rs 300 crore.
Long-standing legal disputes and regulatory levies are dragging down the performance of Indian telecom companies who are yet to “emerge out of the woods,” Bharti group chairman Sunil Mittal said. "India still has some of the lowest data tariffs globally and the industry is barely able to cover the cost of capital," Mittal said. "It requires much more support to repair the deep damage to its finances and make it viable for telecom operators to invest in future technologies", he said. Bharti Airtel reported a total subscriber base of 283 million subscribers as at March-end and ARPU of Rs 154.
The Nifty50's price-earnings (P/E) multiple based on FY21 earnings has hit a 15-year high of 20.6 according to the Bloomberg data. It is 34% higher than the long-term average of 15.2. A major reason for the upbeat valuation is that analysts are now taking into account the FY22 estimated earnings, which may grow in double digits. On FY22 estimates, Nifty's current P/E works out to be around 17, which is 21% higher than the long-term average of 14 for the two-year forward P/E. Based on the two-year forward earnings, Indian equities are the most expensive after the US and Japan.