Mutual Fund Activity in January, Top Q3FY21 Results, and Buzzing Stocks Today

Tue, 9 Feb Pre-Open

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After staging a gap-up opening, Indian share markets witnessed positive trading activity throughout the day yesterday and ended on a strong note.

Benchmark indices extended their winning streak into sixth straight session yesterday with both Sensex and Nifty ending at record closing highs.

At the closing bell yesterday, the BSE Sensex stood higher by 617 points (up 1.2%).

The NSE Nifty closed higher by 192 points (up 1.3%).

M&M and Bajaj Finserv were among the top gainers.

Both, the BSE Mid Cap index and the BSE Small Cap index ended higher by 1.5%.

On the sectoral front, gains were largely seen in the metal sector, automobile and IT sector.

Gold prices for the latest contract on MCX were trading up by 0.1% at Rs 47,313 per 10 grams at the time of closing stock market hours yesterday.

In news from the financial space, the Reserve Bank of India (RBI) said it will aim to purchase up to Rs 200 billion worth of government bonds via open market operations on Wednesday.

The above move pulled yields down by five basis points with the benchmark gauge trading at 6.03%.

Four sets of sovereign papers are included in the proposed purchase plan with residual maturities ranging from 4 to 14 years.

The RBI has so far bought about Rs 2.5 trillion of net debt in the current financial year. The figure will be as high as Rs 3 trillion by end-March as authorities are keen to shrink the spread between the 10-year bond yield and repo rate to around 150 basis points from more than 200 basis points.

Top 5 Factors Why Indian Share Markets Rallied Yesterday

Firm Global Cues: Asian share markets hovered near record highs yesterday on hopes that a US$ 1.9-trillion Covid-19 aid package will be passed by US lawmakers this month just as coronavirus vaccines are being rolled out globally.

Recovering Economy: Last Friday, the Reserve Bank of India (RBI) said India's economy was coming back on track. With the beginning of the vaccination drive, economic growth was likely to pick pace, the central bank said sharing the outcome of its bi-monthly monetary policy committee meeting.

FII Inflows: Foreign portfolio investors (FPIs) remained net buyers to the tune of Rs 122.7 billion in Indian share markets in the first five trading sessions of February, as positive sentiment after the Union Budget 2021 sparked a rally.

Q3FY21 Earnings: So far, India Inc's earnings reports have beaten analysts' expectations, improving investor sentiments.

Sectoral Indices End in Green: Barring FMCG stocks, all sectoral indices ended in green yesterday and the BSE metal index and the BSE auto index surged over 3%.

We will keep you updated on how these factors develop in the coming days and what effect they have on Indian stock markets. Stay tuned!

Speaking of stock markets, note that the Budget announcements cheered Dalal Street last week as the NSE Nifty hit all-time high of 15,014 on Friday. The index surpassed its previous highs today and rose as much as 1.4% to 15,160.

Now, the important question on traders' minds is does the market have enough steam left to extend last week's gains fueled by the budget announcements?

Last week in Momentum Moves, Brijesh Bhatia spoke about what traders can expect on budget day.

In this week's video, Brijesh talks about how the charts say that the Nifty rally will likely pause this week. As per Brijesh, we might see Nifty reversing from the resistance zone of 15,070-15,450.

Tune in to the video to find out more:

Top Stocks in Focus Today

Bharat Heavy Electricals (BHEL) will be among the top buzzing stocks today.

As per a leading financial daily, India may consider BHEL, Mecon and Andrew Yule and Co. among candidates for the next round of disinvestment pick.

SBI Capital Markets, the adviser to the proposed stake sale in BHEL, recently submitted its report to the department of investment and public asset management (Dipam) on the plan. This will help the government's thinking on whether to proceed with the stake sale in India's largest power equipment maker and the amount of stake that would be sold.

Market participants will also track Adani Enterprises share price.

Shares of the company hit a fresh 52-week high of Rs 683 yesterday, up 7% after Adani Airports completed acquisition of 23.5% stake in Mumbai Airport.

Mutual Funds Pull Rs 129.8 Billion from Equities in January

In news from the mutual funds space, continuing the selling spree for the eighth consecutive month, mutual funds pulled out Rs 129.8 billion from equities in January as surge in markets provided an opportunity to book profits.

Overall, mutual funds withdrew a net of over Rs 564 billion in 2020, data available with the markets regulator showed.

Despite withdrawals from mutual funds in the past few months, stock markets have continued to rise as flows from FPIs have been robust.

Foreign portfolio investors (FPIs) have put in Rs 194.7 billion in the Indian equity markets in January after investing Rs 1.7 lakh crore in 2020.

According to the data, MFs pulled out Rs 129.8 billion from equities in January. This has taken the outflow to over Rs 948 billion since June.

On the other hand, mutual funds put in Rs 118.3 billion in debt markets in the month under review.

Individually, MFs withdrew Rs 264.3 billion in December, Rs 307.6 billion in November, Rs 144.9 billion in October, Rs 41.3 billion in September, Rs 92.1 billion in August, Rs 92 billion in July and Rs 6.1 billion in June.

However, they invested over Rs 402 billion in the first five months of the year (January-May). Of this, Rs 302.9 billion was invested in March.

Key Q3FY21 Results: M&M and Divi's Laboratories See Healthy Rise in Net Profits

Mahindra & Mahindra (M&M) reported a healthy performance in the quarter ended December (Q3FY21) with a 39.6% year-on-year (YoY) growth in net profit at Rs 5.3 billion.

The company's revenue from operations grew by 16% YoY in Q3FY21 with strong tractor volumes. The company sold 97,420 tractors in the domestic market in Q3FY21, registering a 20% growth over the corresponding period on a robust rural story but sales from its automotive business fell 7% to 115,272 vehicles due to challenges on the supply side and commodity prices.

At the operating level, its earnings before interest, tax, depreciation and amortization (EBITDA) rose by 33.4% YoY and margins expanded 220 bps to 17% compared to the corresponding quarter, driven by cost optimisation and operating leverage.

However, the company posted an exceptional loss of Rs 12.1 billion for the December quarter, representing impairment provisions for certain long-term assets and other exposures. The profit before exceptional loss stood at Rs 17.5 billion for the quarter.

The company expects the industry to log around 20%YoY volume growth in the tractor segment for FY21. Outlook for domestic tractor industry in the near to medium term stays healthy on account of good water reservoir levels, high crop acreage (Rabi acreage at the highest level of 65 million hectares), procurement (Kharif procurement up 27%YoY in 9MFY21) and remunerative prices.

From the pharma space, Divi's Laboratories reported a 31% YoY increase in net profit to Rs 4.7 billion and a 22% YoY increase in revenue to Rs 17 billion for the quarter ended December.

Operating profit or earnings before interest, tax, depreciation and amortisation (EBITDA) for the Hyderabad-based company rose 45% from the previous year to Rs 6.8 billion whereas margins expanded 640 basis points to 40.5% from 34.1% last year. The company said that its planning, design, research and execution contributed to improvement in margins.

In general, its Customs Synthesis business has higher margins as compared to generics. However, this quarter had a higher share of generics (60:40). Despite this, there was an improvement in margins.

In December 2020, Divi's Laboratories became only the second listed pharma company in India after Sun Pharma to cross the Rs 1 trillion market capitalisation mark.

The company in its conference call has said that it is confident of sales and margins improving in the future. It also said that it is venturing into contract media API in a big way for high volume products.

We will keep you posted for more updates from this space. Stay tuned.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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