Sensex Trades in Green; Metal Stocks Drag

Mon, 8 May 01:30 pm

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After opening the day marginally higher, share markets in India have continued the momentum and are trading above the dotted line. Sectoral indices are trading on a mixed note with stocks in the realty sector and stocks in the auto sector trading in green, while stocks in the metal sector are leading the losses.

The BSE Sensex is trading up by 98 points (up 0.3%), and the NSE Nifty is trading up by 36 points (up 0.4%). Meanwhile, the BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.6% The rupee is trading at 64.22 to the US$.

In news from stocks in the FMCG sector. P&G Hygiene & Healthcare (P&G) share price was in focus today after the company declared its quarterly results after market hours on Friday. The stock went on to hit its record high in the morning trading session.

P&G, which follows a July to June fiscal year declared its third quarter results. The company reported a 2.6% rise in net profit to Rs 996.3 million for the quarter. As compared to a net profit of Rs 971 million in the January-March quarter a year ago,

The company's net sales during the quarter under review rose 7% to Rs 6.2 billion from Rs 5.8 billion in the year-ago period.

P&G Hygiene and Health's board declared a special interim dividend of Rs 362 per share or 5% of its current market price. Its previous dividend was Rs 36 per share in November 2016.

Procter & Gamble Co.'s listed subsidiaries in India are paying a huge dividend to shareholders, a major share of which will go to the parent company. The Indian subsidiaries' cash holdings will get depleted but their return ratios will improve, apart from improving the dividend yield in the current fiscal.

P&G Hygiene will pay out Rs 11.8 billion as dividend and Rs 2.40 billion as dividend distribution tax. As of 31 December, its cash and bank balance was Rs 12.2 billion.

The company's March quarter results along with the dividend announcement show them emerge from the shadows of notebandi.

The FMCG sector itself is still not out of the woods on the notebandi front, especially as the wholesale channel continues to be affected (requires subscription), which has affected sales to smaller outlets and in rural areas.

At the time of writing, P&G share price was trading up by 5%.

The earnings season for the final quarter and financial year FY17 has kickstarted. And while the markets are touching new highs, there is nothing to cheer about India Inc performance.

More than 150 companies have declared results so far. As an article in Business Standard suggests, the earnings growth has slid from 15.6% in FY16 to just 7.2% in FY17, making it the worst in three years

Earnings in Contrast With Market Trends

One must note that the actual performance for the last quarter of FY17 has been much below brokerage estimates.

So how can one make money in a rising market, with little support from earning trends and with brokerages getting it all wrong?

We believe a few super investors could provide the clue. These are the guys who've beaten the markets black and blue and have an eye for multi bagger stocks irrespective of the macro environment.

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What more, they are also tracking promoter activity and bulk and block deals to get insights on where the more knowledgeable investors are putting their money.

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In news from stocks in the IT sector. India's largest IT company, Tata Consultancy Services (TCS) announced it has opened a drone research lab in the United States.

The company said it has opened its first Drones Research Lab in Cincinati, Ohio in the United States to create drone-based solutions to meet the rising demand for unmanned aerial vehicles.

The facility provides both indoor labs, showcase, warehouse, and outdoor terrain footprints - aims to provides a rapid experimentation and co-innovation environment for customers to build solutions for specific industry problems in accelerated 30-60-90-day delivery cycles.

The company said that fully certified TCS pilots based at the research lab fly fully equipped drones to collect data for specific industry use cases. Advanced computer vision, machine learning and deep learning algorithms enable fully automated processing of the drone captured images to reveal precise insights.

One must note that Indian IT companies are currently reeling under the protectionism trend that has gripped major global markets. The most recent scenario is the H1-B visa issue which has potential to put pressure on Indian IT companies' margins.

An overall protectionism trend is expected to hit the Indian IT firms' bottom line. Especially in the US which accounts for more than 50% of revenues of India's IT majors.

Indian IT companies such as Infosys, Wipro, and TCS may have to bear a hit on their revenues for the short term.

However, we believe that it is unlikely that the companies will substantially bring down their focus on the US. Instead companies may look out for other means to reduce costs or protect margins.

That said, Indian IT companies will also need to rise to Trump's challenges. But fortunately, most were already gearing up for this. Trump may have only accelerated their defence.

At the time of writing, TCS share price was trading up by 0.9%.

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