Indian Indices Turn Volatile; Yes Bank Slips 4% ahead of Q2FY20 Results

Fri, 1 Nov 12:30 pm

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Share markets in India are presently trading on a volatile note. Sectoral indices are trading on a mixed note with stocks in the realty sector and telecom sector witnessing buying interest, while energy stocks and consumer durable stocks are witnessing selling pressure.

The BSE Sensex is trading down by 36 points while the NSE Nifty is trading down by 12 points. The BSE Mid Cap index and the BSE Small Cap index are trading up by 0.5%.

The rupee is currently trading at 70.87 against the US$.

Amid the volatility witnessed in stock markets lately, Tanushree Banerjee, in the video below, talks about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times.

Tune in to find out more...

In news from the energy sector, shares of Indian Oil Corporation (IOC) slipped over 4% today after the company reported 83% year-on-year (YoY) decline in profit before tax (PBT) at Rs 8,144.8 million for the quarter ending September, owing to higher inventory losses and a decline in refinery margin.

The company had recorded Rs 48,057.4 million PBT during the same period last year.

Net profit came in at Rs 5,634.2 million as against Rs 32,469.3 million during the same period in the previous year.

Revenue from operations declined by 12.7% to Rs 1.3 trillion, as against Rs 1.5 trillion during the same period a year ago.

The company's inventory loss was seen at Rs 18.1 billion during the quarter, as against an inventory gain of Rs 28.9 billion last year.

Gross refining margin (GRM) was US$ 1.28 a barrel during the quarter versus US$ 6.79 a barrel a year ago. The GRM during the first half of year 2019-20 was US$ 2.96 a barrel, as compared to US$ s8.45 a barrel in the corresponding period of a year ago.

In a press conference on Thursday, the company's Chairman Sanjiv Singh said "the decline in profit during the quarter was mainly on account of inventory loss against an inventory gain during the previous year."

Further, he indicated that the company's interests on the upcoming stake sale process by the government in Bharat Petroleum Corporation (BPCL) would depend on the offer by the government.

IOC share price is presently trading down by 2.3%.

Speaking of quarterly results and corporate profits, economic growth (GDP) and corporate profit growth hardly go hand in hand.

Over the past few years, the share of corporate profits to GDP has steadily declined.

This is evident in the chart below:

Rebound in Corporate Profits May Not Immediately Reflect in GDP

As per Tanushree Banerjee, the revival of capex cycle may cause corporate profits to soar much faster than the GDP growth. Investors who stay focused on macro numbers may miss this bus.

Moving on to news from the telecom sector, shares of Vodafone Idea rallied over 15% today after the UK's Vodafone Group dismissed rumours of it exiting its India operations, and said that it was supportive of the local management and was also actively engaging with the Indian government.

Vodafone Group, in a media statement, said "Vodafone is aware of the unfounded and baseless rumours circulating in some of the Indian media that we have decided to exit the market. We would like to categorically state that this is not true and is malicious."

The British telecom firm said that it is actively engaging with the government and is fully supportive of its local management as they continue to manage our joint venture in these challenging times.

Note that Vodafone Idea is among the worst hit by a recent Supreme Court judgement that backed a broadened definition of adjusted gross revenue (AGR), which has left the telco facing dues worth over Rs 390 billion in license fees, spectrum usage charges, penalties and interest.

The company's active subscriber base declined from 334.1 million in the March quarter to 320 million in the June quarter.

It had posted a loss of Rs 48,739 million in the June quarter, despite witnessing higher data consumption on its network and signing up more 4G subscribers.

In a major blow to telecom companies Bharti Airtel and Vodafone-Idea, the supreme court last week ruled that the existing definition of AGR will prevail.

The verdict allows the government to recover Rs 920 billion of AGR from the financially stressed telecom industry that includes many operators who have already gone out of business or are under insolvency proceedings.

The payout by telcos could rise to an estimated Rs 1.3 trillion once spectrum usage charges (SUC) linked to AGR are taken into account.

Industry body Cellular Operators Association of India (COAI) said the ruling will deal a "disastrous blow" to the industry, given its precarious financial condition.

According to the new telecom policy, telecom licensees are required to share a percentage of their adjusted gross revenue (AGR) with the government as annual license fee.

In addition, mobile telephone operators were also required to pay spectrum usage charges for the use of radio frequency spectrum allotted to them.

How all this pan out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

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

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