Markets this week
Indian equity markets closed the week on a high with Nifty recording its greatest single day gain since January 2015 – it gained about 1.95 percent on Friday. On a weekly basis, however, the 30 scrip CNX Nifty remained flat closing at 8,518.55 (down 46.05 points or 0.53 percent from its previous weekly close at 8,564.60 points). The 50 scrip BSE Sensex closed at 28,067.31 points vis-a-vis last week’s closing at 28,236.39 points – a decline of 169.08 points or 0.59 percent.
The week closed with FM Arun Jaitley announcing a slew of reforms for PSU banks under the Indradhanush scheme. This announcement is likely to have a marked effect on the movement of the equity markets next week.
Corporate earnings
This week Coal India announced its earnings for the quarter ending 30 June 2015. The coal major posted a decline in its consolidated net profit for the quarter by 6.67 percent to INR 37,643.50 million. Its profit for the same quarter last fiscal year was pegged at INR 40,332.80 million.
The country’s largest lender, State Bank of India (SBI), declared its June quarter results this week beating market expectations to reach a 10.25 percent increase in net profits. Bad loans provisions also declined for the quarter. SBI’s net profit rose to INR 3,692 crore this quarter from INR 3,349 crore from the same period last year.
IDBI Bank also reported a growth in net profit by about 27 percent. The bank reported a net profit of INR 135 crore for the June quarter Vis-a-vis a net profit of INR 106 crore for the quarter ended 30 June in 2014.
Indian drug major Sun Pharmaceuticals reported a 60 percent year on year decline in its net profit to about INR 479 crore for the June quarter. The company made a net profit of INR 1,205 crore in the same quarter a year ago. Sun Pharma said that the quarterly earnings had been adversely impacted by exceptional loss, increased tax expenses, and reduced income from other quarters. The exceptional loss is related to costs pertaining to the Ranbaxy merger.
Construction major, DLF declared a dip in net profit by 5 percent to INR 121.55 crore for the June quarter. An increase in operational costs and higher costs of finance caused the decline, said the company.
Jet Airways posted a Q1 profit of INR 221.7 crore and a total income of INR 5220 crore on Friday. This is a growth of INR 484.4 crore or 187.8 percent compared to the profits in same quarter of the previous financial year.
Hindalco’s profits for the June quarter fell by about 67 percent to INR 107.19 crore and this is attributed to lower realisation in Q1.
Government earns INR 65,896 crore dividend from RBI
India’s central bank, the Reserve Bank of India (RBI) has decided to transfer INR 65896 crore surplus to the Government of India – the highest dividend ever paid to the government. In June 2014, the RBI paid the government INR 52,679 crore. This year’s amount is about 25 percent more than that amount. It is also way higher than the budget estimates that pegged the surplus transfer at about INR 54,200 crore. The RBI believes this will help the government in its battle to rein in the national fiscal deficit. This process of transferring the surplus to the government of India as dividend was initiated last year. The RBI’s financial year runs from July through June and this decision comes after its June 2015 closing.
Prior to the initiation of such surplus transfer, the RBI used to allocate any such surplus amounts to contingency funds and towards development of assets and apart from contingency funds to meet any internal operations. In 2014, however, a committee chaired by YH Malegam suggested that the RBI has enough reserve funds without the need to add to the kitty for three consecutive years. It further said that the RBI may transfer its entire surplus to the government to aid the government’s challenge to reduce the fiscal deficit gap.
June IIP at 3.8 percent, July WPI, CPI rates decline
Inflation figures released this week bring a great deal of relief both to the government and to the masses. Retail inflation (Consumer Price Index) declined to a record low of 3.78 percent in the month of July. Wholesale Price Index (WPI) inflation figures also showed a considerable decline falling to about -4.05 percent in July. The WPI inflation for June 2015 was estimated at -2.4 percent and the month on month change seems to be a heartening one. CPI or retail price inflation also showed a slower growth of 3.78 percent (down from 5.4 percent in June 2015), although the prices of onions and pulses have grown sharply in July. The index of food items grew at about 2.15 percent vis-a-vis a growth of 5.48 percent the previous month.
The Index of Industrial Production (IIP) rose to a four month high and was pegged at 3.78 percent in June from 2.7 percent in the previous month. Considering that the IIP growth expectation for June was a mere 2.93 percent, this news must bring cheer to the manufacturing sector. Consumer goods and consumer durables seem to have done pretty well but the capital goods sector has contracted indicating a need for more investments and better industrial environment. India’s Finance Minister said that the figures indicate the country’s firm movement on the economic growth path. Along expected lines, India Inc. is now making a strong case for a rate cut by the RBI.
Tatas stake in AirAsia to go up
The Tata group is in negotiations to take its stake in the low cost airline carrier AirAisa from 30 percent to 41.06 percent, said news reports this week. “We are in the process of subscribing to the capital of AirAsia India which will take up our stake to 41.06 per cent from the current 30 percent”, the Tatas announced. AirAsia is a joint venture between the Tata Sons group, Malaysia’s AirAsia Berhard which owns 49 percent stake and Telestra Tradeplace which now holds 21 percent stake. Tatas are likely to acquire their additional stake from Telestra Tradeplace.
