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Muted earnings by blue chips leads to weakness in domestic bourses..

Benchmark indices ended the week 1% lower on muted earnings posted by notable bluechips amid weakness among the global peers.

Further, concern over the fate of crucial legislations including Goods and Services Tax (GST) and land acquisition bill with the first week of the Monsoon Session of the Parliament being a complete wash out dampened the sentiments.

In the week to July 24, the BSE Sensex dropped 351 points or 1.23% to settle at 28,112.31 and the Nifty declined 88.30 points or 1.02% to end at 8,521.55. In the broader markets, BSE Mid-Cap index shed 0.64% and the BSE Small-Cap index lost 0.41%. 

Key events

The first week of the Monsoon session which began on Tuesday was a complete washout as the Opposition insisted on the resignation of BJP leaders involved in controversies.

Gold settled near five and a half week low amid fears of rate hike by the Federal Reserve later this year. Jewellery shares rallied amid easing gold prices. Gitanjali Gems, TBZ, Shree Ganesh Jewellery, Renaissance Jewellery, PC Jeweller and Rajesh Exports gained between 1-15%. 

Crude oil registered a weekly loss of more than 5 percent on oversupply glut amid China-demand worries.

On the global front, Shanghai gained for the third-straight week as investors believe that Beijing will cut interest rates to boost the market after China's factory activity hit a 15-month low. However, the rest of Asian peers ended lower tracking weakness in US markets on the back of disappointing quarterly numbers. 

Metal shares declined across the board on weaker-than-expected data from China and the euro zone raised concerns about global growth. Vedanta and Tata Steel lost 8 percent and 6 percent respectively.

Earnings review

Infosys surged nearly 9 percent after it reported a 5 percent jump in the net profit on y-o-y basis at Rs 3,030 crore and a robust volume growth for 2015-16.

Wipro dipped 0.4 percent after the net profit of the company declined by 3.7 percent on sequential basis. However, it posted a 4 percent rise in its net profit to Rs 2,189 crore as compared with the corresponding quarter in 2014-15. 

Sun Pharma tanked nearly 12 percent after the drug maker issued a profit warning saying profit might be adversely impacted in financial year 2015-16 owing to expenses related to its integration with Ranbaxy, as well as remedial action at plants under the scanner.

HDFC Bank reported a 21% growth in the net profit to Rs 2,695.7 crore on the back of an increase in net interest income. However, bad loans rise marginally. The stock ended 0.3 percent lower.

HUL reported profit of 0.2 percent on a y-o-y basis to Rs 1,059 crore, which was below the streetís expectations. The stock lost nearly 2 percent during the week.

Bajaj Auto shed 1 percent after the companyís operating profit failed to meet the street expectations. 

Lupin slumped 15 percent after after it reported 16% y-o-y drop in its consolidated net profit at Rs 525 crore for the quarter ended June 3, due to lower sales.

GAIL gave off 3 percent after it reported a 32 percent slump in net profit for the quarter ended June 2015 on lower production and price realization. 

Axis Bank shed 3.5 percent after the percentage of gross Non Performing Assets (NPA) inched up to 1.38% in June quarter from 1.34% in the same quarter a year ago. However, it reported a 18.72% rise in net profit to Rs 1,978 crore.

Reliance posted a 4.4 per cent increase in consolidated net profit for the June quarter of 2015-16 at Rs 6,222 crore post market hours on Friday on the back of six-year high refining margins and strong petrochemicals earnings. The stock gained 0.3 percent.

Ajconís view

The macroeconomic data, progress of monsoon rains, developments during the monsoon session of parliament, policy decision by the US Federal Reserve, trend in global markets, investment by foreign portfolio investors (FPIs), the movement of rupee against the dollar and crude oil price movement will dictate trend on the bourses in the coming week.

Investors will keenly watch out for the futures & options (F&O) expiry for the month of July on Thursday, 30 July 2015.

Tech Mahindra, HDFC, Maruti Suzuki India, Punjab National Bank, Yes Bank, Bank of Baroda, Dr Reddy's Laboratories, IDFC, ITC, Kotak Mahindra Bank and NTPC will announce the results in the coming week.

The Federal Open Market Committee (FOMC) policy meeting on 28-29 July 2015 will be patiently awaited. 

We recommend accumulation in fundamentally strong midcap stocks available at attractive valuations in PSU Banking & Financial Services, Infrastructure, Real Estate, Engineering, Automobiles, Capital Goods, Packaging, Logistics and Pharma.



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"Forum Views" Magazine Published by Brokers Forum of India. (April 2014)
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Ashoka Ajmera

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