Equities rally amidst volatility; all eyes would be now on new Finance Minister’s commentary, onset of monsoons, RBI policy, global cues and upcoming Union Budget..
On a weekly basis, the
S&P Sensex and Nifty gained 0.7 and 0.6 percent respectively on the back of
mixed earnings from India Inc, swearing ceremony of Modi 2.0 government and
allocation of portfolio to the ministers. The Sensex ended 279.48 points higher
at 39,714.2, while Nifty ended at 11,922.8, up 78.7 points in the last week.
The S&P BSE Midcap
index added 1.01 percent, Smallcap Index rose 1.14 percent and S&P BSE
Largecap Index was up 0.77 percent in the last week. The Nifty
Auto index underperformed the sectoral indices with a fall of 3.3 percent
during the week.
On a weekly basis, the
rupee shed 16 paise to end at 69.68 on May 31 against the May 24 closing of
In a key development, President
Donald Trump has terminated India’s designation as a beneficiary developing
nation under the key GSP trade programme after determining that it has not
assured the US that it will provide “equitable and reasonable access” to its
The Generalized System
of Preference (GSP) is the largest and oldest US trade preference programme and
is designed to promote economic development by allowing duty-free entry for
thousands of products from designated beneficiary countries. On March 4, Trump
announced that the US intends to terminate India’s designations as a
beneficiary developing country under the GSP programme. The 60-day notice
period ended on May 3. The Trump administration has prioritised working with
the Government of India to ensure that US
companies have a
level-playing after Shri Narendra Modi was elected as Prime Minister for a
second time following his spectacular electoral victory in the general
Meanwhile, auto companies remain under
pressure. Mahindra & Mahindra Ltd.'s auto sales fell 3 percent on a yearly
basis to 45,421 units in May, due to subdued purchases of vehicles in the
election season, according to its stock exchange notification. Its tractor
sales fell 16 percent year-on-year to 24,704 units. Maruti Suzuki India Ltd.’s
sales declined for the third consecutive month, the most since August 2012.
Maruti Suzuki India Ltd.’s sales declined the most in nearly eight years. The
company sold 1.34 lakh units last month, a fall of 22 percent from May 2018.
Sectors & Stocks
of Hindustan Petroleum Corporation (HPCL) hit a 52-week high of Rs.
330, up 4 per cent, after surging 20 per cent in two weeks on the BSE, lifted
by strong earnings in March quarter (Q4FY19) and fall in
crude oil prices. In comparison, the S&P Sensex was up
5 per cent during the same period. The stock surpassed its previous high of Rs
325 touched on June 18, 2018. The oil prices fell to their lowest in
nearly three months after US President Donald Trump said he would impose
tariffs on imports from Mexico, stoking fears about global economy.
HPCL had reported 70 per cent year-on-year (YoY) growth in net profit at
Rs. 2,969 crore in Q4FY19, on account of a better-than-expected performance in
the marketing segment. EBITDA (earnings before interest tax depreciation and
amortization) increased 55 per cent YoY to Rs 4,660 crore in Q4FY19, supported
by an inventory gain of Rs 920 crore. The state-owned oil marketing
company (OMC's) board has recommended final equity dividend of Rs 9.40 per
share for the financial year 2018-2019.
shares rallied as much as 4.11 per cent in the morning deals on Friday, a day
after the company reported an impressive 362.46 per cent jump in its net profit
at Rs 6,024.23 crore for the quarter ended March 31, 2019. The coal mining company had
posted a net profit of Rs 1,302.63 crore in the corresponding qurater of the
previous fiscal year. The company’s net revenue rose 7.53 per cent to Rs
28,546.26 crore as against Rs 26,547.58 crore logged in the fourth quarter (Q4)
of FY18. “Better average realisation in both coal, Fuel Supply Agreement (FSA)
and e-auction sales coupled with operational cost control propelled the company
to its best ever financial performance. Importantly, coal quality
variance was under control and we have been able to arrest the grade slippage
to large extent”, a company official said.
At Ajcon, we believe the government with
full majority will now have to focus on to boost consumption in the economy,
ease liquidity in the system, focus on infrastructure development, fasten
implementation of policy measures and create an environment to boost employment
in the economy and make India vibrant to attract FDI in economy. The recent GDP
numbers and jobless data have thrown scare in the equity markets coupled with
America’s termination of India as a BDN under key GSP programme and
comparatively weaker monsoon forecast. Unless, there are some faster and bold
initiatives taken by the Government; we may see the markets going down in near
However, on a long term basis, Indian equity markets
are in a structural bull run as the benefits of implementation of GST,
Insolvency and Bankruptcy code, digitization and a stable government coming
back to power would augur well for the economy in the long run.
At present, we believe that most of the largecaps have
rallied significantly. We believe there is huge value unlocking possible in
beaten down quality midcaps and smallcaps. The strategy at present should be to
book profits in a few select largecaps and invest in phased manner only in
companies which have a robust business model, strong earnings and cashflow
visibility, low debt and backed by quality management especially on the
corporate governance front.