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Calm Nifty Weekly Expiry! IT Stocks Fall – Post-Market Analysis

NIFTY started the day at 19,822 with a small gap-up of 11 points. Right from opening, the index moved in a 75-point range between 19,770 and 19,845. Nifty closed at 19,794, down by 17 points or 0.09%.

Nifty chart October 12 - post-market analysis | marketfeed

BANK NIFTY (BNF) started the day at 44,571 with a gap-up of 55 points. Throughout the day, the index consolidated in just a 110-point range between 44,550 and 44,660. BNF closed at 44,599, up by 82 points or 0.18%.

Bank Nifty chart October 12 - post-market analysis | marketfeed

All indices except Nifty IT (-1.67%) and Nifty Realty (-0.18%) closed flat-to-green. Nifty Media (+3.02%) moved up the most.

Major Asian markets closed up to 1.8% in the green. European markets are currently trading in the green.

Today’s Moves

Coal India (+1.7%) was NIFTY50’s top gainer. The company said a three-day strike called by five central trade unions has been deferred.

Aster DM Healthcare (4.9%) surged over 9% following reports that private equity firms BPEA EQT and Ontario Teachers’ Pension Plan Board have shown interest in acquiring the company’s assets, including its India business.

MMTC (+19.95%) rose sharply following the Central Govt’s nod to royalty rates of 3% each for lithium and niobium and 1% for Rare Earth Elements (REEs).

Tech Mahindra (-2.72%) was NIFTY50’s top loser. 

All stocks in Nifty IT fell after the Q2 results reported by TCS yesterday were weaker than analysts’ estimates. 

Laxmi Organics (-5.7%) fell sharply after rallying over 11% yesterday.

Markets Ahead

Major indices held the upper levels and consolidated in a small range today. A breakout or a breakdown from these zones can give us good directional moves.

Nifty: The immediate support in the index is near 19,780. Meanwhile, the immediate resistance to watch out for is the 19,880 level. A breakout from there could take Nifty up to 19,945 and 20,000 levels eventually.

Bank Nifty: The immediate support is near 44,400. A breakdown from this level might take the index down to 44,180 and 44,080. On the other hand, 44,750 is the immediate resistance to watch out. A breakout from there may give us targets of 45,000 and 45,100.

How was Nifty expiry day? Are you in net profit or loss? Let us know in the comments section below!

Please tune in to The Stock Market Show at 7 PM on our YouTube channel.

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Daily Market Feed Post Market Analysis

Bearish Weekly Closing in Nifty! Big Move Incoming? – Post-Market Analysis

NIFTY started the day at 19,301 with a gap-down of 63 points. The index tried moving up initially, but it took rejection from yesterday’s low of 19,330 levels and fell to 19,250 levels. Then, it mostly consolidated in a 50-point range. Post 1:30 PM, good buying kicked in, which took the index all the way up to 19,375 levels. However, the index couldn’t sustain the up-move and fell back below 19,300 zones. Nifty closed at 19,310, down by 55 points or 0.28% 

Nifty chart August 18 - post-market analysis

BANK NIFTY (BNF) started the day at 43,724 with a gap-down of 166 points. The index mostly consolidated throughout the day between 43,770 and 43,960 levels with a negative bias. BNF closed at 43,851, down by 40 points or 0.09%. 

Bank Nifty chart August 18 - post-market analysis

All indices except Nifty Media (+0.65%), Nifty PSU Bank (+0.23%), Nifty FMCG (+0.22%), and Nifty Metal (+0.2%) closed in the red. Nifty IT (-1.47%) fell the most.

Major Asian markets closed up to 2% in the red. European markets are currently trading in the red.

Today’s Moves

Adani Ent (+3.94%) was NIFTY50’s top gainer. Adani Ports (+%), Adani Green (+6.5%), Adani Power (+6.3%), and Adani Trans (+6.04%) rose sharply today.

Adani Group stocks were in focus after reports suggested that the Abu Dhabi National Energy Company PJSC (TAQA) is planning an investment of up to $2.5 billion in the group’s power business. However, both parties have denied all reports.

Vardhman Textiles (+7.9%) surged on the back of strong volumes.

Hero MotoCorp (-2.14%) was NIFTY50’s top loser.

TCS (-2%), Mphasis (-2.09%), INFY (-1.6%), TechM (-1.7%), Wipro (-1.4%), and other IT stocks fell today.

Manappuram Finance (-3.89%) fell the most in over three months after a block trade.

Markets Ahead

Markets are holding the major support levels but are clearly bearish and facing selling pressure in every uptick. On a weekly time frame, both indices have closed in the red for the 4th consecutive week.

If there’s a negative opening on Monday, we can expect the bearishness to continue!

Nifty: The index closed just above 19,300 zones but is still under heavy selling pressure. The immediate supports to watch out for are 19,300 and 19,250 levels (the lows from today and Wednesday). The immediate resistance will be 19,400 levels.

On a daily time frame, Nifty is moving in a down-trending channel. If there’s a gap-up opening, the markets could take a pause and be volatile. On the other hand, a weak opening can trigger a fall to 19,200 and 18,900 levels.

Bank Nifty: The index is still in our volatile zone between 44,500 and 43,400. Bank Nifty can continue to be volatile and hit stop losses on both sides as long as it trades in this range. The immediate resistance now will be 44,100 and immediate support will be 43,650 levels.

Do wait for the volatile range to be broken to get better clarity on the upcoming trend.

Meanwhile, Jio Financial Services will list on NSE and BSE on Aug 21. Reliance moved up with strength following the news today.

How did this week go? Are you in net profit or loss? Let us know in the comments section of the marketfeed app.

Don’t forget to tune into The Stock Market Show at 7 PM on our YouTube channel!

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Daily Market Feed Post Market Analysis

Bearish Weekly Closing in Nifty – Post-Market Analysis

Post-Market Analysis for August 4, 2023:

NIFTY started the day at 19,462 with a gap-up of 81 points. Throughout the day, the index was trading between or stuck between yesterday’s high and today’s opening levels of 19,500 and 19,440, respectively. Nifty closed at 19,517, up by 135 points or 0.7%. 

Nifty chart - Aug 3 post-market analysis

BANK NIFTY (BNF) started the day at 44,754 with a gap-up of 241 points. Initially, the index fell to yesterday’s closing price and support zone of 44,500 levels. Then, it gave a strong up-move till 45,100, fell 500 points back to 44,600 zones, and then took resistance back at 44,900-45,000 levels. BNF closed at 44,879, up by 366 points or 0.82%. 

Bank Nifty - Aug 4 post-market analysis

All indices except Nifty PSU Bank (-0.7%) and Nifty Auto (-0.33%) closed flat-to-green. Nifty IT (+1.5%) moved up the most.

Major Asian markets closed mixed. Germany’s DAX and UK’s FTSE100 are trading in the red, while France’s CAC40 is trading in the green.

Today’s Moves

Cipla (+3.7%) was NIFTY50’s top gainer. World’s largest private equity fund, Blackstone, is set to submit a non-binding bid to acquire the entire 33.47% promoter stake in Cipla.

Zomato (+10.07%) surged after posting its first-ever profit of ₹2 crore in Q1.

IT stocks Coforge (+2.58%), Wipro (+2.3%), TechM (+2.84%), LTIM (+1.46%), TCS (+1.28%) and others moved up with strength.

SBIN (-2.9%) was NIFTY50’s top loser. The bank’s net profit jumped 178% YoY to ₹16,884 crore; beating street estimates.

JM Financial (-7.12%) fell heavily after its Q1 number disappointed investors.

Mahanagar Gas (-5.75%) shares fell even as profit nearly doubled in Q1.

Markets Ahead

Markets are at important long-term support zones: 19,300 for Nifty and 44,200-500 zones in Bank Nifty. If there’s global positivity and a breakout on the upside, we can expect the markets to move further up!

Nifty: The important support zone for Nifty is clearly 19,300 (but the immediate support can be 19,400). The next resistance level to watch out for is 19,500 zones. A breakout from 19,520 levels can give us targets of 19,600 and 19,730 levels in the coming week. A breakdown can give us targets of 19,300 and then eventually 18,900 in the coming weeks.

Bank Nifty: The major support in Bank Nifty is a larger zone between 44,200-500. The important resistance will be 45,000. A breakdown from the support zone can give us a target of 43,000. A breakout on the upper side can give us targets of 45,300 and 45,750 in the coming week.

Markets had a bearish week. But if there’s a follow-up, it can turn into major bearishness for a few months. If support is taken at the levels mentioned above, the markets can bounce back!

Meanwhile, reports say the U.S. jobs report on Friday will help the Federal Reserve understand how its changes in monetary policy are affecting things. It could also tell the Fed if the U.S. economy is slowing down enough to skip another increase in interest rates.

How did this week go? Are you in net profit or loss? Let us know in the comments section of the marketfeed app.

Don’t forget to tune into The Stock Market Show at 7 PM on our YouTube channel!

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Editorial

Major IT Stocks are Falling! Find Out Why!

The stock markets have not been kind to investors over the past few months. Foreign institutional investors (FIIs) have pulled out nearly Rs 1.65 lakh crore so far from the Indian equity markets this year. Major IT stocks (mostly considered defensive stocks historically) have been under heavy selling pressure. The NIFTY IT Index has fallen ~24% since the beginning of April. For comparison, the NIFTY50 fell 9% during the same period. TCS, Infosys, and HCL Tech have all plummeted 10% each since mid-April, while Wipro crashed ~17%! 

In this article, we discuss the factors behind the downtrend in IT stocks.

Reasons Behind the Fall in IT Stocks

Rising Inflation:

Globally, inflation rates are at sky-high levels. Goods and services have become expensive. India’s inflation rate has surpassed RBI’s projections due to many global factors, especially the Ukraine-Russia crisis and rising crude oil prices. It is time for the government to withdraw money out of the system.

The US Fed, Reserve Bank of India (RBI), and other central banks have increased interest rates aggressively. Unfortunately, this move could lead to a slowdown in the global economy. Many investors resorted to dumping IT stocks with high valuations in anticipation of a hike in interest rates.

To make matters worse, clients will be willing to spend less on digital projects, thereby affecting the revenues of IT firms.

Disappointing Q4 Results: 

Even though IT giants like Tata Consultancy Services (TCS) and Infosys reported healthy revenue numbers in the March quarter (Q4 FY22), it did not translate into a comparable increase in profits. Most IT firms reported lower-than-expected earnings with weak operating margins. Thus, market participants simply lost confidence in the IT sector.

Decline in Margins: 

The attrition rate within the IT industry remains at an all-time high. [The rate signifies the number of employees who had either resigned or retired and are not replaced. IT employees often have to endure long working hours and the pressure of meeting targets, leading to burnout.] Moreover, employee and travel costs have been rising rapidly after Covid-19 restrictions were lifted.

As a result of heavy competition and a limited supply of talent in the industry, most prominent IT firms are giving out salary hikes to retain employees. They have also resorted to mass hiring, which is a significant loss of man-hours and other resources. All these increased expenses are adversely impacting margins.

The Way Ahead

Most analysts are expecting IT stocks to drag down the markets further. The slowdown in economic growth, along with revenue and margin pressures, could continue. This phenomenon is not just unique to India. In fact, all major IT and growth stocks in the global stock markets have been severely hit by the prospects of higher interest rates.

On the flip side, this could turn out to be a good opportunity for investors to add or average IT stocks to their portfolios. Look into fundamentally strong companies in the Indian IT industry and buy them at fair valuations.

Have you added IT stocks over the past month? Let us know in the comments section of the marketfeed app.

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Editorial

Tech Mahindra: A Stock for the Future?

Mahindra & Mahindra is one of the biggest groups in India. The IT arm of the group, Tech Mahindra is the 5th biggest IT company in India. It is one of the major sources from where the Mahindra group generate their revenue. marketfeed did an editorial on the future plans of Mahindra & Mahindra. You can find it here. Very soon, the Indian IT companies will be coming out with their Q3 results. Before that happens, let’s dig deeper and understand more about the company.

About Tech Mahindra

Tech Mahindra Limited was incorporated on October 24th 1986 as a joint venture between Mahindra and British Telecom. In 2009, Tech Mahindra purchased a major stake in the Satyam Computer Services after the famous Satyam scam. You can read about the Satyam scam here. Tech Mahindra changed Satyam’s name to Mahindra Satyam. To take the benefits of existing synergies, Mahindra Satyam was merged with Tech Mahindra in 2013.

Since then, Tech Mahindra has focussed on both organic and inorganic growth to march forward. They have acquired many companies over the years. Few to mention are CJS Solutions Group LLC, DynaCommerce BV, BORN Group and more. They have ventured into different industries and provided their solutions and tech-supports for companies to thrive.

In today’s era, every business in any industry requires a robust IT support to make a mark. Thus, it is no surprise to see Tech Mahindra offer services to a number of industries. The chart below shows the percentage of revenue they collect from each industry. The highest contributor to their top line comes from the communications sector.

Strengths of Tech Mahindra

The biggest strength for Tech Mahindra comes from the range of services they offer in several industries. They try to provide a holistic service experience to their customers with its huge portfolio of offerings. Every business is associated with some kind of risks. For example, imagine if Tech Mahindra was serving only hotels and tourist companies, their business would be nearly shut due to pandemic. But, as they serve a range of sectors, even a slowdown in one or two industries does not stop their business as they continue to serve others.

Tech Mahindra’s major chunk of the revenue comes from North America and Europe. In fact, almost 75% of the total revenue comes from these two continents. All in all, Tech Mahindra is present in more than 90 states across Europe, North America, Africa, Middle-East, Australia and Asia-Pacific. In India itself, they operate 38 offices across 14 and more states. This enormous geographical presence helps them to expand and establish as one of the most all-rounded tech companies.

An eye on financials of Tech Mahindra

Tech Mahindra is one of those very few companies which has always seen its top-line growing over the years. At the end of FY20, the company reported revenue from operations to be Rs 36,868 crore. This was up by 6% to what was recorded in FY19. The chart below shows the revenue from operation trend in the last five years. The CAGR for the same stands at 8.6%.

Source: Company’s annual report

The bottom line for the company saw a slight decline in FY20 for the first time in four years. Tech Mahindra recorded profits worth Rs 4,033 crore in FY20 against Rs 4,298 registered in FY19. This was mainly because of a slight increase in the cost of services and higher depreciation. Depreciation amount can go up and down each year so a company should not be judged on that basis alone. The CAGR for the net profit stands at 7.7% as shown by the chart below. Like most companies, Tech M is also net-debt free which allows it to invest more in upcoming technologies and better staff.

Source: Company’s annual report

Tech Mahindra has the highest dividend yield percentage in its sector. It holds a Dividend yield % of 1.61% which is higher than Infosys and TCS’ 1.47% and 1.15% respectively. Their 12-month Earnings Per Share(EPS) currently stands at Rs 41 which is at par with Infosys’ Rs 41 and HCL’s Rs 44. The other two tech giants, TCS and Wipro have an EPS of Rs 81 and Rs 16 respectively. This proves that Tech Mahindra has been making robust and stable money for each share as per the industry pattern.

Leveraging on Technology

Tech Mahindra’s Makers Lab develops solutions with the aid of new technologies so that their clients receive the most innovative experience. They utilize next-generation technologies like Artificial Intelligence (AI), Machine Learning (ML), Robotics, Internet of Things (IoT), Virtual Reality (VR) and 5G. All these techniques aid them to make solutions which are faster as well as easier for the clients to incorporate. All these are the technologies of the next generation, which makes this stock very exciting.

Currently, they have more than 50 technology platforms and solutions. By building intelligent and next-gen solutions, they help their clients to transform digitally. To solve complex business problems across different sectors, Tech Mahindra produced more than 20 Blockchain platforms in FY20 only. These blockchain platforms make the operations of their clients more secure and faster. They also launched the inaugural Blockchain accelerator program for the State Government of Telangana. This program aims to empower Blockchain start-ups across India.

Conclusion

The stock market fall of 21st December 2020 reminded us that we are still in an economic mess. And, this seems to continue until we find a robust fix to the virus. The market fell rapidly wiping out a huge amount of gains of many traders. A similar fall occurred in March when the news of lockdown just started to hit. Which sector was able to revive the fastest? The IT sector.

Tech Mahindra is currently trading at their all-time high. Even the recent bloodbath seems to be relatively comfortable for the IT stocks. Maybe, people will realise this faster and start investing more in the IT companies which are deemed to thrive in the ‘digital’ future. What are your views on Tech Mahindra? Let us know in the comment box. Until next time.

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Editorial

Will IT Stocks Boom Ahead of Q3 Results?

The information technology (IT) industry is one of the fastest-growing sectors of India. As we know, companies such as TCS, Infosys, and Wipro have established themselves as the leading IT firms in the world. These companies have spearheaded the digital revolution and have contributed immensely to India’s rapid economic growth. Despite the Covid-19 pandemic causing disruptions across all economic activities, major IT companies have shown a phenomenal increase in their revenue and overall growth. Even after the recent market crash on December 21, the Nifty IT Index showed a very impressive rebound.

Let us take a closer look at specific factors that have led to a sharp increase in the performance of IT companies over the past year. 

Work from Home Model

The lockdowns imposed all over the world did not affect the productivity of the IT sector employees. In India, the IT industry made employees Work from Home (WFH) as per the government’s mandate. About 90% of employees worked from home, with 65% of them from homes in metros and the rest 35% from homes in small towns. They were able to quickly transition into a WFH model and even obtain a better work-life balance. This was supported by better network connectivity across India. Employees could start and end their day as they choose, as long as their work was complete. More importantly, they were able to focus on their health and well-being. According to many surveys that were conducted over the past few months, it was reported that there was a high increase in productivity and efficiency of the IT sector workforce. 

On the other hand, IT companies were able to introduce very efficient cost-cutting measures. Firms did not have to pay for expenses such as transportation and real estate costs. They have realised that working from home is a very effective and viable option that could be continued even after all lockdown restrictions were lifted. 

Amidst the disruptions caused by the pandemic, companies such as Wipro and Infosys had even introduced salary hikes for their employees.  This shows how committed these firms are towards the wellbeing of their employees.

Massive Deals

Every week, we read about certain deals that have been secured by prominent Indian IT companies. Firms all around the world have realized the need for accelerating their digital transformation process. Even though many listed IT companies reported a decline in revenue during Q1 FY21, the new deals and orders helped them to show a massive rebound. This growth was shaped by major demand for cloud-based services, increasing IT spends by the small and medium-sized business segment, and government initiatives for data localisation. 

The table below shows some of the massive deals/orders that had been signed by IT companies in Q3 FY21. 

CompanyClientDeal Size (in USD Million)Deal Type
TCSDeutsche Bank500-1000Acquisition of IT unit
WiproMetro>700Transformational
InfosysDaimler>1000Cloud
InfosysVanguard1500Transformational
InfosysEl Paso WaterNACloud
InfosysRolls RoyceNATransformational
TCSStar AllianceNADigital
TCSKingfisher plcNAService Partner
Source: ET Now

As we can see, the orders placed by very prominent international business groups or government agencies have helped IT companies to show a rapid increase in performance and revenue. According to NITI Aayog CEO Amitabh Kant, India has witnessed $38 billion (~Rs 2.73 lakh crore) investments in tech companies during the past six months. He further stated that artificial intelligence is going to become one of the biggest opportunities for India, with respect to technology applications. The emerging technology is expected to add $957 billion to the Indian economy by 2035.

Strong Financial Performance in Q2

As mentioned above, IT companies had reported a decline in their revenues in Q1. However, their revival was very strong in the next quarter. Let us take a look at the Q2 results of the three major IT companies in India:

  • Tata Consultancy Services reported a 7.05% year-on-year (YoY) decline in its net profit at Rs 7,475 crore for the second quarter ended September 2020. It reported a net profit of Rs 8,042 in the corresponding quarter last year. However, the results had surpassed all street estimates. On a quarterly basis, the consolidated profit rose 6.66% from Rs 7,008 crore in the June quarter of the current financial year 2020-21. The company has been able to secure a total market share of 32.05%.
  • Infosys Ltd reported a 20.50% year-on-year (YoY) rise in net profit at Rs 4,845 crore for the quarter ended September. The figure stood at Rs 4,019 crore in the corresponding quarter last year. Its consolidated revenue from operations increased to Rs 24,570 crore in Q2FY21, up by 8.6% YoY. The operating profit also rose to Rs 6,228 crore, a growth of 26.8% YoY. Infosys has a market share of 18.57% in the Indian IT sector.
  • Wipro Ltd posted a 3.40% year-on-year (YoY) fall in consolidated net profit at Rs 2,465.70 crore for the quarter ended September 30. It had reported a net profit of Rs 2,552.70 crore in the corresponding quarter last year. Consolidated revenue of the company declined marginally 0.07% YoY to Rs 15,114.50 crore, over Rs 15,125.60 crore posted in Q2FY20. However, it showed an impressive rebound on a quarter-on-quarter (QoQ) basis. Wipro’s market share stands at 12.67%.

Due to the massive deals and cost-cutting measures, it is very likely that these companies will post a significant increase in their revenues in the coming quarters.

Conclusion

As you might have read, the shares of major IT companies such as TCS and Infosys hit a 52-week high on Friday after Accenture Plc announced better-than-expected results for its first quarter. (Accenture follows the September-August Financial Calendar). Interestingly, certain financial analysts have stated that large Indian IT firms tend to follow Accenture’s performance with a certain lag. Despite this, we do know that IT companies all over the world have consistently shown great financial performance over the past few years. The Nifty IT Index continues to show a great bull run. Also, do not forget the common saying in the market, “Buy on rumours, sell on news”.

All major businesses and government entities around the world are improving their digital services to cater to the needs of all citizens. The demand for the services and products of IT companies is only going to increase in the years to come. These companies will post their financial results for the October-December (Q3) period soon. The outlook for Indian-based IT firms remains to be very strong. In anticipation of great results, all major IT stocks tend to show a very impressive rally. Let us look forward to the positive results of India’s fastest-growing sector.