Global markets were expected to rally after the Presidential Election in US was called for Democratic candidate Joe Biden. Nifty was expected to rally along with it too, but the events that unfurled today was unexpected.
Nifty opened the day at 12,399, just 31 points away from the all-time high of Nifty. After the first candle took perfect resistance at 12,340, the second one effortlessly broke this level. By 9:20 am today, Nifty made its fresh all-time high after the Covid-crash in March.
By 10 am, profit booking kicked in and the index took support near 12,367 level twice. Just after noon, Nifty started moving up after the European markets also opened with a big gap-up. A fresh high of 12,474 was made and the index closed at 12,461, up 197 points or 1.61%.
Unlike Nifty, Bank Nifty’s lowest point was in the first candle itself. After opening at 27,095, the index of banks went up quickly pushing Nifty up, as well. After facing profit booking in the morning, the index traded sideways for a bit before continuing its journey upwards. Bank Nifty made a fresh-high after the Covid-crash and closed near that level at 27,534, up 735 points or 2.74%.
Nifty Private Bank once again performed the best today. Only Nifty media closed flat for the day, while Nifty Bank and Nifty Financial Services came in next. Metals also did well today.
All major global indices rallied today, and are closing in green.
News Picks
Divi’s Laboratories closed as Nifty 50’s top-gainer today. It had posted a 45.63% year-on-year (YoY) growth in consolidated net profit at Rs 519.59 crore. Share prices closed at 3,423.75, up 5.76%.
Bharti Airtel rallied after Airtel Africa said it plans to sell 4,500 telecom towers to reduce $3.5 billion debt. Shares of the company closed at Rs 471.80, up 4.87%.
BPCL closed at Rs 375.55, up 3.61% after the government said November 16th would be the final date for the company’s divestment.
Shares of Tata Motors closed at Rs 141, up 1.44% after the company said it plans to increase its SUV offerings in India.
Ashok Leyland in its conference call today said that company’s debt stands at Rs 3,076 crores vs Rs 4,284 crores last quarter. This was in between the reported Rs 147 crore loss for the September quarter due to weak demand for commercial vehicles in the wake of the pandemic and overcapacity in the transport sector.
Shares of Balkrishna Industries closed at 1,493, up 2.81% after the company announced highest ever quarterly sales volume in Q2.
Shares of Cipla crashed 2.91% to Rs 767 even after the company announced better than expectted.
ICICI PRUlife raises Rs 1,200 crores through NCDds. The stock was up more than 1% today.
Markets Ahead
How long will this rally in Global Markets continue? As IT lost its fire early in the morning, it held Nifty back. But as expected, IT went even up towards the end of the day and consolidated. Joe Biden winning the election does not totally mean that his actions will be followed, right now. The President Elect will swear in as President of The United States of America only in January, and till then there is no hope for a stimulus or even a policy change. The easing of H1-B visa will help a lot of Indians with relevant skills get entry in to the US. This hiring from an Indian talent pool will help IT companies like Wipro and TCS reduce their costs of salaries. So do watch the space, do watch Bank Nifty scaling highs and of profit-booking in the market.
Hope you will all tune in to The Stock Market Show tonight. Keep watching this space for more.
The rally in NIFTY does not seem to be stopping. After opening the day at 12,161, Nifty went up strongly but took resistance near 12,200. After consolidating, the index went back up creating higher highs and touched 12,260 mark. Imagine, where was Nifty just 3 months ago? Today it has even touched a day-high of 12,280 and closed at 12,263.55, up 143.25 points or 1.18%.
Bank Nifty opened the day with a red candle at 26,307 and went up the whole day. At around 2 pm, the index of bank saw a quick dip of over 300 points. But within no time, this was covered and Bank Nifty scaled further highs. After taking resistance at 26,850, Bank Nifty closed at 26,798, up 485 points or 1.85%.
Nifty Private Bank along with Nifty Bank did the best today. Nifty Pharma was the worst performing sector today.
Most Asian markets are trading in red today. All european markets are trading in red today.
News Picks
Reliance was among the top gainers after Saudi’s investment authority pumped in Rs 9,555 crores to Reliance Retail Ventures Ltd. Share prices closed at Rs 2,029.15, up 3.79%.
IndusInd Bank continued its strong uptrend and closed at Rs 738.65 per share, up 3.39%.
HDFC Bank shares hit a fresh all-time high in a time when all banks are struggling. Share closed at Rs 1,307.65, up 3.03%.
Shares of Dalmia Bharat closed at 892.95, up 2.33% after the company reported a 544 per cent year-on-year rise in consolidated net profit at Rs 232 crore for the quarter ending September FY 21.
Shares of M&M closed at Rs 613.60, up 1.91% after the company reported. over 20,000 orders for the new Mahindra Thar.
State-owned Coal India Ltd’s e-auction sales nearly tripled to 16.8 million tonnes (MTs) in October, amid a strong demand resumption for coal from the power sector and share prices closed at Rs 121.80, up 1.63%.
Shares of Maruti crashed 2.61% to Rs 6907 after the company’s Japanese parent Suzuki Motor Corp expected a double-digit decline in net profit and revenue for this current fiscal, as the company is unlikely to recover the sales lost during the June quarter in India and Japan due to the pandemic. Maruti Suzuki India contributes over 50% to Suzuki’s revenue and bottomline.
Manappuram Finance registered Q2 profit of 5.3% lower at Rs 405.6 crores, with revenues 16.6% higher at Rs 1,565.6 crores (YoY). Share prices closed at Rs 162.40, up 1.88%.
Markets Ahead
Nifty is all set to scale higher highs. With the positive results coming in from the financial space, Banking stocks are all set to recover. Reliance has started in its upward journey as well, with the latest round of funding giving investors renewed confidence in the stock. IT and Pharma stocks are also expected to rally soon with the weaker dollars helping their profit numbers. So the question now is, will Nifty touch its all-time highs, and go beyond?
Hope you will all tune in to The Stock Market Show tonight. Keep watching this space for more.
The Reserve Bank of India has announced a Co-Lending Model (CLM) scheme for banks and non-banking finance companies (NBFCs). Under this scheme, banks can provide loans along with NBFCs to priority sector borrowers, through a prior agreement. A specified portion of loans will be provided to specific sectors such as agriculture and micro & small enterprises. RBI has stated that this scheme will provide more flexibility to the lending institutions.
Saudi PIF to invest Rs 9,555 crore in Reliance Retail
The Public Investment Fund (PIF) of Saudi Arabia will invest Rs 9,555 crore for a 2.04% stake in Reliance Retail Ventures Ltd (RRVL). The investment values RRVL at a pre-money equity value of Rs 4.58 lakh crore. Earlier, PIF had also acquired a 2.32% stake in Jio Platforms.
Aditya Birla Capital Q2 Results: 3% YoY rise in Net Profit
Aditya Birla Capital reported a 3.3% year-on-year (YoY) increase in consolidated net profit at Rs 264.34 crore, for the quarter ended September (Q2). The company’s revenue from operations increased by 16.1% YoY to Rs 4,589.12 crore, during the same period. The company is present in areas such as housing finance, asset management, and life insurance.
Berger Paints Q2 Results: Net Profit up by 13.55% YoY to Rs 221 crore
Berger Paints India Ltd. reported a 13.55% year-on-year (YoY) increase in consolidated net profit to Rs 221.05 crore, for the quarter ended September (Q2). The company’s revenue from operations has increased by 9% YoY to Rs 1,742.55 crore, during the same period. The paint company has stated that its sales are back at pre-Covid levels.
Tech Mahindra partners with Subex to provide solutions for telecom operators
Tech Mahindra has announced its partnership with Subex Ltd. to provide blockchain-based solutions for telecom operators globally. These solutions will be aimed at fraud detection and improving the operational efficiency of communication service providers. The strategic partnership will help to reduce overhead costs and improve business profitability for telecom operators.
Lupin Q2 Results: Net Profit stands at Rs 211 crore
Lupin Limited reported a consolidated net profit of Rs 211 crore, for the quarter ended September (Q2). The company had posted a net loss of 185.3 crore in Q2 of the previous financial year. Revenue of the Mumbai-based drug maker declined by 1.2% YoY to Rs 3,835 crore in Q2 FY21.
Bajaj Electricals Q2 Results: Net Profit at Rs 53 crore
Bajaj Electricals Ltd. reported a consolidated net profit of Rs 53.11 crore, for the quarter ended September (Q2). The company had posted a net loss of Rs 32.54 crore in Q2 of the previous financial year. The revenue of the consumer electricals firm has increased by 11.1% YoY to Rs 1,217.71 crore in Q2 FY21.
Apollo Tyres Q2 Results: Net profit jumps two-fold to Rs 200 crore
Apollo Tyres Ltd. reported a two-fold year-on-year (YoY) increase in consolidated net profit at Rs 200 crore, for the quarter ended September (Q2). The company’s net sales increased by 8% YoY to Rs 4,234 crore, during the same period. Apollo Tyres has stated that its sales volumes have gone up in both truck tyres and passenger car tyres.
Godrej Consumer Q2 Results: Net profit jumps 11% YoY
Godrej Consumer Products Ltd. reported a 10.66% year-on-year (YoY) increase in consolidated net profit to Rs 458.02 crore, for the quarter ended September (Q2). The company’s revenue has increased by 10.83% YoY to Rs 2915.12 crore, during the same period. The FMCG firm has also stated plans to launch new products and improve its e-commerce platform.
Inox Leisure Ltd. reported a consolidated net loss of Rs 67.83 crore, for the quarter ended September (Q2). The multiplex chain had reported a net profit of Rs 35.13 crore in Q2 of the previous financial year. The company’s revenue from operations declined by 99.93% YoY to Rs 36 lakh in Q2 FY21. The share price of Inox Leisure saw a rise of 4.50% today, after cinema halls were allowed to open in Maharashtra.
It has finally happened, ladies and gentlemen. Nifty has successfully closed above 12,000 for the first time since February 20. It has not only crossed 12,000, it has even closed above 12,100.
Nifty opened the day at 12,065, with a big gap-up tracing positivity in the global markets. After trading sideways for a while, Nifty resumed its upwards journey. The index traded in a range of 90 points today, and was relatively calm. It did not even test 12,000! Nifty closed the day at 12,120.30, up 211.80 points or 1.78%.
Bank Nifty opened the day at 26,179, with a gap-up tracing Nifty. After trading sideways, Bank Nifty took support at 26,000 and moved up through the day. After touching a day-high of 26,375, Bank Nifty closed at 26,313, up 541 points or 2.10%. 2 out of the top 5 gainers from Nifty 50 were banks.
Nifty Metal was the best performing index today. Nifty Media and Nifty PSU Bank also did well with the help of SBI and PVR respectively. Realty continued to be the worst performing sector.
Asian markets are all trading in green. European markets are also currently in green, at the time of market close.
News Picks
Hindalco kept going up with renewed strength, with the current coal auctions going ahead with full steam. It was Nifty’s top gaining stock, closing at Rs 187.35, up 6.15%.
Shares of SBI jumped 5.63% to Rs 218.65 after the company posted a 52% YoY jump in net profits yesterday. This is despite asset quality of the bank remaining a worry.
Reliance share prices closed near its day high at Rs 1,955, up 2.18% after bouncing back from lows. After market hours, a fresh investment of ₹9,555 crore (approximately $1.3 billion) was confirmed from Saudi Arabia’s Public Investment Fund in to Reliance Retail Ventures Ltd.
Share prices of Steel Authority of India Ltd(SAIL) jumped over 10% to Rs 38.25 after the company reported October sales was up 21% YoY to 1.34 million tonnes.
SRF share prices jumped to Rs 4,868, up 9.56% after the company announced a net profit increase of 57% YoY yesterday.
Shares of Hindustan Petroleumjumped 9.91% to Rs 205.25 after the management announced buyback at Rs 250/share. The company’s chief also remarked today that they were highly undervalued, with price to book ratio under 1.
Shares of PVR and Inox jumped after Maharashtra government announced re-opening of theatres from today.
Steel shares hit high today, with Tata Steel leading the game. Tata Steel went up 5.35% to Rs 425.50.
Markets Ahead
Surprisingly, Nifty has closed above 12,100 today. The US Election scene is still confusing, with no fixed winner declared till now. Nifty is so close to turning green for the week. With the all-time high around 12,450, the index is only 2-3% away. Can we see Nifty scaling higher highs this month? Diwali has traditionally been a good time for the markets and we can definitely hope to see Nifty touching even 12,200 soon.
Hope you will all tune in to The Stock Market Show tonight. Keep watching this space for more.
With the US elections happening today, and results being counted, Nifty was highly volatile. Nifty opened the day at 11,802 and made a good strong green candle. This first green candle alone was as large as yesterday’s whole day’s movement. Nifty kept moving up and down with high volatility. After Donald Trump’s tweets on how he was going to move the Supreme Court, to ban counting votes after midnight, Nifty crashed sharply from 11,920 to 11,753. This was quickly recovered, as well. 11,920 was tested multiple times, Nifty closed the day at 11,908.50, up 95 points, or 0.80%.
Bank Nifty opened the day with a gap-down at 25,582 and was not that enthusiastic. While Banks looked tired in the initial parts of the day, it recovered after noon to create fresh highs at 25,900 levels. Bank Nifty closed the day at 25,771.60, up 88.80 points or 0.35%.
Nifty Realty continued its downtrend today, while IT and Pharma did the best. Most other sectoral indices remained flat, although highly volatile.
Most major Asian markets are trading in green today. All major European markets are also trading with profits ahead of the final US elections results.
News Picks
IndusInd Bank continued its uptrend to close at Rs 678.05, up 4.86% today. It was Nifty 50’s top gaining stock of the day.
Reliance finally broke out of its downtrend and got into the top-gainers list. Last week, we had written an article on why Reliance is falling as it is. You can read it here. Share prices closed at Rs 1,913.20, up 3.39%.
Shares of Adani Enterprises jumped to Rs 351.85, up 2.04%. During market hours, the company had announced a net profit at Rs 436 crores, up strongly from last year’s numbers. Stock prices have hit fresh 52-week highs.
UPL was today’s top loser after share prices keep falling and falling. As you may know, KPMG had resigned as the auditor of the company’s Mauritius arm. Share prices closed at Rs 401.35, down 3.76%.
SunPharma shares closed at Rs 504.65, up 3.92%. Yesterday the company had posted a net profit increase of 70% YoY to Rs 1,813 crores, beating all estimates.
Shares of SBI jumped to Rs 207 from Rs 198 intraday after the bank reported net profit up 51% YoY to Rs 4,574 crores. Net interest income(NII) is up 13% to Rs 28,181 crores.
Markets Ahead
For more than a week now, we had been talking about how US elections would bring about volatility into the Indian markets and the volatility reached its peaks today. Even one single tweet by Trump sent markets flying down today. The election is likely to have a disputed result and tomorrow’s market will be extremely difficult. It is also the weekly expiry tomorrow, and we will continue to see a lot of volatility. Stop losses and their importance would have been made clear to a lot of traders today. Keep a watch out for our Top Global News article at 8 pm today, to know about the final developments in US.
Hope you will all tune in to The Stock Market Show tonight. Keep watching this space for more.
Nifty was surprisingly range-bound today, ahead of the US Presidential Elections. After opening with a significant gap-up at 11,739, Nifty entered into a range-bound area of trade. With multiple sectors going up and down together, Nifty remained within the ranges of 11,773 and 11,835 between 10.15 am and market close. Nifty closed the day at 11,810.95, up 141.80 points, or 1.22%. The resistance of 11,800, has changed and proved itself to be a strong support in the 15min chart.
Bank Nifty advanced today, as expected. After opening near yesterday’s high at 25,132, the index quickly shot up in the first few minutes with support from all major banks. The index took perfect resistance near 25,500 and fell, but gradually regained this and went up throughout the day. Bank Nifty pushed the Nifty 50 index up, while IT stocks and Reliance pushed it down. Bank Nifty closed the day at 25,682, up 790.30 points or 3.17%.
Nifty Realty was the only sector which was heavily down today. Nifty Bank and Nifty Financial Services was again the top performing sectors today. Nifty Metal also performed well.
All major Asian markets are in green today. All major European markets are also trading with profits after opening flat.
News Picks
Reliance shares continued to be on a negative trend, as negativity surrounding the company increased. Seemingly false news of Mukesh Ambani’s health is also circulating around the market. Shares of Reliance closed at Rs 1,850, down 1.44% for the day.
Shares of UPL closed at Rs 417.05, down 6.35% after the mystery surrounding KPMG’s exit as auditor of the company’s Mauritius arm. Today, KPMG failed to give more details to SEBI regarding their exit.
Shares of Hindalco featured among the top gainers today after the company posted wins in the coal auction for Chakla Coal Block. Trading ended at Rs 179.75, up 5.27%.
Banks continued to perform, with 3 out the Top 5 Gainers coming from Banks & NBFC space. Will this bullishness continue in the coming days of the week?
SunPharma posted a net profit increase of 70% YoY to Rs 1,813 crores, beating all estimates. Share prices closed at Rs 485.60, up 3.45% for the day.
Shares of CadilaHC closed at Rs 437.65, up 6.57% after the company posted strong Q2 profits yesterday. Shares touched the 10% upper circuit level intraday, but soon came down to closing price.
Dabur reported a year-on-year net profit increase of 19.3% to Rs 482.9 crores. Shares of the company closed at Rs 515.40, up 1.81% for the day.
Shares of Muthoot Finance closed at Rs 1,190.15, down 3.87% after the company posted a profit of Rs 931 crores, up 3% YoY.
Markets Ahead
European markets are sharply up, along with Nifty. Is there a big correction incoming in global markets? Reliance is getting beaten down, and investors can wait and watch for the stock to take a good support. Do not forget that the weekly expiry is in two days, and the exit-polls from tomorrow’s elections will send Nifty flying in either direction. If there is a disputed result, global markets will surely react in a negative way. Bank Nifty reaching post-covid highs is also definitely an achievement, and we can probably look into more rallies ahead.
Hope you will all tune in to The Stock Market Show tonight. Keep watching this space for more.
Probably, the most eagerly awaited results came out late on Friday night. Mukesh Ambani led Reliance Industries reported a 15.05% year-on-year (YoY) drop in consolidated net profit at Rs 9,567 crore. This number was at Rs 11,262 crore for the corresponding quarter last year. The consolidated revenue from operations also fell by 24% to Rs 1,16,000 crore from Rs 1,53,000 crore reported a year ago.
Mukesh Ambani, Chairman and Managing Director of RIL, said: “We delivered strong overall operational and financial performance compared to the previous quarter with recovery in petrochemicals and retail segment and sustained growth in the digital services business. Domestic demand has sharply recovered across our O2C business and is now near the pre-Covid level for most products.”
Let’s have a deeper look at each segment.
Refining & Marketing (R&M)
Economic activity in the R&M segment was highly impacted by Covid-19. EBITDA fell by 50% YoY and 21% QoQ to Rs 3,002 crore. This was because the Gross refining margins (GRM) fell to $5.7/bbl from $9.4/bbl from the same quarter last year. (GRM refers to the earning on turning every barrel of crude oil into fuel.)
Due to the easing of lockdown & preference for personal travel rising, demand for refined oil products like jet fuel saw an increase. The company is positive that the demand for fuels like gasoline and jet fuels will further increase in the third quarter. Even with lower margins, Reliance was able to outperform in the Asia Pacific and European refining margins in the challenging business environment. But with negative global sentiments in the oil market which leads to low GRM, the company might struggle in the longer run.
Reliance Jio
The telecom arm of Reliance reported another dominant result. Their market share in India’s mobile market reached 35.03%. Reliance Jio declared a 13% quarter-on-quarter (QoQ) and 185% year-on-year (YoY) rise in net profit. EBITDA rose by 8.7% QoQ to reach at Rs 7,971 crore.
Amidst the pandemic, Jio became the first mobile service provider to cross the 40-crore customer mark in India. According to the Telecom Regulatory Authority of India (TRAI), Jio added over 35 lakh subscribers which helped it cross the 40 crore mark. As of September 30, 2020, their total customer base stood at 40.56 crores which 1.8% higher than the previous quarter. Their total wireless traffic also grew by 1.5% and amassed to 1,442 crore GB.
ARPU or Average Revenue per User is an important metric for telecom companies. It helps them to get an idea of how much they are earning from a customer on an average. Jio’s ARPU touched Rs 145 per month this quarter. Last quarter, this metric was at Rs 140 per month. Also, there has been a constant uptrend in Jio’s ARPU from the past four quarters.
Q2FY20
Q3FY20
Q4FY20
Q1FY21
Q2FY21
120
128
130.6
140.3
145
(Jio’s ARPU in rupees over the quarters)
Without a doubt, Reliance Jio has been a constant driver for RIL as a whole. Thus, it tells how Reliance wants to position itself as a tech player in the future.
Reliance Retail
The retail segment of the company rebounded sharply in the second quarter after a huge slump in Q1 due to lockdown. Revenue from operations rose by 30% QoQ to reach at Rs 36,566 crore. Last quarter was marred by the shutdown of retail shops and fears of people venturing out of their home.
In Q1FY20, Reliance Retail reported an EBITDA of Rs 1,079 crores. This quarter, EBITDA has increased by a whopping 86% to Rs 2,006 crores. When compared to last year, the operating profit of the segment fell by 14% as normalcy is yet to be achieved during these COVID times. With easing restrictions, Reliance Retail was able to operate 85% of its stores.
A huge jump in the revenue was noticed in the consumer electronics products. Revenue increased by 2X over the last quarter. The apparel segment of Reliance Retail also registered amazing growth. Revenue from Fashion & Lifestyle was almost at 3X over the previous quarter.
“Increased footfall and store openings have contributed to the rebound in retail revenues, with 85% of stores now open,” V. Srikanth, the joint chief financial officer of RIL.
Apart from the results, RIL has seen some huge investments in their retail arm. Around 8% of the stake has been sold to prominent global investors like Silver Lake, General Atlantic, KKR, Mubadala and a few more. The total investment is amassed to Rs 37,710 crore. At the same time, Reliance Retail has acquired companies like Netmeds, Grab, Nowfloats, C-Square and Shopsense (Fynd).
Petrochemical
The petrochemical segment experienced a resurgence in the second quarter. EBITDA reported a rise of 35% QoQ to Rs 5,964. This is still significantly below than Rs 8,964 crore what the company recorded in the same quarter last year.
The overall increase in household spending helped the company to record a 17.8% growth in the total revenue. Q2’s segment revenue stood at Rs 29,665 crore as compared to Q1’s Rs 25,192 crore.
The sequential rise can be attributed to an increase in demand in the agriculture, auto and FMCG sector. The lockdown forced many labours to lose their jobs. This raised the presence of labours in the market, thus, driving the wages expectations lower. It helped the Indian textile industry to get cheaper labour and cut their cost of production.
To sum up
The company showed a strong rebound in its performance when compared to the previous quarter. Yet, it was below what they produced in the same quarter previous year. But that was expected due to Covid-19, right?
Reliance Jio performed better than what the market estimated. Reliance Retail also contributed to give a positive outlook to the market. Petrochemicals displayed a robust fight to give good numbers. But two of the core segments of the company, refining & marketing and oil & gas (upstream), have struggled for another quarter. Main reason? Lockdowns all over the world due to Covid-19.
On one hand, Covid-19 has raised the demand of digitalization which has aided the Jio segment. On the other side, the core business of Reliance, oil & gas continues to struggle. Reliance owns the largest refinery in the world in Jamnagar. It was their oil & gas business which helped them become what it is today. This quarter, the EBITDA through the oil & gas sector (upstream segment) was reported to be – Rs 194 crore. This is way below than Rs 128 crore EBITDA recorded in the same quarter previous year. This has led to some serious concerns on the oil & gas segment of Reliance.
A few days back, Mukesh Ambani displayed his desire to spearhead India’s fight towards renewable energy. How often have you heard a company dealing with crude oil talking about a move to renewable energy at such a massive scale? Mukesh Ambani insisted that shifting towards renewable energy does not mean leaving the oil & gas business completely. But, is it so easy to make such a large shift? You can read more about this here.
Halloween Horror Show! Why Did Reliance Fall?
Halloween is celebrated each year on October 31. Seems like it came on 2nd November for Reliance. You can find how the market performed today here. Reliance’s share price fell by a massive 8.69% to close at Rs 1876. This fall of Rs 178.50 in one day took Reliance on their lowest share price in the past three months. What were the reasons behind such a fall that eroded more than Rs 1 lakh crore of market capitalization?
We can understand three possible reasons behind this. Firstly, negative sentiments due to holding off of Reliance-Future Retail deal. The big bull Amazon has insisted that the deal between the two cannot go ahead as it violates Future’s commitment towards them. Read about this war here. The deal with Future group has huge importance for Reliance to take the next step in the retail segment. If this deal collapses, the speed of growth for Reliance Retail in that sector will be hugely affected.
Secondly, unsatisfactory results. Reliance’s oil business is really struggling due to COVID-19. Demand for oil is struggling to revive. Yesterday, the UK government announced that the second wave of infections has been increasing rapidly. To contain the spread, the UK government has declared another four-week lockdown. Before them, Spain and France have also announced lockdowns in their country. With an increase in cases worldwide and no vaccine as of now, the oil & gas companies may find themselves in a very bad situation once again.
Thirdly, profit booking kicking in. Reliance has been on a relentless upside rally from the past 7 months. With every major announcement of investment, Reliance has gone up rapidly. But this pattern stopped in the previous month when major investments in the Retail segment failed to boost up the price. Thus, there might be a feeling among the investors that Reliance won’t be going up so easily now.
With a subdued performance in a few segments this quarter, people might have just booked their profits rather than hoping that Mukesh Ambani can turn around again. Also, Rs 2,000, being a round number, was a very solid support for investors. As soon as the stock went below it, many stop losses would have been triggered which created a panic among the shareholders to sell the stock.
There are also rumours floating around about Ambani’s health. While this has not been verified, stock prices may crash further if this is verified. It will be very interesting to see where Reliance goes from here. Any negative news will be forcing another big fall in its share price. But can Mukesh Ambani do his magic again?
It was indeed a very volatile day in the market today. Two competing forces fighting for power; Reliance and Bank Nifty. But in the end, Bank Nifty won the tug-of-war.
Nifty opened the day at 11,679 with a slight gap-up today with the positive sentiment of Bank Nifty. But just after opening and taking resistance near 11,680, the index started falling due to the steep fall in Reliance. Nifty took support at 11,550 near yesterday’s low at around 10 am. Then for the rest of the day, it was a competition between Reliance and Banks today and it seems like banks won. After being volatile, Nifty shot up after 1:30 pm to touch a day-high of 11,725. Just before the close, Nifty corrected to end the day at 11,669.15, up 26.75 points or 0.23%.
Calling Bank Nifty ‘Star of The Show’ would be an understatement today. Not even for a bit did the index dip into red today. After opening at 24,282 with a good gap-up, Bank Nifty consolidated for a bit, but then quickly shot up making higher highs. The index effortlessly crossed many resistance levels, even crossing 25,000 easily to touch a day high of 25,140. Towards the end of the day, Bank Nifty corrected to close at 24,892, up 991 points or 4.15%.
Bank Nifty and Nifty Financial Services were the stars of the day. Nifty Realty also did well, moving up from the moving average line plotted by us on The Stock Market Show last day.
All major Asian markets are trading in the green today. All European markets are surprisingly trading in the green, even after the lockdown announcements.
News Picks
Reliance’s fall was the major event of the day, with shares closing the day at Rs 1,877.45, down 8.62%! The partly paid-up shares, Reliance PP, was locked at 10% lower circuit for most of the day. This big jump came after investors panicked following the quarterly results which showed core businesses of the company falling. We will be writing an in-depth article analysing the results, and the possible reasons for the fall in Reliance. Talking about Nifty, this fall in Reliance pulled down the index by 136 points today. So if Reliance was flat, Nifty would have tested 11,850 today.
The HDFC Twins jumped in the afternoon, mainly because results of parent company HDFC was still awaited. The Non-Banking Financial Company reported a net profit of Rs 2,870.1 crores, down 27.6% year-on-year, but still above estimates. Net Interest Income(NII) jumped 20.7% YoY to 3,647 crores. Shares of HDFC closed at Rs 2,040.80, up 6.10% while that of HDFC Bank closed at Rs 1,215.25, up 2.68%.
Bharti Airtel outperformed today, as expected. If you checked out our live feed on the new marketfeed app, you would have seen both HDFC Bank and Airtel giving good returns. Shares of the company closed at Rs 457.40, up 5.45%. There is news circulating that Airtel may sell stake in its fiber assets to raise funds. Also, the company is said to have added more customers than Jio in the previous quarter.
IndusInd Bank shares jumped 7.28% in trade today to Rs 628.35, after the company declared good results on Friday after market hours.
Shares of Wockhardt Pharma jumped in trade as the company got selected to supply Covid-19 vaccine in the UK. Share prices closed at Rs 295.50, up 1.41% when the rest of pharma stocks were trading in the red.
Tractor manufacturer Escorts reported a 130% YoY increase in net profit to Rs 230 crores. Share prices jumped from red to close at Rs 1,228.20, up 2.27%.
Markets Ahead
The big-tree of Nifty, Reliance, has fallen. Who is next? There are many speculations running around the market as to why Reliance fell. But as we discussed above, it can be attributed to the fall in revenues in core petrochemical business. Banks outperforming, and even holding up Nifty was indeed a marvellous sight today. Surprisingly, global markets are trading in green even though the news from Europe is not that good. The next factor of volatility left is the US elections, which are scheduled to happen tomorrow. marketfeed is writing an article on how the markets might react, depending on whether Trump or Biden gets elected. Watch for even more volatility in Reliance, and in Nifty tomorrow.
Hope you will all tune in to The Stock Market Show tonight. Keep watching this space for more.
India’s retail market is estimated to be worth Rs 60 lakh crores in FY 2019-20 and is expected to grow at a CAGR of 10% over the next 5 years to reach Rs 90 lakh crores by FY 2024-25. Reliance and Amazon are indulging in a serious war to capture this retail market in India.
Reliance and Amazon have been pursuing to buyout the cash-strapped Future Group, which owns retail brands like Big Bazaar, HyperCity, etc. This deal can give access to around 1,800 stores across Future Group’s brands and subsidiaries such as Big Bazaar, FBB, Easyday, Central, which are spread across 420 cities in India.
Right after Reliance finalized its deal to acquire the Future Group for Rs 24,700 crores, Amazon opposed the deal and approached an international arbitration court to try and stall the deal. The court has given a temporary decision in favor of Amazon. A permanent injunction order is awaited. On the other hand, Reliance refuses to take a step back either. Let’s find out what the mess is all about.
Why is Amazon Opposed to the Reliance-Future Deal?
After Reliance finalized its deal to acquire the Future Group, Amazon approached the Singapore International Arbitration Centre(SIAC) to appeal against Reliance for buying out Future Group. Amazon stated that this would be a violation of a contract that Future and Amazon had signed when Amazon had acquired a 49% stake in Future Coupons Limited, in November 2019. This acquisition gave Amazon a 3.58% stake indirectly in Future Retail Limited.
Coming to the contract between the two companies, they had mutually agreed that Amazon would have an option to acquire all or a part of the Promoter’s Shareholding in Future Retail Limited in the near future, under certain circumstances. Additionally, Amazon would have the first right of offer. The Promoters had also agreed to not sell their stake to ‘specified persons’ and agreed to certain restrictions. We can get a smell of who the ‘specified persons’ might be.
Amazon says that according to the contract it has the first right of refusal. This means that a company can buy a stake in Future Retail only after Amazon refuses to buy it in the first place. The interpretation of the contract is debatable.
Is it a Retail War?
Reliance wishes to capture the e-commerce market through its brand JioMart(a subsidiary of Reliance Retail Ventures Ltd.), which was recently launched in January 2020. The company gained momentum during the COVID-19 lockdown. Amazon, on the other hand, wishes to acquire a better logistics, warehousing, and supply chain for its already existing e-commerce platform.
In January 2020, Future Retail and Amazon had ‘joined hands’ to ‘take-on’ Reliance’s JioMart.They were strategizing for a partnership and possibly an investment. The relationship between Amazon and Future was steady. Future saw hope in partnering with Amazon. However, Reliance offered to acquire the group for a lucrative amount which could prevent the company from going bust. The deal was too good to let go. Future Group jumped off Amazon’s Boat and got into Reliance’s Boat. At the same time, Reliance being an Indian entity faced no restrictions of Foreign Direct Investments(FDI), unlike Amazon.
Future Group might face insolvency and eventually shut shop: Arbitrations are long and lengthy, they aren’t as effective as litigation. Reliance has its own set of tricks up its sleeve. If the arbitration proceeding continues for long, Future Group won’t get the cash it needs. This means that it won’t be able to operate for long and eventually go bust. What would follow is a set of insolvency proceedings which would last long enough, such that neither Amazon nor Reliance would be able to acquire the assets. Since the assets would be auctioned off to pay back the debt that Future Group owes to its creditors. Essentially, this would be collateral damage.
Amazon was in talks with Reliance to buy a 26% stake in Reliance Retail in August 2019. In September, there were unconfirmed reports that Amazon was in talks with Reliance to acquire a 40% stake in Reliance Retail for $20 Billion(1.4 Lakh Crores). The deals didn’t go through. The liquidity would have allowed Reliance to get rid of its huge debt. However, with foreign investments flowing in Reliance managed to go net-debt free without giving Amazon a piece of its cake.
Not just Retail, there’s more to it: Reliance, Amazon, and Flipkart, the three major competitors, are all arms out against each other. All three own a food retail license, All three have their own OTT platforms, All three have their own UPI/Wallet payment services. All three have an established fashion brand. There could be more than just Retail in the picture.
Who Wins, Who Loses?
Reliance is an old and home-grown company, with a strong lobbying ground and sources in the government. Amazon on the other hand is a relatively newer foreign company with not as much lobbying power as Reliance. Amazon might therefore face problems on FDI and regulation even if things run in its favor. Reliance and Future have both come out in support of the acquisition. Reliance has stated that ‘it intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay’. Reliance and Future both want to go forward with the deal.
Amazon faces a challenge since enforcement of emergency arbitration orders is contestable in the Indian court of law. Future Group or Reliance might approach the respective court and stall the interim order by SIAC. Whatever is the course of action needs to be taken fast, time is ticking.
Reliance Industries Q2 Results: Net Profit at Rs 9,567 crore
Reliance Industries Ltd. (RIL) has reported a 15% year-on-year (YoY) decline in net profit at Rs 9,567 crore, for the quarter ended September (Q2). The revenue from operations of RIL has declined by 24% YoY to Rs 1.16 lakh crore, during the same period. The company had posted a net profit of Rs 11,262 crore in Q2 of the previous financial year.
Indian Oil Corporation Q2 Results: 13-fold jump in Net Profit to Rs 6,026 crore
Indian Oil Corporation (IOC) reported a 13-fold year-on-year (YoY) increase in consolidated net profit at Rs 6,025.91 crore, for the quarter ended September (Q2). The consolidated revenue of IOC declined by 13.39% YoY to Rs 1.16 lakh crore, during the same period. The share price of IOC saw a rise of 1.47%, and closed at Rs 79.55 on the NSE today.
UPL Q2 Results: Net Profit jumps 165% YoY to Rs 537 crore
UPL Ltd reported a 165.84% year-on-year (YoY) increase in consolidated net profit at Rs 537 crore, for the quarter ended September (Q2). The company’s revenue from operations increased by 14% YoY to Rs 8,939 crore, during the same period. UPL has also stated that it has decided to stop production at its oldest manufacturing plant in the Netherlands.
BSE to consult SEBI on Future-Reliance deal: Report
Reports from various news publications have stated that the Bombay Stock Exchange (BSE) will consult market regulator SEBI, to seek clarifications from Future Retail and Reliance Industries. This comes after Amazon Inc. had objected to the $3.4 billion (~Rs 25,365 crore) deal between Reliance Retail and Future Retail. As per reports, US-based Amazon had written to SEBI and the stock markets to put the deal on hold, due to the Singapore arbitration order.
IndusInd Bank Q2 Results: 53% YoY decline in net profit
IndusInd Bank Ltd. reported a 53% year-on-year (YoY) decline in net profit to Rs 663 crore, for the quarter ended September (Q2). The bank’s net interest income (NII) increased by 12.7% YoY to Rs 3,278 crore, during the same period. The lender had increased its provisions during the July-September quarter to Rs 1,964 crore. Provision is an amount set aside by a company to pay for any losses that might arise in the future.
Axis Bank revises stake acquisition agreement with Max Life
Axis Bank, on Friday, announced that the lender and its subsidiaries have agreed to enter into a revised agreement with Max Life Insurance (MLI). They will acquire 19% of the equity share capital of Max Life, instead of 17% as mentioned before. The revised agreement had to be made, as the Reserve Bank of India (RBI) had rejected Axis Bank’s earlier proposal to directly buy a 17% stake in Max Life.
Suven Pharma Q2 Results: Net Profit declines 20% YoY to Rs 74 crore
Suven Pharmaceuticals reported a 20.35% year-on-year (YoY) decline in consolidated net profit to Rs 74.07 crore, for the quarter ended September (Q2). The consolidated total income of the company stood at Rs 237.74 crore, during the same period. Suven Pharma’s Board of Directors has allotted bonus shares at a 1:1 ratio. This means that the company will issue one bonus share for every one share held by the existing shareholders.
Blue Dart Q2 Results: 189% YoY increase in net profit
Blue Dart Express Ltd. reported a 189.1% year-on-year (YoY) increase in consolidated net profit at Rs 42.33 crore, for the quarter ended September (Q2). The net sales of the company increased by 8% YoY to Rs 866.57 crore, during the same period. The share price of Blue Dart Express saw a rise of 13.32%, and closed at Rs 3,680 on the NSE today.
BPCL puts Bina refinery expansion plan on hold pending privatisation
Bharat Petroleum Corporation Ltd. (BPCL) has put on hold its plans to expand its Bina refinery and install a secondary unit at its Mumbai refinery to boost efficiency. The plans have been put on hold due to the privatization process of the company. The Government wants to sell a 53.29% stake in BPCL, in order to raise funds and cover-up its fiscal deficit.
Karur Vysya Bank Q2 Results: Net profit rises 81% YoY to Rs 115 crore
Karur Vysya Bank reported an 81.4% year-on-year (YoY) increase in net profit at Rs 114.89 crore, for the quarter ended September (Q2). The bank’s net interest income (NII) has increased by 0.9% YoY to Rs 601.5 crore, during the same period. NII is the difference between the interest earned by a bank on its loans, and the interest it pays to depositors.
Mahindra Logistics Q2 Results: 34% YoY increase in net profit
Mahindra Logistics Ltd. has reported a 34% year-on-year (YoY) increase in net profit to Rs 14.98 crore, for the quarter ended September (Q2). The company’s sales have declined by 2.34% YoY to Rs 832.51 crore, during the same period. The company has stated that its sales volume has reached pre-Covid levels.
Nifty opened at 11,680 with a slight gap-up today. The index went up making multiple green candles, but took resistance at 11,750 near yesterday’s high. From there the index fell sharply making lower lows and fell almost 210 points! After 1 pm, Nifty recovered a bit to close at 11,642, down 28 points or 0.24%.
Bank Nifty opened the day at 24,102 and up to take resistance near yesterday’s high at 24,279. The index fell from the highs beautifully, almost 700 points. The index tracking banks closed the day at 23,900, down 191 points, or 0.79%.
Metals went up after lunch to become one of the best performers. Realty also performed well today. Auto was the worst performing sector today.
All Asian markets are trading in losses. European markets are also trading in losses, at the time of market close.
News Picks
Shares of Vodafone Idea moved positively today even after yesterday’s bad results. Shares closed at Rs 8.75, up 4.79%. The company said they are not shy to take first step towards tariff hike. They are also expecting Rs 6,400 crores from Vodafone PLC on certain arrangement for AGR dues.
Reliance share price jumped in late market hours to close at Rs 2,054.50, up 1.36% for the day. The company is all set to release their Q2 results very soon, and any result is sure to cause volatility on Monday.
BPCL share prices jumped up 3.70% to Rs 354.45. Today the company said it is trying to close the divestment plan by the end of this financial year. The company had announced good results yesterday.
Angel Broking jumped 8.47% to Rs 353.35, after Kuwait Investment bought 4.3 lakh shares. IPO investors would be very happy with the stocks movements over the last few days.
Shares of TVS Motors jumped to Rs 455.50, up 7.85% after the company announced better than expected earnings yesterday. Margins have also been improving.
Blue Dart shares closed at Rs 3,696.30, up 13.82% after the company announced a profit jump of 190% YoY.
Shares of IOC jumped to Rs 79.55, up 1.47% after consolidated profits jumped 1187 % to Rs 6,025.8 crore vs Rs 468 crore YoY. Revenue is down 14% to Rs 1.16 lakh crore.
Telangana Govt has rolled out an EV Policy with a 10-year roadmap. Companies will get incentives such as exemption from road tax & registration. Carmakers like Tata Motors and MG Motors are ready with their India specific electric cars already.
Markets Ahead
Nifty was very volatile today, as expected. And it will continue to be. High volatility is leading to high premiums for options, as well making them very desirable to sellers. Watch out for Reliance results coming out today, along with the US Presidential Election on Tuesday. Yes, I know that I have been saying this many times. But I cannot stress the importance of this even more. Nifty may fly in either direction next week after the election, I think we are all done with the consolidation.
Hope you will all tune in to The Stock Market Show tonight. Keep watching this space for more.
Recently, Mukesh Ambani was spotted speaking to economist and business journalist Omkar Goswami during a book launch event. In the conversation, the chairman of Reliance Industries revealed he is working towards these three things:
Transforming India into a digital society.
Transforming the education sector in India.
To move India away from fossil fuels to renewable energy.
We have seen Reliance already putting a lot of efforts in the digital transformation of India. We did a separate write-up “Reliance Jio: The driving force behind India’s digital transformation“. Here, you can read how the company has built itself as one of the leaders of digital change in the country.
Coming back to the interview, the point which surprised us was the thought process of Mukesh Ambani to aid India in shifting from fossil fuels to renewable energy. He said “the third thing that we are working towards is really the transformation of energy. And we think again that the world is right and India is in the right mindset to completely, in the next few decades, move away from fossil fuels to completely renewable energy.”
The core business of Reliance is oil. They came to the global map with unimaginable success in the oil & gas industry. Oil and hydrocarbon are two of the primary fossil fuels. So if Reliance wants to drive the change to renewable energy, doesn’t it counters their own business? What does this statement really signal?
Reliance has grown exponentially this year. They have expanded and received several investments from foreign firms. During the last few months, Nifty 50 rallied mostly due to the heavy presence of Reliance. But all the developments have come either in the Jio front or in the retail domain of Reliance. Its oil & gas business has not expanded much. In fact, a deal with Saudi Aramco in the oil & gas business is pending even after one year of announcement. This situation is completely opposite to what they are facing in different business verticals like telecom and retail, where investors are waiting in line to throw money at Reliance.
How has the business’ numbers changed?
Reliance has operated in several spaces since their inception. From trading yarn to oil to telecom and now to digital transformation and retail segment. One of the key aspects of any business is how they adapt to the changing times. Reliance is a perfect example of how a company should evolve with the market.“Data is the new oil”. We are sure that you have heard this several times in the last few years. It seems like Reliance would accept this literally and think of moving their business line in the future.
The numbers show a downtrend in the oil & gas business for Reliance in the last four years. Also, it shows massive growth in retail and Jio segment. The table below shows the revenue contribution from the different segments in the last four years.
2017
2018
2019
2020
Refining
63.7%
56.4%
50.9%
47.8%
Petrochemicals
23.5%
23.1%
22.3%
17.9%
Crude Petroleum
2.7%
2.3%
2.9%
5.2%
Digital Services
0.2%
4.4%
6.3%
8.4%
Organized Retail
8.6%
12.8%
16.9%
20.1%
(Segment-wise Revenue Contribution)
The table shows how the revenue contribution from the refining and petrochemicals segment has been falling. At the same time, digital services and retail has been on a continuous uptrend. The Compounded Annual Growth Rate, CAGR, (2017-20) for the digital services segments, which stands at 226%, beats all other four segments. It is followed by Organised Retail (49%), petrochemicals (11.9%) and refining (11.4%).
We find a similar pattern when we compare the profits from the oil & gas business with other business. From 2017 to 2020, the profit contribution of the refining segment has been halved from 65% to 30%. Profit generated from petrochemicals has remained constant at around 35%. Contrary to them, organised retail and digital services has jointly contributed more than 30% of the profits in 2020. This percentage was even below 2% in 2017.
No long-love for fossil fuels
Crude oil, hydrocarbon, natural gas or other fossil fuels are limited in nature. Earth does have them in abundance quantity but the rate of its depletion has been very rapid in recent years. In future, there will be a time when oil becomes a scarcity. How would the oil firms conduct exploration then?
The main work of an exploration & production (E&P) company in the oil & gas industry is to search and extract oil and gas. This requires heavy machinery and very high use of technology. Thus, it is no surprise that the companies working in this industry are highly leveraged.
Reliance’s primary work is not in the E&P horizontal (or the upstream segment) but in the downstream segment (Refining and marketing). But if the E&P companies find the level of oil in the surface very low, they won’t be able to sustain their cash inflows. If the E&P companies fail to find oil, how will the Refining and Marketing (R&M) companies like Reliance survive in the long-run?
Again, this is not something which will happen in the next 2-5 years. But, there are high chances of depletion of fossil fuels in the long-run (10-30 years). When this happens, what is left for the core business of Reliance?
Decreasing oil portfolio
Currently, the company holdstwo shale gas joint-ventures with Ensign Natural Resources and Chevron. Three years back they exited two oil blocks it held in Myanmar. In 2016, they exited their Peru’s oil and gas block. These move to sell off blocks signalled their aspiration to leave the upstream segment and rely more on the downstream segment.
At one time, the company had 42 oil & gas blocks domestically. Currently, they hold only 5 of these domestic oil & gas blocks. Also, only two of these blocks are fully owned by the company. BP holds almost 33% of the stake in each of the remaining three domestic blocks.
Leading the change
Not once, but many times, Reliance has voiced their desire to lead India’s change to renewable energy. According to Mukesh Ambani, “Energy is an essential requirement for all 8 billion people on this earth. There is a need to provide efficient, clean, affordable energy. And we have to do it in a responsible way. That’s the business. We should not confuse that between clean and unclean.”
India has pledged to decrease the emissions concentration of its GDP by 33%-35% by 2030 from the levels of 2005. On those lines, Reliance also declared its plans to become net-carbon zero by 2035. The government of India also wish to double their consumption of renewable energy to 20% by 2025. Transforming the energy business of the country will give new growth opportunity to the company.
It is also crucial to mention that entering into renewable energy business does not mean leaving fossil fuels instantly. The use of fossil fuels can be decreased by huge amounts but completely replacing them is not possible.So does Reliance wants to lead the fight in both the domains? Or they want to leave one for another? This is something we have to wait and watch in the next two years. But surely, India is geared for a big change in the renewable energy sector and Reliance could be a very big part of that. Until, next time.
