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Domestic indices trade in red in early deals
Jan-15-2021

Indian equity benchmarks made cautious start amid overnight weakness on Wall Street and mixed cues from Asian peers. Soon, markets extended their losses and are trading lower with cut of over half a percent each in early deals. Selling in IT, Healthcare and Auto stocks weighted down on the domestic indices. There was some cautiousness as rating agency CRISIL projected CPI Inflation at 6.4% for fiscal 2021. Also, traders were concerned as India registered 15,515 fresh Covid-19 cases in the last 24 hours, taking the tally to 10,528,346. Market participants overlooked report that Prime Minister Narendra Modi will launch India's Covid-19 vaccination drive tomorrow via video conferencing. This will be the world's largest vaccination programme covering the entire length and breadth of the country. Meanwhile, the government has notified a modified scheme to provide financial assistance to distilleries producing first-generation ethanol from feedstocks, including cereals.

On the global front, Asian markets were trading mixed after U.S. President-elect Joe Biden revealed details of a $1.9 trillion stimulus proposal, called the American Rescue Plan, to support American households and businesses amid the pandemic. Worries about rising U.S.-China tensions weighed on the markets after the Trump administration placed Chinese smartphone maker Xiaomi on a blacklist of companies with alleged ties to the Chinese military.

Back home, auto stocks will be in focus with industry body SIAM’s statement that passenger vehicle wholesales in India slipped to a ten-year low in the April-December this fiscal, and the industry will have to work hard to regain better volumes and business health. In scrip specific development, HFCL advanced after it posted nearly 87 percent jump in its consolidated net profit for the December quarter.

The BSE Sensex is currently trading at 49253.66, down by 330.50 points or 0.67% after trading in a range of 49182.38 and 49656.71. There were 3 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 0.65%, while Small cap index was down by 0.44%.

The top gaining sectoral indices on the BSE were Telecom up by 2.56%, Power up by 0.21%, Consumer Durables up by 0.13%, Metal up by 0.12%, Utilities up by 0.04%, while IT down by 1.07%, Healthcare down by 1.04%, Auto down by 1.01%, FMCG down by 0.88%, Bankex down by 0.86% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.76%, NTPC up by 0.54% and Titan Co up by 0.15%. On the flip side, Ultratech Cement down by 2.10%, Asian Paints down by 1.70%, Tech Mahindra down by 1.68%, Dr. Reddy’s Lab down by 1.54% and HCL Tech. down by 1.44% were the top losers.

Meanwhile, rating agency ICRA in its latest report stated that demand for digital technologies and resumption of normal economic activities will drive sales for IT companies, and the sector will post a revenue growth of up to 9 per cent in 2021-22 (FY22). The agency gave a ‘stable' outlook for the sector, whose size is pegged at over $180 billion by industry lobby Nasscom, including the business process outsourcing business. It estimated that the IT services sector's revenues will rise between 7-9 per cent in rupee terms and between 5-8 per cent in dollar terms in 2021-22.

ICRA’s vice president Gaurav Jain said ‘Demand for IT services has been mildly impacted due to COVID-19 pandemic on all end-user industries though some sectors like travel/hospitality, retail, oil/gas have been impacted more severely’. Jain added that higher adoption of digital services has mitigated the impact to a large extent with companies ensuring that nearly 95 per cent of their staff transition to work-from-home. He added that the BFSI (banking financial services and insurance) vertical was initially impacted as modifications were required in confidentiality agreements with clients while the BPO vertical was impacted due to infrastructure constraints.

Jain said the pace of conversion of earlier deal wins into revenues picked up pace after some moderation during June quarter of this fiscal year, while the focus of new deals is now on cost take-outs, cloud transformation, virtualisation and digital customer experience. He noted that the pricing pressure mostly seen in legacy work during contract renegotiations too has been compensated by new digital transformation deals.

He said there will be little impact on growth and profitability for the companies, and added that margins will be in line with pre-COVID-19 levels, in 2021-22 for such companies. He also said the key risks for the companies in the sector continue to be increase in minimum wages, changes to eligible occupations, frequency and restrictions in issuance for H-1B visas. The rating agency said 82 per cent of the 52 companies it rates in the sector are in the investment grade category, indicating healthy cash flow generation led by higher margins and low working capital requirements.

The CNX Nifty is currently trading at 14503.40, down by 92.20 points or 0.63% after trading in a range of 14474.95 and 14617.45. There were 8 stocks advancing against 42 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 3.21%, UPL up by 2.58%, Tata Steel up by 0.84%, GAIL India up by 0.63% and NTPC up by 0.49%. On the flip side, Hero MotoCorp down by 2.53%, Shree Cement down by 1.87%, Ultratech Cement down by 1.83%, Asian Paints down by 1.66% and Grasim Industries down by 1.66% were the top losers.

Asian markets were trading mixed; Nikkei lost 202.66 points or 0.71% to 28,495.60, KOSPI declined 52.19 points or 1.66% to 3,097.74, Jakarta Composite fell 37.18 points or 0.58% to 6,391.14 and Shanghai Composite was down by 18.94 points or 0.53% to 3,546.96. On the other hand, Straits Times rose 11.22 points or 0.37% to 3,011.22, Hang Seng gained 0.12 points to 28,496.98 and Taiwan Weighted added 71.55 points or 0.46% to 15,778.74.
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