Weekly Market View – 30th January 2021

Indian Market Outlook:

The Key benchmark indices fell over five percent over the week  due to continuous FII selling under a weakening global trend. Nifty ended the week 5.13 percent lower at 13634 points while Sensex ended 5.3 percent lower at 46286 points. Broader market outrperformed the key benchmark indices. BSE Midcap index ended 3.62 percent lower, while the BSE Small cap index fell 2.36 percent, during the course of the week. Foreign Institutional Investors were the net sellers during the week; sell equities worth Rs.12096 crore while the DIIs were the net buyers of Rs.3789 crore. The last trading session of the domestic equity market ahead of the announcement of the Union Budget for 2021-22 on Monday recorded the highest quantum of net selling by foreign institutional investors in more than 10 months. Going forward the big events to watch out next week will be the Budget 2021 announcements and December quarter earnings. More than 400 companies will declare their results from February 1-5, 2021. We believe that the budget would focus on reviving growth and any disappointment on that front would lead to further correction in the markets. We would recommend investors to invest in quality stocks as every correction brings opportunity for investment. Nifty 50 Results to watch next are Heromotocorp, NTPC, HDFC Ltd. Bharti Airtel, State Bank of India, Britannia and Mahindra and Mahindra. On Macro Front Nikkei Markit Manufacturing PMI and Nikkei Services PMI would be announced on 1^st and 3^rd February 2021. Auto sales numbers and the RBI policy would be the other driving factors in upcoming week.

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Domestic Economy Indicators

Economic News:

• The Union Budget 2021 is being widely considered a pivotal point in the country’s economic and social recovery from a deadly pandemic that battered incomes and disrupted countless lives. Finance Minister Nirmala Sitharaman, who will deliver the budget on Feb. 1, has the daunting task of reviving an economy that was floundering since before the coronavirus struck while manoeuvring through the various new challenges that have emerged due to the pandemic-led lockdowns. With India’s flagship employment scheme failing to keep up with the demand for jobs, farmers protesting on the streets and wealth inequality getting more stark, Sitharaman’s economic package will be closely eyed by the country.

• The Indian economy is likely to grow by 11% in 2021-22, the V-shaped recovery having been made possible by its strategy of Covid management that focused on protection of life at the expense of a short-term impact on livelihoods, the Economic Survey for 2020-21 has argued. The annual birds’ eye view of the economy strongly emphasized the need for the government to loosen its purse strings to aid the recovery without getting overly concerned about the fiscal deficit.

Industry News:

• Indian automakers continued to ship more vehicles from their factories than last year, aided by a recovery in demand and a low base even as supply-side constraints persist, according to estimates by four brokerages. Factory-gate shipments of most automakers for January rose in the range of 3-25% over the year earlier, data compiled from research reports of Motilal Oswal, Emkay Global Dolat Capital and Prabhudas Lilladher showed. Only Mahindra & Mahindra Ltd. is expected to report an up to 22% year-on-year decline in wholesales. The automakers, barring Escorts Ltd. and Maruti Suzuki India Ltd., also saw sales rise over the preceding month according to the brokerage estimates.

• India’s insurance penetration at just 3.76% of the GDP is “extremely low” against comparable Asian countries such as China, Malaysia and Thailand as well as the global average, according to the central government’s Economic Survey of 2020-21 released on Friday. Even as India’s insurance penetration grew from 2.71% in 2001 to 3.76% in 2019, when compared with the penetration recorded in comparable Asian economies such as Malaysia, Thailand and China at 4.72, 4.99 and 4.30 % respectively,  was found to be much lower, the survey stated. Both, India’s life and non-life insurance penetration in 2019 at 2.82% and 0.94% respectively are also significantly lower than the global average of 3.35% and 3.88%, respectively.

Company News:

• Tata Motors Ltd. returned to profit after three quarters as sales at its luxury unit climbed and domestic passenger vehicle shipments rebounded amid festive push and preference for personal mobility during the pandemic. Net profit of the homegrown automaker stood at Rs 2,941 crore in the quarter ended December compared with a net loss of Rs 314 crore in the preceding three months and a Rs 1,738- crore profit a year ago, according to an exchange filing. A consensus estimate of analysts tracked by Bloomberg had pegged the income at Rs 1,173 crore.

• Cipla Ltd.’s quarterly profit rose as the drugmaker saw double-digit growth in key markets. Net profit more than doubled to Rs 748.1 crore year-on-year in the quarter ended December, the drugmaker said in an exchange filing. Analysts tracked by Bloomberg pegged the metric at Rs 604.9 crore. Revenue rose 18% year-on-year to Rs 5,168.7 crore. Analysts estimated Rs 4,940.6 crore. API revenue rose 22% to Rs 201 crore. Operating profit rose 62% year-on-year to Rs 1,231 crore—higher than the Rs 1,069.1-crore estimate. Margin expanded more than 600 basis points to 23.8% from 17.4% last year.

• IndusInd Bank Ltd. saw its net profit fall as provisions increased. Net profit of the private sector declined 36.5% year-on-year to Rs 830.39 crore in the three months ended December, according to an exchange filing. That compares with the Rs 833.6-crore consensus estimate of analysts tracked by Bloomberg. Its net interest income, or core income, however, rose 11% year-on-year to Rs 3,406 crore,  against the Rs 3,276.7-crore forecast. Other income stood at Rs 1,645.78 crore, down 8% over the year-ago period. The lender’s gross non-performing asset ratio as on Dec. 31 stood at 1.74% compared with 2.21% in the July-September quarter. Its net NPA ratio stood at 0.22%, down 30 basis points sequentially.

Global News:

• The U.S. economy downshifted in the final three months of 2020 after record third-quarter growth, as the pandemic battered the labor market and limited Americans’ ability and willingness to spend. Gross domestic product expanded at a 4% annualized rate in the fourth quarter, according to a preliminary estimate released by the Commerce Department on Thursday.

• Hong Kong’s economy shrank by a record in 2020, with the global pandemic dragging down output in a city already reeling from massive political upheaval. Gross domestic product fell 3% in the fourth quarter from a year earlier, resulting in a full-year decline of 6.1%, according to advance estimates from the Hong Kong Census and Statistics Department Friday.

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Major Economy Indicators

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