Sunday, April 20, 2014

Weekly wrap: Nifty ends flat, eyes 6800; IT cos kick off earnings season

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Equity benchmarks closed on a flat note during the truncated week as Thursday’s 352-point rally offset initial losses. March quarter earnings season kicked off with top four IT companies reporting numbers, while March inflation started northward move.
The 30-share BSE Sensex fell 0.12 point to close at 22628.84 and the Nifty rose 3.10 points to 6779.40 after rallying 1.2 percent last week. There were only three trading session during the week.
It was also a big week for Lok Sabha elections - the fifth phase (the biggest among nine phases) of voting for 121 constituencies across 12 states was held on Thursday, which included all of Karnataka, some parts of Maharashtra and Rajasthan. Political experts feel this phase may give some indication of general elections outcome that will be announced on May 16.
Market experts believe this election excitement will take the benchmarks to newer highs as the day of polls results come closer. If the outcome shows BJP-led NDA government coming to power with majority then the Nifty has to see more than 7000 level, say experts.
“There is really a good possibility of a strong government being formed. Today the base case is that BJP will be very close to majority on its own, which looks stretched to me. But if that is the case the market will really do very well immediately after the election. Probably even close to 8000 may not be impossible if there is majority for BJP,” says UR Bhat, Dalton Capital Advisors.
“However, if the results are slightly more disappointing in the sense that BJP is sub 200, then there will be a correction of probably 10 percent,” he adds.
The market will be shut on April 18 for Good Friday.
Rating agency Standard & Poor’s says it can upgrade outlook on India to stable if new government manages economic problems while it can downgrade outlook if economic challenges are not addressed. “New government must address fiscal challenges for outlook upgrade,” it says in its report.
In case of economic data, March WPI inflation and CPI inflation started rising again and even industrial output (announced on Friday after market hours last week) has seen contraction in February. WPI climbed to 5.70 percent, the highest level since December 2013, as against 4.68 percent in previous month due to higher food, manufacturing and fuel costs while CPI rose to 8.31 percent from 8.03 percent month-on-month.
India’s index of industrial production in February came in at negative 1.9 percent versus an expansion of 0.8 percent in January, which was a nine-month low.
Meanwhile, top four IT companies kicked off the March quarter earnings season with positive commentary for the year ahead (FY15), though numbers were mixed. The BSE IT index climbed gained 0.8 percent as Wipro and TCS rallied 3 percent each while HCL Technologies and Tech Mahindra climbed 1.7 percent.
Infosys’ revenues were lower than analysts’ forecast while margin and profits were better. The company also beat on guidance front as it expects 7-9 percent growth in FY15 dollar revenue as against street forecast of 6-8 percent.
Top software services exporter TCS missed expectations in terms of Q4 dollar revenues (up 1.9 percent Q-o-Q) and margin (down 60 basis points) while profit was higher but the management reiterated its outlook saying FY15 will be better than FY14 .
In case of Wipro, EBIT margin in March quarter grew 150 bps sequentially and revenue was in line but its Q1FY15 guidance is muted. HCL Technologies and midcap IT company Mindtree reported strong numbers in the quarter ended March 2014 with their dollar revenue growing 3 percent and 4.4 percent, respectively.
Private sector IndusInd Bank too announced its earnings during the week, which were higher-than-expected. Net interest income grew 18.2 percent and profit rose 29 percent as against expectations of 15.4 percent and 13.5 percent growth, respectively.
Among sectoral indices, the BSE FMCG topped the buying list with 2.2 percent upmove while Auto and Oil & Gas gained over 0.6 percent. However, Realty fell 4 percent while Metal and Capital Goods were down 0.8-1 percent. Bank index slipped 0.4 percent.
United Spirits was the biggest gainer among Nifty 50, rising more than 11 percent after Diageo announced open offer to buy further 26 percent stake in the company at Rs 3,030 per share.
Shares of Cairn India, ITC, ICICI Bank and Hero Motocorp were up 2-3 percent whereas DLF tanked 9.5 percent. HDFC, IDFC, Tata Power, BHEL, ACC, L&T and Axis Bank lost 2-4 percent.
HDFC Bank declined 2.6 percent. MSCI reduces weightage of the nank further in its MSCI India Index and warned the stock will be dropped from MSCI India Index if it remains on RBI ban list at November review.
The broader markets too closed flat. Among midcaps, Panacea Biotech, Future Retail, Dhanlaxmi Bank, UB Holdings, Sasken Communication, Future Lifestyle and JK Tyre surged 10-40 percent.
Tata Metaliks climbed 13 percent as Tata Steel on Thursday says its shareholders will meet on May 16 to discuss merger of Tata Metaliks with the company. Tata Metaliks’ shareholders will get four equity shares of Tata Steel for 29 shares held.
However, Suzlon Energy fell 10 percent on profit taking. Radico Khaitan was down 10 percent too as sources told CNBC-TV18 that Japanese brewer and distiller Suntory may call off its deal (to buy a 26 percent stake) with India's third-largest liquor maker post due diligence.
For the week ahead, stocks will react to Reliance Industries and Persistent Systems' Q4 earnings that will be announced on Friday and Saturday, respectively.
HDFC Bank, ICICI Bank, Maruti Suzuki, Siemens, Cairn India, UltraTech Cement, YES Bank, ACC, Ambuja Cements, Biocon, Axis Bank, South Indian Bank, LIC Housing Finance, L&T Finance Holdings, Indiabulls Real Estate and Mastek will announce January-March quarter earnings.
Sixth phase of general elections for 117 constituencies (including all 39 seats of Tamil Nadu and the solitary constituency of Puducherry) spread across 12 states will be held on April 24.

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Thursday, April 17, 2014

Wipro Q4 net up 10.5%, sees Q1FY15 revenue at $1.72-1.79 bn

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India's third largest software services exporter Wipro 's IT services revenues met analysts' expectations and margin beat forecast but the guidance for June quarter is muted. Net profit of the company grew 10.5 percent sequentially to Rs 2,226.5 crore on revenue of Rs 11,703.6 crore (3.3 percent Q-o-Q) during the quarter. IT services revenue in rupee terms rose 2.8 percent Q-o-Q (up 24 percent Y-o-Y) to Rs 10,619 crore and dollar revenue increased 2.5 percent (up 8.5 percent Y-o-Y) to USD 1.72 billion during the quarter.
                          The guidance range for Q4FY14 dollar revenue was USD 1.712 billion to USD 1.745 billion and analysts had expected it at USD 1.720 billion and rupee revenue at Rs 10,541 crore. "Our focus on process simplification, automation and platform-based delivery continues to deliver results and we are seeing the benefits through improved productivity, reduced timelines in execution and greater business agility," says TK Kurien, executive director & chief executive officer. Wipro expects revenues from IT services business to be in the range of USD 1.715 billion to USD 1.755 billion during April-June quarter of financial year 2014-15. It says this guidance is based on conversion rate of 61.62 a dollar. Operational performance was very strong. Earnings before interest and tax (EBIT) grew 9.5 percent on sequential basis to Rs 2,605.4 crore and margin expanded 150 basis points to 24.5 percent in the quarter gone by. Analysts had expected both at Rs 2,409 crore and 22.85 percent, respectively. 
                                    For the year ended March 2014, EBIT came in at Rs 9,030 crore, up 29 percent compared to previous year and margin jumped 195 basis points to 22.6 percent. "We continue to systematically work on improving our operational efficiencies resulting in expansion of full year IT services operating margins by 195 basis points," says Suresh Senapaty, executive director & chief financial officer. Full year IT services revenue rose 18 percent to Rs 39,950 crore and dollar revenue jumped 6.4 percent to USD 6.618 billion. Wipro says it added 59 new customers in Q4. Some of the deals won during the quarter were: 1) Five-year infrastructure managed services contract with a Fortune 500 global leader in specialty chemicals. 2) Seven-year engagement with Xoserve, an organization which is an integral part of the restructured gas distribution market in Britain. 3) A leading apparel and footwear company has renewed its multi-year engagement with Wipro, for application support services in a managed services model. 4) Deal from a multinational telecommunications company to manage IT and network operations for enterprise business in India. 5) Large deal in the Basel II risk & compliance domain from a large state owned bank in India. Wipro, which has announced earnings after market hours, has declared a final dividend of Rs 5 per equity share for the year ended March FY14. 
                             The payout date for final dividend is fixed as July 31, 2014. Meanwhile, the company says its IT products segment delivered revenue of Rs 1,111 crore for the quarter, up 3 percent compared to a year-ago period and revenue was Rs 3,880 crore, down 1 percent Y-o-Y. Wipro's stock closed at Rs 585.55, up 2.39 percent on the Bombay Stock Exchange.

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