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Indian share markets finished the trading week in red dragged by technology stocks, after Infosys revenue outlook and plan to return cash to shareholders fell short of expectations, raising concerns at the start of the earnings reporting season. The sentiments also remained weak on account of global cues.
At the closing bell, the BSE Sensex stood lower by 182 points, while the NSE Nifty finished down 53 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished up by 0.1% and 0.2% respectively. Losses were largely seen in capital goods stocks, IT stocks and metal stocks.
Mid and small cap index have returned 31% in FY17, as against nearly 16% given by the S&P BSE Sensex and around 19% by Nifty. Interestingly, many mid and small cap stocks have outperformed the index not only in last one year, but have been on the winning streak from last 5 years.
With earnings not improving from quite some time now, the rise in the stock prices has led to unreasonable valuations. In fact, some of them are in a bubble phase right now. We believe, these stocks are vulnerable if there is any correction in the broader market.
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Infosys share price fell as much as 4% to hit a two month low of Rs 927 a share after the company reported profit at Rs 36.03 billion for January-March quarter, degrowth of 2.8% against Rs 37.08 billion in the previous quarter. Revenue fell 0.88% to Rs 171.2 billion compared with Rs 172.73 billion previous quarter. The company also reported weaker than expected constant currency guidance to 6.5-8.5% from 7.2-9.4%.
Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.07%, while the Nikkei 225 & the Hang Seng fell 0.68% and 0.21% respectively. European markets are lower today with shares in France off the most. The CAC 40 is down 0.64%, while London's FTSE 100 is off 0.51% and Germany's DAX is lower by 0.36%.
The rupee was trading at Rs 64.32 against the US$ in the afternoon session. Oil prices were trading at US$ 53.72 at the time of writing.
Indian Oil Corporation (IOC) share price surged 3.3% in today's trade after it was reported that the company's Gujarat Refinery has registered gross refining margins (GRMs) for FY17 at US$7.7 per barrel, up from US$4.87 per barrel in FY15 and US$6.73 per barrel in FY16, on the back of increased operational efficiency, reduced costs and technical up-gradation.
Moreover, Gujarat Refinery has achieved a new crude processing record of 13.99 million metric tonnes per annum (MMTPA) during FY17. The distillate yield of the refinery has improved to 81% up from 80.1% in 2014-15, thereby providing better production.
IOC has entered the elite league of corporate entities with a market value of over Rs 2 trillion after the stock price of the company hit a new high on the BSE. Thus far in the calendar year 2017, the stock has outperformed the market by surging 29% against a 11% rise in the benchmark index.
IOC along with the other two state-owned oil marketing companies, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd had opened this week on a high note with news abuzz that the companies are contemplating a daily revision of retail fuel prices. The three companies have already announced a pilot project for the daily revision of fuel prices in five major cities, starting May 1, before a nationwide roll-out.
Moving on to economic news. India's retail inflation for the month of Mach climbed to 3.81% in March 2017 from 4.83% in march 2016 and 3.65% in February 2017, on the back of costlier protein items, edible oils and non-food products like fuel and light. Though, it remained below the Reserve Bank of India's forecast for an average of 5% inflation for the financial year 2016-17.
As per the data of the Central Statistics Office (CSO), Ministry of Statistics and Program, the Consumer Price Index (CPI) (Rural, Urban, Combined) on Base 2012=100 for March 2017, stood at 3.75%, 3.88% and 3.81% respectively compared to 5.70%, 3.95% and 4.83% respectively in March 2016. The Consumer Food Price Index (CFPI) for all India Rural, Urban and Combined for March 2017 stood at 1.85%, 2.27% and 1.93% respectively in March 2017.
As per the data, retail fuel inflation accelerated to 5.56% in March from 3.9% in the previous month even as food prices rose 1.93%, slower than the 2.01% increase in the previous month. Prepared meals, snacks and sweets prices were also high, as prices grew by 5.65%. Further, vegetables continued to remain in the negative zone with deflation of (-) 7.24% and pulses declined by 12.42% in March 2017.
In news from the FMCG sector, as per a leading financial daily, ITC is reportedly planning to overhaul its foods portfolio in a bid to increase its market share in categories that have been showing signs of fatigue more than a decade.
While ITC is now the third largest player in the packaged foods market, trailing Nestle and Britannia, its market share in two large categories - biscuits and snacks - has been almost stagnant for the past three years.
The company will not launch any new food brand. Instead, it will take undue credit of existing ones for new launches and claims it has nearly 5-6 new categories in its innovation funnel.
Under the consumer sector, the lingering effects of demonetisation are likely to continue impacting the FMCG companies, particularly those with a higher proportion of wholesale trade and greater exposure to rural as well as north and east regions.
ITC share price finished the day down by 0.7% on the BSE.
Infosys announced its quarterly results today and the stock is down 4%. The stock market got a weak head start to Q4FY17 result season.
After Infosys hit a high of Rs 1,279 in June 2016, the stock traded in a downtrend until it hit a low of Rs 901 in November 2016. The stock made a pullback rally to Rs 1,040. But it again slipped to the 900 level in a month's time. It found strong support there and rallied back towards 1,020. But the stock again found resistance at this level from the horizontal resistance line and 200 EMA (see the chart above).
The stock is now heading south again towards the 900 level.
If the stock finds support there yet again, it will form a triple bottom pattern which indicates strength. But if the stock snaps below this level, it will open up lower levels for the stock.
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