Tag - crude oil

04 Jul

Week in a nutshell (27June-1July)

Technical talks

NIFTY opened the week on 27th June at 15,926 and closed at 15,752 on 1st July. The lower Bollinger Band level of 15,370 might act as a support, while, on the upside, the 16,250 level might act as a resistance.

Among the sectoral indices, FMCG (+2.8%), REALTY (+1.6%), and HEALTHCARE (+1.1%) were the gainers during the week. OIL&GAS (-4.2%) was the only loser.

Weekly highlights

  • All of the major US indices ended the week on a volatile note as oil prices rose and fell throughout the week. S&P 500 closed the week marginally higher at 3,825 and Nasdaq at 11,129.
  • WTI crude oil and Brent crude closed flat at -0.3% after fears that the US economy would enter a recession, resulting in lower oil demand.
  • Accenture reported 3QFY22 earnings, with revenues exceeding expectations at US$16.2 billion. According to the leadership, cost optimization, along with growth, is now the focus area for clients. However, it lowered its fiscal forecast due to a negative foreign exchange impact and rising inflation.
  • According to official data released on June 30th, output in India’s eight core infrastructure sectors increased by 18.1% in May, compared to 16.4% the previous year. This suggests that the economy is gradually returning to normalcy.
  • Japan’s factory activity growth slowed in June, with the PMI falling from 53 to 52, as supply disruptions, exacerbated in part by China’s strict COVID-19 curbs, hurt manufacturers, keeping the economy underpowered and with few catalysts to spur a robust recovery in the short run.
  • US consumer spending data was released on June 30th, showing that US consumer spending rose less than expected in May as motor vehicles remained scarce and higher prices forced cutbacks on purchases of other goods, indicating that the early recovery in economic growth was a losings steam.
  • On June 29, India’s Cabinet approved a plan that would allow local crude producers to sell oil to private companies, boosting revenue for state-run producers such as ONGC and Oil India. The decision will take effect on Oct. 1, and existing conditions for selling crude oil to government-run companies will be waived, according to a government statement, adding that exports will be prohibited. Reliance Industries’ share price tanked more than 7% Friday after the government levied an additional tax on crude oil.
  • FII (Foreign Institutional Investors) net sold ₹ 68,350 mn and DII (Domestic Institutional Investors) were net buyers this week. DIIs bought shares worth ₹ 59,250 mn.

Things to watch out for the next week

  • On Monday the labor markets will be in the spotlight next week, with the June nonfarm payrolls report due on Friday.
  • The 1QFY23 result season kicks off with IT major TCS reporting earnings on Friday.
  • The International PMI surveys, which track business sentiment in the United Kingdom and the eurozone, will be released on Tuesday, while the meeting minutes from the FOMC’s most recent policy meeting, held in mid-June, will be available on Wednesday.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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17 May

Strong growth expected in Navratna, Kesh King and Fair & Handsome – Emami

Update on the Indian Equity Market:

On Tuesday, the shares of Life Insurance Corporation of India Ltd (LIC) got listed on the bourses and it closed at an 8% discount to its issue price of Rs949.

NIFTY closed 2.6% higher at 16,259, led by HINDALCO (+9.8%), TATASTEEL (+7.7%), and COALINDIA (+7.6%). There was no NIFTY stock that ended in the red. METAL (+6.9%), OIL & GAS (+3.7%), and MEDIA (+3.0%) led the sectoral gainers and no sector ended in the red.

Excerpts of an interview with Mr. NH Bhansali, CEO – Finance, Strategy & Business Development, and CFO, Emami published in the Economic Times on 16th May 2022:

  • New age channels like modern trade and e-commerce are growing very strongly for Emami. These contributed 15% and 13% to domestic sales in 4QFY22 and FY22 respectively.
  • The company has taken price hikes of ~4.5% and may take further hikes in case the need arises. Due to price hikes, strategic procurements, and other cost optimisation initiatives, the gross margin contraction was limited to 30bps and it was 62.4% in 4QFY22.
  • There has been significant inflation for key materials like crude derivatives, vegetable oils, camphor, and packaging materials. Geo-political uncertainty and high inflation is impacting input costs adversely.
  • 4QFY22 witnessed unprecedented inflation which hurt consumer wallets across rural and urban areas, which impacted volumes. With a good monsoon season and an uptick in government initiatives to boost rural income, the management expects the slowdown to fade away.
  • The Company’s rural distribution initiatives like Project KHOJ have continued to progress with ~8,000 rural towns being added in FY22 taking the total tally to 40,000 rural towns which will aid rural growth.
  • Notwithstanding the pandemic-related challenges and inflationary pressure, Emami managed to increase its leadership position and increased household penetration for most of its brands.
  • The Company expects gross margin pressure of ~200bps in 1QFY23.
  • Despite the high base in the pain management portfolio, it expects a strong growth in Navratna, Kesh King, and Fair and Handsome, which have been impacted for the last 2 years due to the pandemic. This would help maintain the double-digit growth rate momentum.
  • The company is expanding its distribution footprint across markets and channels to supplement the growth targets.
  • Emami maintains a bullish view on digital businesses- Zanducare or e-commerce. Through the D2C model, it is connecting directly with consumers and generating superior consumer insights leading to higher offtakes.

Asset Multiplier Comments

  • High inflation and a weak rural sentiment are expected to weigh on the short-term outlook for the company. Unprecedented levels of inflation are leading to downtrading across markets. The impact of downtrading is expected to be lower for Emami as it generates 24% from smaller SKUs.
  • A severe summer season across India and rural recovery post a good monsoon season could act as a tailwind for the company.

Consensus Estimates: (Source: Market screener website)

  • The closing price of Emami was ₹ /- as of 17-May-2022.  It traded at x/ x the consensus earnings estimate of ₹ 16.7/ 20/- for FY23E/FY24E respectively.
  • The consensus target price of ₹ 565/- implies a P/E Multiple of 28x on the FY24E EPS estimate of ₹ 20/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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19 Mar

This Week in a Nutshell (14th-18th March)

Technical talks

NIFTY opened the week on 14th March at 16,646 and ended at 17,287 on 17th March. NIFTY gained 1.8% throughout the week. The next support and resistance levels for the index would be 16,711 and 17,380 respectively.

All the sectoral indices gained this week, with Financial Services  (+6.8%), Bank (+5.7%), and Auto (+5.6%) being the gainers.

Weekly highlights

  • The retail inflation rate in India – measured by the Consumer Price Index (CPI)- came in at 6.07% in February 2022 as compared to 5.93% in February 2021. Commodity prices are expected to remain at elevated levels due to the geopolitical tensions disrupting supply chains and rising costs.
  • Russia-Ukraine update: Ukraine has warned that peace negotiations could last for weeks and said evacuations of combat zones continued, with another 5,000 people leaving Mariupol. Russia repeated a threat to target arms convoys sent by the US and its allies.
  • After losing ground for 5 consecutive days in the hopes of Russia-Ukraine coming to some sort of agreement, WTI crude settled above US$100/barrel on 18th March after negotiations between Russia and Ukraine deteriorated. Oil prices are expected to remain volatile till there’s some resolution on what Russia’s ultimate goal is.
  • The Federal Reserve on Wednesday raised interest rates by 25bps for the first time since 2018 and laid out an aggressive plan to push borrowing costs to restrictive levels. Investors in the US seemed to shrug off the initial jitters of the rate hike as Feds Chair Jerome Powell said the economy is strong enough to weather the rate hikes and maintain its current strong hiring and wage growth.
  • The Bank of England on Thursday hiked its main interest rate to its pre-pandemic level by 0.25%, the third increase in a row, to battle decades-high inflation. K. inflation hit a 30-year high in January and is expected to rise further as Russia’s invasion keeps energy prices high.
  • NASDAQ (+2%) and S&P500 (+1%) rallied for the fourth consecutive session on Friday as Fed met market expectations by starting its rate-hiking cycle on Wednesday.
  • The foreign institutional investors (FII) turned buyers this week and bought equities worth Rs 16,860 mn. Domestic institutional investors (DIIs) continued to be buyers and bought equities worth Rs 12,900mn.

Things to watch out for next week

  • The geopolitical tensions between Russia and Ukraine are expected to continue impacting supply chains, high commodity prices, and volatility in crude oil prices.
  • In India, the next few weeks are expected to be quiet on the corporate front as companies will be in a silent period before the announcement of the FY22 earnings.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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