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ICICIdirect Research Posted on 09:34am 13-Oct-2021

IndusInd Bank and Kotak Mahindra Bank have been authorised by the RBI to collect direct and indirect taxes.

* Market Outlook

Indian markets are likely to open positive tracking mixed global cues as traders weighed the impact of elevated inflation on an economic recovery and looked ahead to earnings reports.

 

*  Markets Yesterday

• Domestic markets ended higher on the back of gains in auto, FMCG, metals and PSU banking stocks before awaited quarterly earnings reports.

• US markets ended lower amid concerns on elevated commodity prices and other signs of inflation heading into the corporate earnings season.

 

* Key Developments

• CPI Inflation for September 2021 fell sharply to 4.3% vs. 5.3% in August 2021. Significant decline in food inflation at 0.7% in September vs. 3.1% in August drove the headline print lower. The favourable base effect in almost all food items is the major reason for the low food inflation. Core inflation, however, stayed at similar levels of 5.8%. Overall three items viz. oil & fats, transport & communication and fuel & light continue to be major contributor of inflation. Elevated crude oil and other commodity prices remain key monitorable. Lower CPI print will comfort RBI in continuing its easy monetary policy stance.

• Index of Industrial Production (IIP) grew 11.9% YoY in August 2021 as opposed to an increase of 11.5% in July 2021. Manufacturing sector grew 9.7% YoY. Mining and power output grew 23.6% and 16% YoY, respectively. IIP during April-August 2021 showed sharp growth of 28.6% YoY as the IIP was impacted by the nationwide lockdown during the corresponding period a year ago.

• Infosys will be reporting its Q2 numbers today. We expect the company to report dollar revenue growth of 4% QoQ to US$3934.9 million while EBIT margins are expected to decline 87 basis points QoQ to 22.8%.

• Wipro will be reporting its Q2 numbers today. We expect the company to report dollar revenue growth of 6% QoQ to US$2559.4 million while EBIT margins are expected to decline 93 basis points QoQ to 16.9%.

• Mindtree will be reporting its Q2 numbers today. We expect the company to report dollar revenue growth of 4% QoQ to US$322.9 mn while EBIT margins are expected to decline 60 basis points QoQ to 17.1%.

• Fintech firm Mobikwik has turned unicorn after a recent secondary Esop sale round led by former Blackstone India head Mathew Cyriac. MobiKwik employees exercised their Esops in a recently opened window by selling part of their shares in a secondary sale. The transaction took place at an enterprise valuation of around $1 billion (~| 7500 crore), according to The Economic Times.

• Zee Entertainment has said that Invesco, its single largest shareholder, had itself come with a proposal in February this year for a merger of the company with certain entities owned by a large Indian group (Strategic Group) which had overvalued the latter entity by at least | 10,000 crore and would have been non-beneficial to Zee’s minority shareholders, as per Punit Goenka. We expect the legal battle to get stretched with both parties trading allegations. This could lead to stock price volatility in the interim period.

• According to Bloomberg, IndusInd Bank and Kotak Mahindra Bank have been authorised by the RBI to collect direct and indirect taxes, on behalf of the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC).

• According to Business Standard, the Reserve Bank of India has issued a small finance bank license to the Centrum Group-BharatPe consortium. Incorporated as Unity SFB, the lender will start operations in some weeks with a | 1,500-crore loan book.

• The government has received a total of 24 bids for 21 oil & gas blocks that were offered in the sixth exploration licensing round from three companies. ONGC submitted bids for 19 blocks, Sun Petrochemicals for three, and Oil India submitted bids for two blocks.

• Reliance Industries will invest €39 million in NexWafe GmbH (NexWafe), a German manufacturer of silicon wafers for solar panels via its wholly owned subsidiary, Reliance New Enrgy Solar.

• The Ministry of Civil Aviation on Tuesday allowed airlines to operate at 100% of their scheduled capacity vs. 85% earlier from October 18 onwards. However, restrictions on fare bands continue to be in place.

• Prime Minister Narendra Modi will launch the digital platform for the National Infrastructure Masterplan, through which the entire network of projects - from roads and railways to telecom networks and gas pipelines - until 2020, with plans up to 2024-25, will be laid out. The masterplan, named PM GatiShakti, was announced on Independence Day and will bring together 16 ministries, including seven core infrastructure sectors, on one platform to synergise project planning across stakeholder ministries to avoid duplication, expedite clearances and plug gaps at the right time.

 

*  Today's Highlight

Results: Infosys, Wipro, Mindtree.

Events: EU Industrial Production, UK Trade balance, China CPI, US CPI.