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Sensex drops 420 pts; RIL sheds 4%

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The Sensex and the Nifty ended with steep losses on Wednesday, dragged by selling in index heavyweight Reliance Industries. Weakness in auto and IT stocks negated strength in pharma stocks.

As per the provisional closing data, the barometer index, the S&P BSE Sensex dropped 421.82 points or 1.1% at 38,071.56. The Nifty 50 index lost 102.1 points or 0.9% at 11,198.60.

Reliance Industries (down 4.02%), HDFC Bank (down 1.91%) Infosys (down 1.12%) were major index shakers.

In the broader market, the S&P BSE Mid-Cap index gained 0.68% while the S&P BSE Small-Cap index added 0.43%.

The market breadth was almost even. On the BSE, 1370 shares rose and 1329 shares fell. A total of 132 shares were unchanged.

Edelweiss Financial Services hit an upper circuit of 5% at Rs 77.85. According to the media reports, the government has picked Edelweiss Financial Services and Deloitte as the two pre-initial public offer (IPO) transaction advisors for the listing of the country's biggest insurer - Life Insurance Corporation of India (LIC). The scope of the mandate includes advising the government on the modalities of the IPO and the timing, arriving at an optimal capital structure, preparing restated consolidated financial statements for the past three years for LIC and its subsidiaries, structuring the transaction amongst other aspects.

COVID-19 Update:

Total COVID-19 confirmed cases worldwide stood at 16,670,063 with 659,077 deaths. India reported 5,09,447 active cases of COVID-19 infection and 34,193 deaths while 9,88,029 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India.

Earnings Today:

Bharti Airtel (up 0.1%), TVS Motor (down 1.03%), Bombay Burmah Trading Corp (down 1.74%), Indian Energy Exchange (up 3.3%), InterGlobe Aviation (down 0.5%), Glaxosmithkline Pharmaceuticals (up 1.19%), Mastek (down 1.63%), Navin Fluorine International (down 3.9%), Union Bank of India (up 1.3%), CEAT (down 0.87%) and GMM Pfaudler (down 3.59%) are some of the other companies that will announce their results today.

Earnings Impact:

Maruti Suzuki India fell 1.98% to Rs 6162.95 after the car major reported net loss of Rs 249.4 crore in Q1 June 2020 as against net profit of Rs 1435.5 crore in Q1 June 2019. The result was impacted by significantly lower sales volume due to COVID-19 pandemic related disruptions. The impact was partially off-set by lower operating expenses and higher fair-value gain on the invested surplus. Net sales tumbled 80.4% on a year-on-year basis to Rs 3,677.50 crore during the quarter. Sales volume declined 81% to 76,599 units in Q1 FY21 from 402,594 units in Q1 FY20. The company reported a negative operating EBIT of Rs 1646.70 crore with a negative operating EBIT margin of 44.8% in Q1 June 2020. Pre-tax loss in the first quarter stood at Rs 345.7 crore compared with pre-tax profit of Rs 1910.9 crore in the corresponding period last year. The company sold a total of 76,599 vehicles during the quarter. Sales in the domestic market stood at 67,027 units. Exports were at 9,572 units.

Dr. Reddy's Laboratories jumped 6.66%. The drug major's consolidated net profit skid 12.59% to Rs 579.30 crore on 14.93% jump in revenue from operations to Rs 4,417.50 crore in Q1 June 2020 over Q1 June 2019. Consolidated profit before tax (PBT) gained 3.39% to Rs 878.90 crore in Q1 June 2020 as against Rs 850 crore in Q1 June 2019. Current tax expenses for the quarter jumped 60.04% at Rs 299.60 crore as against Rs 187.20 crore in Q1 June 2019. The effective tax rate is around 34% for the quarter. The higher tax rate was primarily due to discontinuation of weighted deduction on R&D and completion of tax holiday for one of the plants. The company's gross margin for the quarter stood at 56% as against 51.7% in Q1 June 2019 and 51.5% in Q4 March 2020. EBITDA for the quarter stood at Rs 1,162 crore, registering a 2% Y-o-Y (year-on-year) growth and 16% Q-o-Q (quarter-on-quarter) jump.

Colgate-Palmolive (India) gained 4% after net profit jumped 17.18% to Rs 198.18 crore on 3.93% decrease in revenue from operations to Rs 1,033.60 crore in Q1 June 2020 over Q1 June 2019. The company's gross margins grew by 30 bps while EBITDA for the quarter was up 190 bps. The company launched Palmolive hand sanitizer in April. It also launched a brand new range of toothbrushes, Colgate Gentle.

IDFC First Bank rose 1.26% after net profit of Rs 93.55 crore in Q1 June 2020 compared with net loss of Rs 617.36 crore in Q1 June 2019. The bank's gross non-performing assets (NPAs) stood at Rs 1,741.66 crore as on 30 June 2020 as against Rs 2,279.56 crore as on 31 March 2020 and Rs 2,418.56 crore as on 30 June 2019. The ratio of gross NPAs to gross advances stood at 1.99% as on 30 June 2020 as against 2.60% as on 31 March 2020 and 2.66% as on 30 June 2019. The bank's provisions and contingencies declined 40.34% to Rs 764.08 crore in Q1 FY21 over Rs 1280.75 crore in Q1 FY20. During Q1 FY21, the bank has created additional COVID-19 related provision of Rs 375 crore to further strengthen the balance sheet.

IDBI Bank hit an upper circuit of 5% at Rs 40.15 after the bank reported net profit of Rs 144.43 crore in Q1 June 2020 compared with net loss of Rs 3,800.84 crore in Q1 June 2019. Net Interest Income (NII) for Q1 FY2021 jumped 22% to Rs 1,773 crore from Rs 1,458 crore for Q1 FY2020. Net Interest Margin (NIM) during the quarter improved by 68 bps to 2.81% as compared to 2.13% in the corresponding quarter last year. The bank's gross non-performing assets (NPAs) stood at Rs 44,475.20 crore as on 30 June 2020 as against Rs 47,272.37 crore as on 31 March 2020 and Rs 51,657.63 crore as on 30 June 2019. The ratio of gross NPAs to gross advances stood at 26.81% as on 30 June 2020 as against 27.53% as on 31 March 2020 and 29.12% as on 30 June 2019. The bank's provisions and contingencies slumped 86% to Rs 888.05 crore in Q1 FY21 over Rs 6,332.05 crore in Q1 FY20. Provision coverage ratio (including technical write-offs) improved to 94.71% as on 30 June 2020 from 87.79% as on 30 June 2019 and 93.74% as on 31 March 2020.

Global Markets:

European markets were mildly higher while Asian shares ended mixed on Wednesday as rising global coronavirus cases weighed on investor sentiment, while the new U.S. relief package unveiled by Republicans hit an impasse in Washington.

Hong Kong Chief Executive Carrie Lam has reportedly warned that the city faces an outbreak that could lead to the "collapse" of its hospital system, with 106 new cases reported Tuesday. In France, confirmed cases rose to 183,804 from 183,079 on Monday.

In US, stocks indexes closed lower Tuesday, as tech shares were under pressure and lawmakers continued their debate over the next coronavirus relief package. Shares of Amazon slipped 1.8% and Netflix declined by 1.4%. Alphabet shares fell 1.7%. Facebook shares dipped 1.5% and Apple closed 1.6% lower.

US Senate Majority Leader Mitch McConnell unveiled Senate Republicans' proposed $1 trillion coronavirus aid bill on Monday, but Democrats have criticized the package's limitations compared to a $3 trillion proposal that passed the House of Representatives in May. Complicating matters further, President Donald Trump on Tuesday voiced disagreement with some aspects of the bill, though talks are continuing.

On the vaccine front, Moderna Inc. kicked off its late-stage trial while Pfizer Inc and BioNTech entered late-stage trials of their candidates also.

The Federal Reserve began a two-day policy meeting on Tuesday that is expected to see Chairman Jerome Powell underline a willingness to take further action to support the economy and maintain easy financial conditions. The Fed on Tuesday announced that its board of governors had decided to extend until the end of the year several emergency loan programs that had been set to expire on Sept. 30.

In US economic data, the Conference Board's consumer-confidence index fell to 92.6 in July from a revised 98.3 reading in June. The measure of how consumers feel about the economy right now actually rose to 94.2 in July from 86.7, but the subindex that gauges expectations about the future fell to a four-month low 91.5 from 106.1 in June.

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First Published: Wed, July 29 2020. 15:30 IST