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Benchmarks hit day's high; pharma shares correct

Key equity indices extended early gains and hit fresh intraday high in morning trade. Positive Asian shares boosted sentiment. At 10:23 IST, the barometer index, the S&P BSE Sensex, was up 465.92 points or 1.17% at 40,448.90. The Nifty 50 index added 109.45 points or 0.93% at 11,871.90.

In the broader market, the S&P BSE Mid-Cap index gained 0.32% while the S&P BSE Small-Cap index rose 0.42%.

The market breadth was strong. On the BSE, 1340 shares rose and 738 shares fell. A total of 117 shares were unchanged.

Coronavirus Update:

India reported 772,055 active cases of COVID-19 infection and 114,610 deaths while 6,663,608 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India. Total COVID-19 confirmed cases worldwide stood at 39,899,915 with 1,112,599 deaths, according to data from Johns Hopkins University.

Buzzing Segment:

The Nifty Pharma index shed 0.65% to 11,737.75. The index had gained 1.51% on Friday.

Torrent Pharma (down 1.93%), Divi's Labs (down 1.82%), Biocon (down 1.22%), Cipla (down 1.20%) and Lupin (down 0.81%) declined.

Dr. Reddy's Laboratories (DRL) gained 0.32% to Rs 5098.40. DRL and Russian Direct Investment Fund (RDIF) announced that they have received approval from the Drug Control General of India (DCGI) to conduct an adaptive phase 2/3 human clinical trial for Sputnik-V vaccine in India. This will be a multicenter and randomized controlled study, which will include safety and immunogenicity study.

Cadila Healthcare shed 0.75% to Rs 427.30. The drug maker received final approval from US drug regulator for ursodiol capsules and tentative approval for linagliptin and metformin hydrochloride tablets. Both drugs will be manufactured at the group's formulation manufacturing facility at the SEZ, Ahmedabad.

Earnings Today:

Britannia (up 0.31%), HDFC Life (up 1.16%), ACC (down 0.95%), Century Textiles (up 0.75%), Hatsun Agro (up 1.58%), L&T Technology Services (up 0.08%), Rallis India (up 1.18%), Tata Metaliks (up 2.51%) and CSB Bank (up 2.71%) will announce quarterly earnings today.

Earnings in Focus:

HDFC Bank added 0.91% to Rs 1209.95 after the bank's net profit increased 18.4% to Rs 7513.11 crore on a 6.9% rise in total income to Rs 36,069 crore in Q2 September 2020 over Q2 September 2019.

The bank said it is net interest income (interest earned less interest expended) for Q2 September 2020 grew by 16.7% to Rs 15,776.4 crore from Rs 13,515 crore recorded in Q2 September 2019, driven by asset growth of 21.5% and core net margin of 4.1%. The bank's continued focus on deposits helped in maintenance for a healthy liquidity coverage ratio at 153%, above the requirement.

The bank's provisions and contingencies increased by 37% to Rs 3,703.50 crore in Q2 September 2020 from Rs 2700.68 crore in Q2 September 2019. The private lender said total provisions of current quarter includes contingency provisions of approximately Rs 2300 crore for proforma NPA as additional contingent provisions to make the balance sheet more resilient. The provisions held by the bank are in excess of the RBI prescribed norms.

On the asset quality side, the ratio of gross NPAs to gross advances stood at 1.08% on 30 September 2020 as against 1.36% as on 30 June 2020 and 1.38% as on 30 September 2019. The ratio of net NPAs to net advances stood at 0.17% as on 30 September 2020 as against 0.33% as on 30 June 2020 and 0.42% as on 30 September 2019.

Avenue Supermarts rose 2.16% to Rs 2026.35. The company's consolidated net profit tumbled 38.4% to Rs 199 crore on 11.4% fall in revenues to Rs 5,306 crore in Q2 September 2020 over Q2 September 2019. EBITDA margin was at 6.2% in Q2 September 2020 compared with 8.6% in Q2 September 2019.

Commenting on the performance of the company Neville Noronha, CEO & managing director, Avenue Supermarts, said: "Within the continued uncertainty from Covid-19, our business has seen improvement and it continues to gradually progress towards prepandemic levels.

FMCG and staples demand remains robust. September 2020 sales of all stores exceeded September 2019 sales for FMCG and Staples while General Merchandise and Garments did lesser sales in the same period. However, discretionary consumption has seen significant improvement over Q1FY21.

We continue to focus on new store openings and have opened six new DMart stores during the quarter. We have closed two of our Mumbai stores for customers and converted them into fulfillment centers (FC) for our ECommerce business.

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