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Inflation Down Stock Up

Tale of the Tape

Hey, guys. Markets extended their unbeaten run to day 4. 🔥

Nifty and Sensex opened higher after lower-than-expected US inflation turbocharged bulls. More details below. Midcaps and Smallcaps also witnessed healthy gains, +0.9% each. The advance-decline ratio was split evenly. ✌️

Most sectors ended in the green. State-owned Banks (+2.4%) pulled back after the recent bout of profit booking. IT (+1.8%) and Banks (+1.6%) provided additional support. 💸

Eicher Motors (+1%) Q1 results easily beat Street estimates. Read more below. 💯

ICICI Bank (+1%) hit a new all-time high. The private lender’s market cap crossed Rs 6 lakh crore mark. Take a bow! 🙏

NMDC increased iron ore prices by up to 5%, the first hike since March! The stock closed flat. 📈

Kolte-Patil (-2%) will develop a residential project in Pune. The project is estimated to earn Rs 1,400 cr in revenue. 🏗️

Zydus (+5%) received the US Food and Drug Administration (USFDA) approval for a new drug used to treat severe nausea and vomiting. ✅

JMC Projects (+2%) won multiple orders worth Rs 1,524 cr. 💰

Cryptos were back in the green. Bitcoin roared +6%. Ethereum rallied +12% as Goerli Testnet “merge” went live. 🚀

Here are the closing prints:

Nifty 17,659 +0.7%
Sensex 59,332 +0.9%
Bank Nifty 38,879 +1.6%

The War On Inflation Is (Not) Over!

Markets were as ecstatic as sisters receiving their Rakhi gifts as US inflation slowed down for the time since April! 🥳

What’s going on? The July Consumer Price Index (CPI) reading fell to 8.5%. This is a marked slowdown from June’s 9.1% – not to mention better than economists had predicted. Equity markets read this as a positive indication and believe that the US Federal Reserve may slow down the pace of interest rate hikes. FYI – the probability of a 75 basis points rate hike in next month’s meeting dropped from 68% to 43%. Hurray! 🕺

But there’s a catch. The US Fed has been clear that it wants to see months of evidence before concluding that inflation has peaked! More specifically, they need “core inflation” – which strips out volatile energy and food prices – to consistently drop off, which hasn’t happened yet. The labor market continues to remain tight which means salaries are still climbing at record rates. This can throw off the Fed’s inflation projection giving equity bulls more headache. Lastly, even at 8.5%, inflation continues to remain elevated and most economists believe we’re still not close to topping out. 👀

Anyways, markets are clearly in no mood to give a f@#$. Good vibes only! 😇


Earnings Roundup 

Eicher Motors jumped +3.5% intraday on outstanding Q1 results. The Royal Enfield maker beat Street estimates on all counts. Volumes grew 51% over the previous year led by record demand and market share gains. Operating margins continued to expand hitting a multi-quarter high despite higher raw material costs. Price hikes, higher sales of top-end bikes, and lower other expenses boosted the operational performance. Here’s its report card: 📊  

  • Revenue: Rs 3,398 cr; +72% YoY (vs Est: Rs 3,304 cr)
  • EBITDA: Rs 831 cr; +2.3x YoY (vs Est: Rs 769 cr)
  • EBITDA Margin: 24.5%; (vs Est: 23.3%)
  • Net Profit: Rs 611 cr; +2.6x YoY (vs Est: Rs 592 cr)

Strong demand for Royal Enfield coupled with new launches and easing supply bottlenecks are set to drive volume growth, said experts. Focus on ramping up exports plus better pricing power may boost earnings. 💰 

Eicher Motors is +17% YTD. 📈


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Earnings Highlights 

  • Mazagon Dock Shipbuilders: Revenue: Rs 2,230 cr; (+84% YoY) | Net Profit: Rs 225 cr; (+1.2X YoY)
  • Patanjali Foods: Revenue: Rs 7,211 cr; (+37% YoY) | Net Profit: Rs 241 cr; (+39% YoY)
  • Bharat Forge: Revenue: Rs 2,884 cr; (+34% YoY) | Net Profit: Rs 164 cr; (+7% YoY)
  • Greaves Cotton: Revenue: Rs 671 cr; (+1.9X YoY) | Net Profit: Rs 16 cr;
  • Trent: Revenue: Rs 1,803 cr; (+2.6X YoY) | Net Profit: Rs 115 cr;

Calendar 

A ton of companies will report their Q1 results tomorrow… Here are all the important earnings you don’t want to miss: