IT stocks reboot after strong Q1 show from TCS

Key benchmark indices saw divergent trend on last trading day of the week after witnessing high intraday volatility. The barometer index, the BSE Sensex, logged small gains to settle at over 7-week high. The 50-unit CNX Nifty finished slightly lower. The Sensex advanced 21.44 points or 0.11%, off 106.75 points from the day's high and up 38.72 points from the day's low. The market breadth, indicating the overall health of the market, was negative.

Index heavyweight Reliance Industries rose ahead its Q1 June 2013 results today, 19 July 2013. Index heavyweight and cigarette major ITC rose marginally after striking a record high. Bank stocks dropped. In the pharma pack, Lupin scaled record high. Power equipment major Bhel dropped sharply. IT major TCS hit record high after reporting good Q1 results after trading hours on Thursday, 18 July 2013. Other IT stocks were boosted by good Q1 results from TCS. HCL Technologies scaled record high. Asian Paints reversed direction after striking a record high.




Bajaj Auto surged in volatile trade after declaring Q1 June 2013 result. HDFC fell after announcing Q1 June 2013 result. MMTC was locked at 5% upper circuit, with the stock recovering on bargain hunting after recent steep slide.

Key benchmark indices pared initial gains triggered by good Q1 result from IT major TCS. Key benchmark indices extended gains in morning trade. The Sensex hit over 7-week high. The CNX Nifty hit 7-week high. Key benchmark indices held positive zone in mid-morning trade. Key benchmark indices pared gains in early afternoon trade as Asian stocks dropped. Key benchmark indices recovered after hitting fresh intraday lows in afternoon trade. High volatility was witnessed as key benchmark indices recovered after paring intraday gains in mid-afternoon trade. Volatility ruled the roost in late trade as the 50-unit CNX Nifty reversed intraday gains and as the BSE Sensex gave away almost the entire intraday gains as European stock markets declined.

The S&P BSE Sensex was up 21.44 points or 0.11% to 20,149.85, its highest closing level since 30 May 2013. The index jumped 128.19 points at the day's high of 20,256.60 in mid-afternoon trade, its highest level since 30 May 2013. The index fell 17.28 points at the day's low of 20,111.13 in late trade.

The CNX Nifty was down 8.85 points or 0.15% to 6,029.20, its lowest closing level since 18 July 2013. The index hit a high of 6,066.85 in intraday trade, its highest level since 31 May 2013. The index hit a low of 6,020.25 in intraday trade.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,342 shares declined and 1,052 shares gained. A total of 151 shares were unchanged.

The total turnover on BSE amounted to Rs 1922 crore, higher than Rs 1905 crore on Thursday, 18 July 2013.

The BSE Mid-Cap index shed 0.58% and the BSE Small-Cap index fell 0.56%. Both these indices underperformed the Sensex.

Among the 30-share Sensex pack, 16 stocks declined and rest of them gained.

Index heavyweight Reliance Industries rose 0.71% to Rs 923.55, with the stock recovering from intraday low of Rs 912.80 ahead of its Q1 June 2013 results today, 19 July 2013.

Index heavyweight and cigarette major ITC rose marginally by 0.03% to Rs 368.60. The stock hit a record high of Rs 371.95 in intraday trade today, 19 July 2013.

Asian Paints shed 1.12% to Rs 5,157, with the stock reversing direction after striking a record high of Rs 5,246.60 in intraday trade today, 19 July 2013. Asian Paints after market hours on Thursday said Berger International (BIL), Singapore's net profit rose 145.59% to Rs 6.41 crore on 2% growth in total revenue to Rs 133.56 crore in the quarter ended June 2013 over the quarter ended June 2012. Berger International (BIL), Singapore, which is listed on the Singapore Stock Exchange, is an indirect subsidiary of the Asian Paints.

Auto stocks were mostly higher. Tata Motors advanced 2.24%. Maruti Suzuki India rose 0.38%. Mahindra & Mahindra (M&M) shed 0.21%.

Two wheeler stocks rose. Hero MotoCorp rose 2.73%.

Bajaj Auto surged 3.83% to Rs 1,970 in volatile trade. The stock hit a high of Rs 1,985.60 and low of Rs 1,860.10. The company's net profit rose 3% to Rs 738 crore on 1% growth in total income to Rs 5087 crore in Q1 June 2013 over Q1 June 2012. The result was announced during trading hours today, 19 July 2013.

Bajaj Auto said its EBITDA margin surged to 21.3% in Q1 June 2013 from 18.9% in Q1 June 2012. The company said its strategy to focus on international markets has paid rich dividends. The company said its strategy to hedge future earnings from exports has ensured the company's ability to leverage to its advantage the depreciation of the rupee against the dollar. While exports were almost flat at $327 million, in rupee terms, exports recorded a growth of 10% to Rs 1876 crore in Q1 June 2013 over Q1 June 2012. The company said that taking into account the current trend of the rupee against dollar and current position of hedged contracts, a further benefit on account of depreciating rupee would accrue to the company in the coming quarters.

Bajaj Auto said that the outlook on sales of three wheeler passenger vehicles in India remains positive with the release of new permits in Hyderabad and Maharashtra and given the company's strong footing in the diesel segment.

Capital goods pivotals edged lower. Power equipment major Bhel tumbled 8.71% to Rs 172.45. It was the top loser from the Sensex pack.

L&T slipped 0.95%. The company on Wednesday, 17 July 2013, said its transportation infrastructure business made a major breakthrough in its international business by securing a new order worth Rs 2085 crore from the Ministry of Transport and Communications, Sultanate of Oman, for the construction of the Al Batinah Expressway Package 4. The project is scheduled to be completed in 36 months. This order was won against stiff international competition and augurs well for L&T's expansion in international infrastructure, the company said.

VA Tech Wabag rose 2.23% after a joint venture of the company bagged an order worth Rs 344 crore in Philippines. VA Tech Wabag is the lead partner and the project is funded by World Bank.

Housing Development Finance Corporation (HDFC) lost 2.77% to Rs 800. The housing finance major reported 17.08% rise in net profit to Rs 1173.10 crore on 12.59% growth in total income to Rs 5564.94 crore in Q1 June 2013 over Q1 June 2012. The Q1 result was announced during trading hours today, 19 July 2013.

As at 30 June 2013, the loan book (net of loans sold) stood at Rs 176993 crore, as against Rs 148262 crore in the previous year. Loans sold during the preceding 12 months amounted to Rs 6310 crore. As at 30 June 2013, the total borrowings stood at Rs 163269 crore, as against Rs 143812 crore in the previous year.

HDFC's consolidated net profit surged 33.79% to Rs 1707.10 crore on 14.81% growth in total income to Rs 8482.85 crore in Q1 June 2013 over Q1 June 2012.

IT major TCS jumped 4.84% to Rs 1,740.50 after striking a record high of Rs 1,755 in intraday trade today, 19 July 2013. The company reported good Q1 results after trading hours on Thursday, 18 July 2013. TCS' net profit rose 5.9% to Rs 3831 crore on 9.5% growth in revenue to Rs 17987 crore in Q1 June 2013 over Q4 March 2013. Operating profit rose 12% to Rs 4847 crore in Q1 June 2013 over Q4 March 2013.

TCS said growth in Q1 June 2013 was seen across all industry segments, led by life sciences, retail, telecom and BFSI. There was balanced growth across IT and other service lines led by Assurance, EiS, Global Consulting and Asset Leveraged Solutions. Major markets grew smartly led by USA, Europe and UK alongside growth in emerging markets like Latin America and Asia Pacific, TCS said in a statement. The company added two new $100 million clients in Q1 June 2013.

During the quarter, TCS closed the acquisition of Alti, one of the top 5 system integrators of SAP solutions in France with several top French corporations in the banking, financial services, luxury, manufacturing and utilities sectors as its key customers.

TCS said it continued to hire employees to support business growth. There was a total gross addition of 10,611 people and net addition of 1,390 people in Q1 June 2013, taking the total employee strength to 277,586 on a consolidated basis. The utilization rate (excluding trainees) was at 82.7% and that including trainees was 72.5%. The attrition rate (LTM) dropped further sequentially to 10.52% including BPO. The attrition rate in IT was at 9.55%, while BPO attrition was higher at 15.77%.

Commenting on the Q1 performance, TCS Chief Executive Officer and Managing Director N Chandrasekaran said: "We have delivered another solid quarter, driven by the highest volume growth in the past seven quarters. It has been an all-round performance with strong revenue growth across markets led by the US. Our investments in Europe continue to gain strong traction with customers and helped us deliver industry-leading growth this quarter. Strong momentum in our business, the right cost structure, a customer-centric approach and our increasing investments in new digital solutions and services positions us well to post another year of strong business growth".

TCS Chief Financial Officer Rajesh Gopinathan said: "The current environment demands an agile operating model that can capture diverse growth opportunities. We continue to execute to plan and invest for growth, while maintaining stability in our margin profile".

Good results from TCS lifted other IT stocks. Wipro gained 1.51%.

Infosys was up 1.55%. Infosys last week retained its revenue growth guidance in dollar terms for the year ending 31 March 2014 (FY 2014) at the time of announcing Q1 June 2013 result, belying fears that it may lower the guidance.

HCL Technologies advanced 4% to Rs 892.50 after striking a record high of Rs 906.15 in intraday trade today, 19 July 2013. The company declares year ended 30 June 2013 results on 31 July 2013.

Tech Mahindra jumped 3.68% to Rs 1,131.50. The stock hit 52-week high of Rs 1,141.50 in intraday trade.

Mindtree surged 3.13% to Rs 943 after striking a 52-week high of Rs 966.20 in intraday trade today, 19 July 2013. The company's consolidated net profit surged 71.6% to Rs 135.40 crore on 5.8% growth in revenue to Rs 647.70 crore in Q1 June 2013 over Q4 March 2013. The Q1 result was announced after market hours on Thursday, 18 July 2013.

In dollar terms, Mindtree's consolidated net profit jumped 69% to Rs $24.6 million on 4.1% growth in revenue to $117.7 million in Q1 June 2013 over Q4 March 2013.

Mindtree added 1,057 employees in Q1 June 2013 on a gross basis. The company's active customers as of 30 June 2013 stood at 222.

Commenting on the first quarter results, Mindtree's CEO & MD, Krishnakumar Natarajan said: "We have delivered 15 consecutive quarters of revenue growth. This quarter's performance continues that trend and has been encouraging both from a revenue and profitability perspective. We hope to continue this momentum. We have made some key changes to our strategy and structure to enhance our expertise led positioning and to build an agile organization. We are confident that these steps are in the right direction to achieve our aspirations to deliver industry leading growth".

Hexaware Technologies rose 0.85% after consolidated net profit surged 23% to Rs 97.90 crore on 5.7% growth in revenue to Rs 536 crore in Q2 June 2013 over Q1 March 2013. The Q2 result was announced before market hours today, 19 July 2013. Hexaware Technologies' consolidated earnings before interest, taxation, depreciation and amortization (EBITDA) margin for Q2 June 2013 expanded to 23.7%, up 440 basis points (bps) on QoQ basis.

Hexaware expects 3.5% to 5.5% growth in consolidated revenue at between $98.10 million to $100 million in Q3 September 2013 over Q2 June 2013.

Mastek tumbled 9.76% after consolidated net profit declined 65.02% to Rs 7.10 crore on 3.13% decline in operating revenue to Rs 222.30 crore in Q1 June 2013 over Q4 March 2013. The Q1 result was announced during trading hours today, 19 July 2013.

Mastek's consolidated earnings before interest, taxation, depreciation and amortization (EBITDA) declined 30.07% to Rs 18.60 crore in Q1 June 2013 over Q4 March 2013. The decline in EBITDA margin was due to drop in UK revenue, higher product development expenditure and mandated provision for receivables greater than 180 days, Mastek said.

Mastek said that the drop in revenue in Q1 June 2013 was primarily in the UK with the successful completion of one project and the anticipated ramp down in another project totaling to Rs 12 crore. The profit after tax (PAT) of Rs 7.10 crore in Q1 June 2013 includes additional tax provision during the quarter for tax on dividend received from a foreign subsidiary and deferred tax charge as compared to negative tax in the previous quarter, the company said.

Commenting on the company's results, Mr. Sudhakar Ram, Group CEO & MD, Mastek said, "While the quarter was muted due to the anticipated drop in the revenues in UK, the momentum for the company for the full year remains strong. We have seen a substantial improvement in our order backlog position and this gives us the confidence that the revenue will follow through in the rest of the quarters".

Mr. Farid Kazani, Group CFO and Finance Director, Mastek said, "The highlight of the quarter was the strong improvement in cash position to Rs 281 crore. The EBITDA margins remain healthy although the quarter has been impacted by higher product development expenditure and provisioning for overdue receivables. We remain confident that margins going forward will improve on the back of improvement in sales traction and operational efficiency measures".

Bank stocks dropped. Among private sector bank stocks ICICI Bank (down 2.34%), and Yes Bank (down 3.36%) declined.

Axis Bank dropped 3.67%. The bank's net profit jumped 22.14% to Rs 1408.93 crore on 15.86% increase in total income to Rs 9059.12 crore in Q1 June 2013 over Q1 June 2012. The result was announced during trading hours on Thursday, 18 July 2013.

Kotak Mahindra Bank fell 3.32%. The bank during market hours on Thursday reported 42.61% rise in net profit to Rs 402.82 crore on 28.94% rise in total income to Rs 2652.40 crore in Q1 June 2013 over Q1 June 2012. Gross non-performing assets surged to Rs 995.39 crore as on 30 June 2013, from Rs 758.11 crore as on 31 March 2013 and Rs 684.68 crore as on 30 June 2012. The ratio of the bank's gross non-performing assets (NPAs) to gross advances increased to 1.95% as on 30 June 2013, from 1.55% as on 31 March 2013 and 1.6% as on 30 June 2012. The ratio of the bank's net non-performing assets (NPAs) to net advances increased to 0.98% as on 30 June 2013 from 0.64% as on 31 March 2013 and 0.8% as on 30 June 2012.

Private sector banking major HDFC Bank fell 0.16%. The bank on Wednesday, 17 July 2013 reported 30.08% rise in net profit to Rs 1843.86 crore on 17.94% growth in total income to Rs 11588.56 crore in Q1 June 2013 over Q1 June 2012.

Among PSU bank stocks, State Bank of India (down 0.67%), Canara Bank (down 3.82%), Union Bank of India (down 3.64%), Bank of India (down 3.75%), Bank of Baroda (down 0.15%) and Punjab National Bank (down 1.08%) declined.

Oriental Bank of Commerce slipped 3.52%. The bank today, 19 July 2013, said it has put on hold the implementation reduction in base rate by 25 basis points to 10%. The bank had on 9 July 2013 announced that reduction in base rate from 10.25% to 10% would be applicable from 22 July 2013.

UCO Bank slumped 6.59% as sticky loans rose in Q1 June 2013 over Q1 June 2012. The state-run bank during market hours today reported 41.01% rise in net profit to Rs 511.11 crore on 5.93% rise in total income to Rs 4668.81 crore in Q1 June 2013 over Q1 June 2012.

The bank's ratio of net non-performing assets (NPAs) to net advances increased to 3.15% as on 30 June 2013, from 2.23% as on 30 June 2012, but decreased from 3.17% as on 31 March 2013. The ratio of gross NPAs to gross advances increased to 5.58% as on 30 June 2013, from 3.88% as on 30 June 2012 and 5.42% as on 31 March 2013.

UCO Bank's capital adequacy ratio (CAR) as Basel II norms stood at 13.72% as on 30 June 2013, as against 12.33% as on 30 June 2012 and 14.15% as on 31 March 2013. CAR as per Basel III norms stood at 13.44% as on 30 June 2013.

The bank's provisions and contingencies jumped 81.3% to Rs 741.30 crore in Q1 June 2013 over Q1 June 2012.

The Reserve Bank of India (RBI) on 15 July 2013 announced measures to tighten liquidity in the banking system to arrest slide in rupee against the dollar.

Lupin rose 0.78% to Rs 897 after striking a record high of Rs 908 in intraday trade today, 19 July 2013. Lupin during market hours on Thursday, 18 July 2013, said it has entered into a strategic partnership with MSD to co-market MSD's 23-valent Pneumococcal polysaccharide vaccine for Indian market. Lupin will have a non-exclusive licence to market, promote and distribute MSD's 23-valet Pnemococcal Polysaccharide vaccine under a different brand name in India. MSD is one of the world's leading players in the Pneumococcal polysaccharide vaccine (PPV) category.

Sun Pharmaceuticals Industries fell 3.78%. The company has fixed 30 July 2013 as record date for 1:1 bonus shares.

Hindustan Zinc lost 3.75%. The company during trading hours today, 19 July 2013, reported 5% growth in net profit to Rs 1660 crore on 8% rise in net sales/income from operations to Rs 2939 crore in Q1 June 2013 over Q1 June 2012. The increase in revenue was driven by higher sales volume and rupee depreciation, partially offset by lower metal prices. EBITDA rose 6% to Rs 1506 crore in Q1 June 2013 over Q1 June 2012 on higher sales, partially offset by higher operating costs.

Mr. Agnivesh Agarwal, chairman, Hindustan Zinc said: "We delivered growth on all fronts in the quarter and are committed to consistently deliver superior performance and maintain our leadership position."

Mined metal production was 237,825 MT in Q1, as compared with 186,642 MT in the corresponding prior period. The increase was in line with the company's plan to deliver 1 million MT mined metal production for the year. Integrated production of refined zinc was up 10% year on year to 173,000 MT in Q1 on higher smelter utilization rate. Integrated production of refined lead was flat at 29,110 MT. Integrated saleable silver production was up 9% to 77 MT in Q1 on higher contribution from Sindesar Khurd and Zawar mines.

The zinc metal cost of production before royalty during the quarter was Rs 46,800 per MT ($836), 2% higher in rupee terms and 1% lower in dollar terms from a year ago. The increase was primarily due to lower sulphuric acid credits and higher excavation costs, partially offset by lower coal price, lower specific coal consumption and benefits of higher volume.

Hindustan Zinc said it follows a conservative investment policy and invests in high quality debt instruments and debt mutual funds and fixed deposit with banks. As on 30 June 2013, the company had cash and cash equivalents of Rs 22365 crore, out of which Rs 14743 crore was invested in debt mutual funds, Rs 2217 crore in bonds and Rs 5398 crore were in fixed deposits with banks.

MMTC was locked at 5% upper circuit at Rs 52.95, on bargain hunting after sliding 76.14% in prior 26 trading sessions. The stock hit a 52-week low of Rs 49.55 in intraday trade today, 19 July 2013. On 13 June 2013, the Government of India (GoI) sold 9.33% stake in MMTC via Offer for Sale (OFS) through stock exchanges mechanism at an indicative price of Rs 60.86 per share, at a discount of 71.21% to the closing price of the stock of Rs 211.45 on 12 June 2013.

Bajaj Corp ended almost unchanged at Rs 244.35 in highly volatile trade. The stock rose as much as 7.02% at the day's high of Rs 261.55. The stock fell as much as 10.7% at the day's low of Rs 218.25. Bids were received for a total of 3.5 crore shares at an indicative price of Rs 225.98 per share for the Offer for Sale (OFS) of the company's shares, as per data from the stock exchanges. The company's promoter, SKB Roop Commercial LLP, had put on block 1.43 crore shares of Bajaj Corp, constituting 9.75% of the equity share capital of Bajaj Corp, through Offer for Sale (OFS) via the stock exchanges mechanism today, 19 July 2013. The floor price for the OFS was set at Rs 200 per share.

SKB Roop Commercial LLP currently holds 20% stake in Bajaj Corp. The total promoter shareholding in the company is 84.75% (as per the shareholding pattern as on 30 June 2013). Stock market regulator Securities & Exchange Board of India (Sebi) has mandated a minimum 25% public shareholding in private sector companies which are listed on the bourses.

Jaiprakash Associates shed 2.66% on turning ex-dividend today, 19 July 2013, for dividend of 50 paise per share for the year ended 31 March 2013 (FY 2013).

Container Corporation of India rose 2.09% after the company said its board will meet on 25 July 2013 to consider a proposal of issuing bonus shares to shareholders. The company made the announcement after market hours on 18 July 2013.

Bayer CropScience surged 3.83% to Rs 1,720 after striking a record high of Rs 1,769 in intraday trade today, 19 July 2013. The company on Thursday, 18 July 2013, said that a meeting of the board of directors of the company will be held on 22 July 2013, to consider a proposal for buy-back of the company's equity shares, constitution of buyback committee, and appointment of intermediaries in accordance with all applicable provisions of laws.

Indian Hotels Company declined 3.74% and Raymond fell 3.64% after the NSE announced removal of both these scrips from the futures and options segment. Contracts for new expiry months in these two securities will not be issued on expiry of existing contract months, NSE said in a circular. However, the existing unexpired contracts of expiry months for July, August and September would continue to be available for trading till their respective expiry and new strikes would also be introduced in the existing contract months, the NSE said.

Hanung Toys and Textiles rose 2.67% after the company said it bagged an export order from a leading US-based buyer for exporting value-added home furnishing to the extent of $60 million (approximately Rs 360 crore) to be completed within three years. The announcement was made after market hours on Thursday, 18 July 2013.

Prime Minister Dr. Manmohan Singh today, 19 July 2013, said that the economy may grow slower than previously expected 6.5% for the year to March 2014. India is committed to bringing its current account deficit under control and reducing demand for gold and petroleum products, he said.

European stock markets slipped from an almost seven-week high on Friday, 19 July 2013, as technology firms dropped in the wake of disappointing earnings from US heavyweights Google Inc. and Microsoft Corp. and as mining firms tracked most metals prices lower. Key benchmark indices in UK, France and Germany were down by 0.32% to 0.4%.

Asian markets declined as fund managers shift money from Asia to the US amid concerns that growth is slowing in China and Japan's economic reforms may be losing steam. Key benchmark indices in South Korea, Singapore, Taiwan and China fell 0.15% to 1.62%. Key benchmark indices in Indonesia and Hong Kong rose 0.08% each.

Japanese shares beat a sharp retreat after opening comfortably higher, with a wave of selling ahead of weekend elections in the country. The Nikkei 225 Average was off 1.48%. The volatility in Tokyo came ahead of the country's upper house elections this weekend, in which the ruling Liberal Democratic Party (LDP) is expected to easily clinch a majority. The LDP already has a majority in the lower house of the parliament, and a majority in the upper chamber of the Diet is widely expected to strengthen Prime Minister Shinzo Abe's government in its attempt to revive the Japanese economy.

Trading in US index futures indicated that the Dow could fall 25 points at the opening bell on Friday, 19 July 2013. US stocks rose on Thursday, 18 July 2013, after the second day of congressional testimony from Federal Reserve Chairman Bernanke and some upbeat earnings results, including from Morgan Stanley. The Dow Jones Industrial Average and S&P 500 reached record closing highs, with sentiment also boosted by Moody's Investors Service lifting its outlook on US credit ratings to stable and reaffirming the country's AAA sovereign rating.

In his two-day testimony to Congress which concluded on Thursday, 18 July 2013, Federal Reserve Chairman Ben Bernanke said plans to taper asset purchases were not on a preset path and stressed intentions to be very responsive to data. Additionally, Bernanke said recent data have been "mixed" and it was "way too early" to make a judgment on when the central bank will slow down the pace of its asset purchases. The Fed currently buys $85 billion a month in government and mortgage bonds in an effort to keep interest rates low and stimulate economic growth.