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Benchmarks pare early gains; steel stocks tumble

·5-min read

Key indices pared early gains in morning trade as profit booking emerged at higher levels. The Nifty, however, held above the 14,400 mark. While tech and financials led the gains, steel stocks corrected after Union Minister Nitin Gadkari hinted at presence of cartel in the cement & steel industry.

At 10:24 IST, the barometer index, the S&P BSE Sensex, was up points 258.37 or 0.53% to 49,040.88. The Nifty 50 index added 57.95 points or 0.40% at 14,405.20.

The broader market corrected. The S&P BSE Mid-Cap index shed 0.77% while the S&P BSE Small-Cap index lost 0.45%.

The market breadth was negative. On the BSE, 1288 shares rose and 1402 shares fell. A total of 161 shares were unchanged.

COVID-19 Update:

Total COVID-19 confirmed cases worldwide stood at 90,260,464 with 1,934,605 deaths. India reported 222,526 active cases of COVID-19 infection and 151,160 deaths while 10,092,909 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India.

Buzzing Index:

Shares of four steel companies declined after Union Minister Nitin Gadkari reportedly said that there is a cartel in cement & steel industries, and cement manufacturers are exploiting the situation in the real estate sector, as prices of the two commodities rise.

"Every steel company has its own iron ore mines & there has been no increase in labour & power costs but they are increasing rates. It is difficult for me to understand (the reason behind it)," the minister reportedly said.

SAIL (down 2.60%), Tata Steel (down 2.13%), JSW Steel (down 1.54%) and Jindal Steel & Power (down 1.17%) edged lower.

Tata Steel's Indian crude steel production rose 2.90% to 4.60 million tons (MT) in Q3 December 2020 (3QFY21) from 4.47 MT in Q3 December 2019 (3QFY20). On a sequential basis, the crude steel production has improved marginally from 4.59 MT in Q2 September 2020 (2QFY21).

Tata Steel India saw strong sales momentum in 3QFY21, however, sales volumes were constrained by lower opening inventory post very strong sales in 2QFY21. As a result, deliveries were 4.66 MT in 3QFY21, lower by 8% as compared to 5.05 MT in Q2 FY21 and lower by 4% from 4.85 MT in 3QFY20.

During the quarter, despite planned maintenance shutdowns, the company was able to ramp-up steel production at Tata Steel Europe by 22% QoQ and 4%YoY to 2.61 MT. This was aimed at replenishing inventory ahead of improving market condition and seasonally better Q4 March 2021 (4QFY21).

While Q3 FY21 steel sales volume declined by 7% QoQ and 10% YoY to 2.11 MT, due to lower opening inventories and COVID-19 impact at beginning of the quarter, the mix of deliveries saw further improvements in the Automotive and Engineering sectors.

Earning Impact:

TCS gained 1.48% to Rs 3166.50 after the IT major reported 16.4% rise in consolidated net profit to Rs 8,701 crore on a 4.7% increase in revenue to Rs 42,015 crore in Q3 December 2020 (Q3 FY21) over Q2 September 2020 (Q2 FY20). The company's September quarter net profit had a post-tax one-time impact of Rs 958 crore due to provision for ongoing litigation with EPIC.

The company's consolidated net profit has grown by 7.2% and revenue has risen by 5.4% in Q3 FY21 over Q3 FY20.

TCS said that constant currency revenue for Q3 FY21 rose 4.1% quarter-on-quarter and 0.4% year-on-year. The IT major's operating margin stood at 26.6% in Q3FY21 compared with 26.2% in Q2FY21. Net margin stood at 20.7% in Q3FY21.

TCS said that all its verticals showed good sequential growth, led by Manufacturing (+7.1%), BFSI (+2%), Life Sciences and Healthcare (+5.2%), Communications & Media (+5.5%) and Retail and CPG (+3.1%). On a year on year, constant currency basis, Life Sciences and Healthcare continued to grow in double digits at 18.2%. BFSI (+2.4%) and Technology & Services (+2.4%) also moved into positive territory.

The IT firm continued to witness a strong rebound in growth and transformation services as customers seek to operationalize new models. Growth in the quarter was led by Cloud Services, Analytics & Insights, Cognitive Business Operations, IoT and Quality Engineering & Transformation Platform Services.

As on 31 December 2020, the company has applied for 5,634 patents, including 134 applied during the quarter, and has been granted 1,713 patents. The company's net cash from operations in Q3 FY21 was Rs 11,952 crore.

Avenue Supermarts added 2.41% to Rs 3039 after the company's consolidated net profit surged 16.4% to Rs 446.97 crore on a 10.8% rise in net sales to Rs 7542 crore in Q3 December 2020 over Q3 December 2019.

EBITDA for Q3 December 2020 stood at Rs 689 crore, rising 15.4% from Rs 597 crore posted in the corresponding quarter of last year. EBITDA margin improved to 9.1% in Q3 December 2020 from 8.8% in Q3 December 2019.

Commenting on the performance of the company, Neville Noronha, CEO & MD of Avenue Supermarts, said: “The quarter has seen further improvement in our business and financial metrics. Our overall sales and sales mix is now trending very close to our usual times except for specific customer consumption changes post Covid-19. Apparel, laundry, footwear, travel and such relevant out of home usage categories are taking more time to recover. Agile OPEX management along with a good surge in festival shopping allowed us to deliver a significantly better quarter than the previous two quarters.