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Nifty, Sensex still weak - Tuesday closing report
Nifty may find a short-term support at 8,420
 
We had mentioned in Monday’s closing report that the major indices in the Indian stock market made marginal losses at the end of the day with no significant highs during the day. Our forecast was that only a close above 8,550 can put Nifty back on the uptrend. In Tuesday’s trading, the indices slipped further from Monday, and the day’s losses were around 1%. The downward trend is likely to continue uptil there is fresh buying interest from institutional investors.
 
 
A sudden devaluation of the Chinese yuan coupled with the upcoming key economic data points subdued investor sentiments on Tuesday leading to a barometer index of the Indian equity markets closing 235 points in the red. The wider 50-scrip Nifty of the National Stock Exchange (NSE) closed lower by 63.25 points or 0.74 percent at 8,462.35 points. The Sensex touched a high of 28,205.12 points and a low of 27,825.83 points in the intra-day trade.
 
China's central bank has devalued yuan by 2%. This is the biggest devaluation in the Chinese currency since 1994. The move has strengthened the dollar value, which has negatively impacted major world currencies including the Indian rupee. 
 
However, most commodities like oil, zinc and steel fell, the international gold prices inched-up above $1,100 a troy ounce due to the upcoming festive season in India. India is the largest gold importer in the world. The Indian gold prices rose by over Rs.1,000 per 10 gram in just under a week.
 
Investors were also anxious over the upcoming key economic data points of Consumer Price Inflation (CPI) and Index of Industrial Production (IIP) slated to be released on Wednesday. 
 
The monsoon session of parliament ends on August 13 with the fate of key legislations like the GST and the land bill hanging in the balance.
 
Sector-wise, all 12 sub-indices of the S&P BSE except the information technology (IT) and technology, entertainment and media (TECK) index ended in the red.
 
The S&P BSE banking index fell by 331.79 points, followed by metal index which fell by 302.30 points, automobile index declined by 259.14 points, capital goods index edged lower by 225.35 points and oil and gas index fell by 110.04 points.
 
However, the S&P BSE IT index gained by 153.28 points and TECK index rose by 56.87 points.
 
The top gainers and top losers of major indices in the stock market are given in the table below:
 
 
Among the Asian markets, Japan's Nikkei was down 0.42 percent and Hong Kong's Hang Seng slipped by 0.09 percent. China's Shanghai Composite Index was at a standstill from Monday's levels. 
 
In Europe, the London FTSE 100 index lost by 0.68 percent, Germany's DAX Index plunged by 1.64 percent and French CAC 40 fell by 1.09 percent at the closing bell here.
 
The closing values of major Asian indices are given in the table below:
 
 
Among European indices, FTSE 100 was at 6,690.25, down 0.68% and DAX was at 11,416.09, down 1.63%.
 

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Consolidated revenues of 38 Nifty companies down 3%
Due to lower raw material costs, consolidated net profit has risen by 1.40%. Valuations however, have defied this stark reality and gone up over 12% during the last one year
 
Of the 50 companies present on the CNX Nifty index, 38 have declared their first quarter results of 2015-16. The 38 companies reported consolidated revenues of Rs3.69 lakh crore in Q1FY16, down 3% year-on-year, from Rs3.80 crore in the June quarter of 2014-15. On the other hand, valuations have risen significantly of the 38 stocks. In terms of market-cap-to-sales (MC/sales) the valuations have risen by 17% to 3.06 times as on 10 August 2015, from 2.62 times a year ago. The 50-stock Nifty Index has risen 12.65% to 8,525 from 7,659 over the same period.
 
Despite the disappointing top-line figures, the companies reported 11% growth in operating profit, due to cheaper raw material costs. In the June 2015 quarter, operating profits grew to Rs78,228 crore from Rs70,643 crore for the quarter ended June 2014. Operating profit margin increased to 21.18% from 18.61% over the same period. Net profit of the 38 companies, increased by 1.40% to Rs48,291 crore in Q1FY16 from Rs47,622 crore in Q1FY15. Net profit margin increased marginally to 13.08% from 12.55% over the same period.
 
As on 10 August 2015, the Nifty is commanding a price-to-earnings (PE) of 23.54. This translates to an earning per share (EPS) of Rs362. A year ago, the Nifty EPS was Rs381.30, resulting in a PE of just 20. Therefore, despite the EPS declining by 5.06%, the index has risen nearly 13% thanks to a growth of 17.70% in PE valuations. Valuations have been hovering near a PE of 23 since February 2015, even as both March quarter and June quarter results have disappointed.
 
Among the sectors, banks led the list with the highest revenue growth. Not surprisingly, their valuations too, increased significantly over the period. The eight banks on the list reported a total revenue of Rs82,044 crore in the recent quarter up 16% from the same period a year ago. However, profits rose marginally to Rs10,689 crore from Rs10,604 crore over the same period. HDFC Bank, Yes Bank, Axis Bank, Indusind Bank and ICICI Bank reported double digit profit growth. The valuations too, of these banks increased by over 30%. Bank of Baroda and Punjab National Bank reported a decline in profits.
 
Telecom stocks did well too. The two stocks on the list, Idea Cellular and Bharti Airtel reported a y-o-y revenue growth of 17% and 9% over the period. Of the two, only Idea Cellular reported a y-o-y net profit growth of 28% while the net profit of Bharti Airtel declined by 8%.
 
The five software and IT stocks on the list reported a rise of 10% in consolidated revenues. TCS led the list with a 15% growth while Infosys and Tech Mahindra followed closely behind with a revenue growth of 13% and 10% respectively in the June 2015 quarter. The bottom-line of the companies grew by 8%, 7% and 55% respectively. HCL Technologies reported a 28% y-o-y decline in net profit.
 
Auto stocks reported an 8% growth in consolidated revenues. Tata Motors and Maruti Suzuki led the list with a y-o-y revenue growth of 21% and 17% respectively in the latest quarter. Bajaj Auto reported a revenue growth of 7%. Maruti Suzuki reported a 56% rise in net profit, while Bajaj Auto and Hero MotoCorp reported a 37% and 33% rise in net profit respectively.
 
Revenues of Reliance Industries declined 32% to Rs65,817 crore in Q1FY16 from Rs96,351 crore in Q1FY15. However, it net profit grew by 12% to Rs6,318 crore over the same period. ITC too, reported a decline in revenues. For Q1FY16, ITC reported a revenue of Rs8,588 crore, down 7% from Rs9,248 crore in Q1FY15. It’s net profit rose 4% to Rs2,265 crore over the same period.
 
Energy companies too, saw their profits erode significantly. GAIL reported a 32% decline in net profit, while Cairn India reported a 50% decline over the same period. NTPC reported a 3% decline in profits.
 

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