Latest news with #DhananjaySinha
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Business Standard
5 days ago
- Business
- Business Standard
IT companies' valuation hits 5-year low amid selloff by investors
Top information-technology (IT) services companies continue to lose ground on the bourses as investors turn away from them owing to an earnings slowdown and threat from artificial intelligence. The combined market capitalisation of the country's top five IT firms that are part of the BSE Sensex is down 24 per cent since January and their valuation has slipped to lowest levels in the past five years. The sector is trading at a discount to the BSE Sensex and trailing the price/earning (P/E) multiple for the first time in the past four years. The trailing P/E of the top five IT companies has now declined to 22.3 times from 25.5 times at the end of December last year and a record high of 36 times in December 2021. In comparison, the BSE Sensex is up 2.2 per cent since the end of last year. The index closed at 79,858 on Friday, up from 78,139 at the end of December. Index valuation remained range-bound in the past three years unlike the valuation of IT services companies. The combined market capitalisation of Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, and Tech Mahindra declined to ₹24.86 trillion on Friday from ₹32.67 trillion at the end of December. Among individual companies, TCS, the industry leader, has been the biggest loser and its market capitalisation is down 26 per cent year-to-date (YTD) in 2025. It is followed by Infosys, which is down 24.3 per cent and HCL Technologies 23.1 per cent. Tech Mahindra has been a relative out-performer and has lost just 13.2 per cent, while Wipro is down 20.7 per cent YTD. Analysts attribute the decline in share prices and market capitalisation to an earnings slowdown besides sector rotation. 'The IT companies' revenue and earnings growth in April-June 2025 was below par with low single-digit growth in net sales and net profit. Investor sentiment was further dented by Tata Consultancy Services' admission about growth challenges facing the industry and headcount reduction,' said Dhananjay Sinha, co-head, research and equity strategy, Systematix Institutional Equity. IT companies' stock prices took a hit from a selloff by foreign portfolio investors (FPIs). 'FPIs have been big sellers in recent weeks and they had a big exposure to top companies such as TCS, Infosys, and HCL Technologies,' added Sinha. Others point to global growth uncertainties owing to American President Donald Trump's trade war leading to weak demand, which has led to underwhelming results across the sector. This softness has manifested in multiple ways — margin pressure, increased reliance on balance sheets to drive growth, and heightened aggression in cost take-out deals. 'Revenue performance was weak in Q1FY26 (April-June 2025) with four of the five large IT companies reporting revenue decline on Q-o-Q basis and three of the five on a Y-o-Y basis,' write Kawaljeet, Saluja Sathishkumar, and S Vamshi Krishna of Kotak Institutional Equity in their result review of the IT companies. The combined net sales of the top five IT companies were up just 4 per cent in Q1FY26 to ₹1.71 trillion, growing at the slowest pace in the last four quarters. Their combined net profits were up 5.6 per cent year-on-year (Y-o-Y) in Q1FY26 to ₹27,995 crore, down from 10 per cent Y-o-Y growth in Q1FY25 but an improvement from the 1.5 per cent increase in Q4FY25. Analysts at Kotak Institutional Equity say the demand environment has taken a slight hit due to uncertainties over the Trump administration's tariff regime with a considerable impact on the retail, logistics, and manufacturing verticals.
Time of India
5 days ago
- Business
- Time of India
May add pharma, hospitals stocks as we go forward: Dhananjay Sinha
Dhananjay Sinha , CEO and Co-Head Institutional Equities, Systematix Group , says the US tariffs are casting a shadow on pharmaceutical companies . A correction has occurred in companies exposed to the US market. The outcome of the tariff investigation is expected in a couple of months. Companies may pass on tariff costs to product prices. Analysts are closely watching Sun Pharma , Orchid, Ajanta, and Cipla . What are you making of the SBI numbers? What is your first read through here? Dhananjay Sinha: There has been pressure as far as the margin is concerned. It is kind of expected and the net interest income is also flat on a year-on-year basis. They have been able to generate operating profit by relying a lot on other income and also curtailing a certain amount of operating expenses. So, a certain optimisation is happening and also the fact that they made trading profit. That is contributing to the other income and so, that is broadly the situation. Of course, there is a positive surprise with respect to the asset quality, the provisioning, etc, which has been moved up a little bit, but generally asset quality numbers look to be okay. Productivity Tool Zero to Hero in Microsoft Excel: Complete Excel guide By Metla Sudha Sekhar View Program Finance Introduction to Technical Analysis & Candlestick Theory By Dinesh Nagpal View Program Finance Financial Literacy i e Lets Crack the Billionaire Code By CA Rahul Gupta View Program Digital Marketing Digital Marketing Masterclass by Neil Patel By Neil Patel View Program Finance Technical Analysis Demystified- A Complete Guide to Trading By Kunal Patel View Program Productivity Tool Excel Essentials to Expert: Your Complete Guide By Study at home View Program Artificial Intelligence AI For Business Professionals Batch 2 By Ansh Mehra View Program by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Undo I would say that there are no negative surprises here by and large. The trend of flattening NII has been shared by other banks as well. So, the pressure on spreads has been there. RBI has cut rates and stuff. Things have to be looked at from a future perspective, but as such, on a standalone basis, the SBI numbers look to be matching the market expectation. There is no negative surprise there. What is your reading on Biocon numbers ? Dhananjay Sinha : I have not looked at the Biocon space. On the pharma pack, there is an overhang of the US tariffs. So, there has been a significant correction across the pharma companies that have exposure in the US market and so this is under investigation. It will take about a couple of months for the outcome to come out. So, this is somewhat exempt from the tariff hikes that have been announced in the US. So, there is a possibility that whenever the hike happens, whenever we get to know what the US wants to do eventually, we will get to know what the reaction would be. But the broader view that we have taken is that if the tariff hike happens, companies would be able to pass on those costs to end product prices. So, we are equal weight at this juncture. We will decide on what the eventual price one would look at but if there is an adverse price reaction, we would want to buy into select names such as Sun Pharma, Orchid, Ajanta, and Cipla. These three-four names we are looking at very keenly, and not very negative at a broader level because the cyclical sectors might actually see a more adverse market reaction. But pharma, hospitals, etc, healthcare is something I would consider adding as we go forward. You Might Also Like: Tariffs may go either way but stay fully invested and avoid frequent portfolio churning based on news: Prashant Khemka Trent, AU SFB and Eternal should be part of portfolio; buy Bharti Airtel if you get a 3% discount: Rahul Shah
The Wire
06-08-2025
- Business
- The Wire
RBI Acknowledges Limitations of Policy Easing
Banking Dhananjay Sinha From the market standpoint, unchanged policy rate implies that additional support from the RBI is lesser, though surplus liquidity is favourable for valuations. RBI Governor Sanjay Malhotra during a press conference on monetary policy statement, at the RBI headquarters in Mumbai, Wednesday, Aug. 6, 2025. Photo: PTI. The Reserve Bank of India (RBI) has decided to keep the policy repo rate unchanged at 5.5%, maintaining its current policy stance. This decision was anticipated, especially after the central bank implemented a front-loading of rate cuts totalling 100 basis points since February 2025 and injected liquidity into the system. The effects of these measures are expected to influence growth only with a lag. The RBI's outlook for growth remains steady, projecting an average growth rate of 6.5% for FY26, with quarterly estimates closely aligning with this figure. While the RBI's expression of optimism regarding growth is derived from factors such as a strong monsoon season, increasing capacity utilisation, and supportive monetary, regulatory, and fiscal policies, the decision to ease monetary policy and provide excess liquidity is primarily influenced by the current inflation situation. Inflation is projected to average lower at 3.1% in FY26, with an upward trend anticipated at 4.4%. Unchanged growth projections imply that the central bank does not foresee any significant impact from the front-loaded monetary accommodation on growth in the near term. Additionally, the lower near-term inflation is primarily influenced by volatile food items, and the predicted rise towards the fourth quarter, which aligns with the core inflation rate of 4.4%, suggests the RBI may consider one more rate cut in October 2025. The cumulative liquidity infusion, estimated at Rs 13.16 trillion (5.7% of bank deposits) and including upcoming Cash Reserve Ratio (CRR) cuts, is expected to maintain a substantial liquidity surplus in the coming quarters. Also read: RBI's Potential Record Dividend: Fiscal Relief or Long-Term Risk? What contributes to RBI's optimistic growth outlook? The RBI's growth forecast is heavily reliant on resilient demand in less productive rural areas, despite stagnant urban demand. Private investment continues to decline, with the Ministry of Statistics and Programme Implementation's survey guiding for significant cutbacks in planned private capital expenditure for FY26. The RBI's growth assessment also depends on the performance of the service sector, as it expects sustained growth in the construction and trade segments to bolster services in the upcoming months. However, structural challenges, such as persistent weakness in real household income growth and a lack of productive employment, continue to affect consumption demand. Additionally, trade is facing increased uncertainties due to higher US tariffs, complicating future demand and investment forecasts for corporates, which further restrains private capital expenditure. While the RBI acknowledges supportive fiscal policy, the central government remains committed to fiscal consolidation, implying a pro-cyclical tightening. The RBI has lowered its inflation projection for FY26 to 3.1% from 3.7% previously, reflecting subdued demand and ongoing deflation in food prices, particularly for volatile items like vegetables. However, the core CPI inflation continues to rise, partly driven by higher gold prices. Considering the uncertainties around volatile food inflation and the waning high base effect from the previous year, an expected increase in inflation during the fourth quarter appears reasonable. Monetary transmission: Banks adjusting to low-lending growth expectations Systemic liquidity has remained in surplus, averaging Rs 3 trillion per day since June 2025, and is expected to increase further in response to forthcoming CRR cuts. Due to sustained margin pressure and a lack of credit demand, fresh term deposit rates have declined by 87 basis points to an average of 5.75% since January 2025, outpacing the 71 basis point decrease in fresh lending rates to 8.62%. This surplus liquidity situation is likely to extend the competition in bank lending, with lower money market rates, such as Commercial Papers and Corporate Bonds, intensifying margin pressure. Consequently, banks are attempting to optimise their cost of funds by significantly reducing term deposit rates and aggressively pursuing CASA deposits along with attempts to control operating costs. Bank credit growth has already slowed considerably to below 10%, down from a peak of 22% in November 2023. Also read: RBI Is Buffering Against Impending Volatility, Rate Easing Can Wait Additionally, banks are experiencing pressure to adjust lending yields due to a shift in preference from uncollateralised to collateralised lending amid rising credit cost concerns, with early signs of stress appearing in MSME lending. This combination of pro-cyclical credit tightening by lenders and slowing credit growth continues to adversely impact spreads and profitability. In summary, while the RBI's decision to maintain the status quo is not surprising, it is noteworthy that its unchanged growth projections highlight the limitations of policy easing in revitalising demand. The structural obstacles to growth, such as faltering private investment, stagnant household income growth, and insufficient productive employment, diminish the effectiveness of monetary accommodation. Furthermore, uncertainties in global trade, especially arising from U.S. tariffs, further impede corporate investment. Given these challenges and the potential bottoming out of inflation in the second half of the fiscal year, the scope for further rate cuts appears limited. It is likely that margin pressures for banks may persist for several more quarters, particularly due to rising credit costs. From the market standpoint, unchanged policy rate implies that additional support from the RBI is lesser, though surplus liquidity is favourable for valuations. From the banking perspective, deceleration in bank lending and decline in inflation does have an upside potential for GNPA ratio. Going with the past cycles, the NPA cycles typically last for couple of years at least. Hence, extended period of subdued credit growth and onset of the NPA cycle forebodes modest returns from banking stocks. Dhananjay Sinha is a CEO and co-head of institutional equities at Systematix Group. The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.
Business Recorder
14-07-2025
- Business
- Business Recorder
India shares edge lower as IT losses outweigh broader gains
India's equity benchmarks edged down in early trade on Monday, as losses in information technology stocks following weak earnings overshadowed gains in other sectors. The Nifty 50 fell 0.25% to 25,087.85 points, while the BSE Sensex lost 0.31% to 82,243.94, as of 9:47 a.m. IST. The IT index slid more than 1% and was the biggest sectoral loser, extending its 4% fall last week, as uncertainty over U.S. tariffs continued to weigh on demand. Sector leader Tata Consultancy Services posted weak results last week, which propelled investors to remain cautious ahead of the earnings from other companies in the sector, analysts said. Wipro, HCL Technologies, Tech Mahindra and Infosys fell in the range of 1.1%-1.4%, and were among the top five Nifty 50 losers on the day. While Infosys is scheduled to report its earnings next week, the other three will report their quarterly numbers this week. India's equity benchmarks log weekly losses as IT stocks drag 'The (market) momentum is slackening as earnings visibility remains feeble, and factors supporting valuations are fading,' said Dhananjay Sinha, CEO and co-head of institutional equities at Systematix Group. Ten of the 13 major sectors advanced in early trade. The broader mid- and small-caps rose 0.4% and 0.7%, respectively. Meanwhile, U.S. President Donald Trump on Saturday said he would impose a 30% tariff on most imports from the European Union and Mexico from August 1, even as they are locked in long negotiations. Among individual stocks, exchange operator BSE and Jane Street's India trading partner Nuvama Wealth Management rose 2.5% and 1.7%, respectively, after a report that the U.S. trading firm has deposited $567 million in escrow accounts, allowing it to resume trading in India.
Mint
14-07-2025
- Business
- Mint
India shares edge lower as IT losses outweigh broader gains
(Reuters) -India's equity benchmarks edged down in early trade on Monday, as losses in information technology stocks following weak earnings overshadowed gains in other sectors. The Nifty 50 fell 0.25% to 25,087.85 points, while the BSE Sensex lost 0.31% to 82,243.94, as of 9:47 a.m. IST. The IT index slid more than 1% and was the biggest sectoral loser, extending its 4% fall last week, as uncertainty over U.S. tariffs continued to weigh on demand. Sector leader Tata Consultancy Services posted weak results last week, which propelled investors to remain cautious ahead of the earnings from other companies in the sector, analysts said. Wipro, HCL Technologies, Tech Mahindra and Infosys fell in the range of 1.1%-1.4%, and were among the top five Nifty 50 losers on the day. While Infosys is scheduled to report its earnings next week, the other three will report their quarterly numbers this week. "The (market) momentum is slackening as earnings visibility remains feeble, and factors supporting valuations are fading," said Dhananjay Sinha, CEO and co-head of institutional equities at Systematix Group. Ten of the 13 major sectors advanced in early trade. The broader mid- and small-caps rose 0.4% and 0.7%, respectively. Meanwhile, U.S. President Donald Trump on Saturday said he would impose a 30% tariff on most imports from the European Union and Mexico from August 1, even as they are locked in long negotiations. Among individual stocks, exchange operator BSE and Jane Street's India trading partner Nuvama Wealth Management rose 2.5% and 1.7%, respectively, after a report that the U.S. trading firm has deposited $567 million in escrow accounts, allowing it to resume trading in India. (Reporting by Vivek Kumar M; Editing by Janane Venkatraman and Rashmi Aich)
