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Indian benchmark equity indices rallied over 1 percent in trades on Friday on the back of frenzied buying in IT shares, a day after Infosys and TCS announced their Q3 performance. Shares of PSU banks too perked up in the latter half of the day.  

The S&P BSE Sensex scaled a fresh lifetime high at 72,721 and finally ended with a gain of 847 points at 72,568. The NSE Nifty 50 registered a new summit at 21,928, before signing off the day with a solid 247-point at 21,895.

Since the start of the calendar year, the markets have been trading on a volatile note, with certain sectors of market participants turning skeptical on valuation concerns given the sharp rally from the October lows. Also, rising geopolitical concerns and upcoming general elections in India have kept investor’s sentiments in check.

However, here’s what driving Friday’s rally:

IT stocks: Markets broadly believed that the IT sector would report subdued earnings for the December quarter. While, Infosys and TCS did report subdued numbers, with the former even lowering its growth guidance for the third straight quarter. The silver lining was the total contract value (TCV) signed, which continued to show a healthy momentum. 

This has prompted brokerages to remain optimistic about the future growth prospects. That apart, the Infy ADR on the NYSE had rallied 5 percent post results, which were announced after market hours on Thursday in India.

As a result this morning, Infosys opened with a gap of 4 percent at Rs 1,556 and went on to build gains as the day progressed. The stock so far has touched a high of Rs 1,613 (up 8 percent) and is within striking distance of its 52-week high at Rs 1,620.

TCS too started a trade gap-up at Rs 3,844 and has touched a high of Rs 3,894 so far in the day. The stock quotes 4 percent higher at Rs 3,883.

The buying soon spread across the IT sector, with the likes of Wipro and HCL Technologies also up 4 percent and 3 percent, respectively, ahead of Q3 results today. The BSE IT index was up almost 5 percent at 37,063.

DIIs lend support: After selling shares worth Rs 7,300 crore in the first week of the New Year, the Domestic Institutional Investors turned net buyers this week, and have net purchased stocks to the tune of Rs 3,950 crore so far in the four trading sessions this week.

Technical: Amid the current volatile phase, the Nifty 50 repeatedly tested support around its 20-DMA (Daily Moving Average) which it eventually managed to sustain. Presently, the 20-DMA stands at 21,550. The NSE benchmark is now seen climbing towards the higher end of the Bollinger Bands on the daily chart at 21,900 levels.

Indian Rupee: The Rupee has been steady around the 83-mark in recent trading sessions. The resilience shown by the Indian Rupee against the US dollar will help attract FII flows to India.

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Shares of Nazara Technologies rallied 8 percent on the BSE to hit a 52-week high of Rs 974.80 in Friday’s intra-day trade on the back of a healthy business outlook.

The stock of the digital entertainment company surpassed its 52-week previous high of Rs 927.25 touched on September 6, 2023. It had hit a record high of Rs 1,678 on October 11, 2021.

Nazara is a diversified gaming and sports media platform headquartered in India with a presence in developing and developed global markets such as Africa and North America.

The company’s portfolio includes interactive gaming, eSports, and ad tech ecosystems.

Nazara has several popular IPs within the gaming segment, such as Kiddopia and Animal Jam, which focus on gamified early learning, World Cricket Championship, and Classic Rummy in skill-based real money gaming (RMG).

Within eSports, Nazara has leadership positions through Nodwin, the dominant player in eSports in India and South Asia, and Sportskeeda, a multi-sports content destination catering to sports fans in India and the United States.

For the first half (April to September) of the financial year 2023-24 (H1FY24), Nazara reported 13 percent year-on-year (YoY) growth revenue at Rs 551.7 crore.

Profit after tax climbed 42 percent YoY at Rs 45 crore. The company’s EBITDA margin improved to 11.1 percent compared to 10.6 percent in the comparative period of the previous year.

During the September quarter, Nazara secured fresh capital of Rs 510 crore from investors like Zerodha co-founder Nikhil Kamath and SBI Mutual Fund.

With a consolidated cash position of around Rs 1,300 crore, Nazara said it is exceptionally well-positioned to seize acquisition opportunities and expedite its growth in the years ahead.

The management said Nazara recognizes the substantial ‘Make In India’ potential within the gaming industry, where Indian developers have the opportunity to create top-tier games for both the domestic and international markets.

The company’s newly launched initiative, ‘Nazara Publishing,’ is geared to offer capital and support services to empower developers to deliver high-quality games to the expanding consumer base.

The gaming industry is witnessing rapid expansion worldwide. It appears to be on the cusp of a period of substantial growth, fuelled by the widespread availability of smartphones, the affordability of technology, and rising disposable incomes.

This presents a remarkable opportunity for the industry to contribute significantly to the economy, with incremental penetration into untapped markets driving expansion.

As the number of gamers in India grows, convenient gaming culture is anticipated to emerge, further catalyzing industry growth, Nazara said in its FY23 annual report.

Nazara aims to maintain its market leadership and capitalize on the immense potential for growth in the Indian mobile game industry.

The recent acknowledgment of eSports by the government as a part of a multi-sports event will open a new casement of opportunities.

With the stronghold in the segment through Nodwin and Sportskeeda, Nazara is well-positioned to capitalize on the opportunities in the Indian eSports division and make the most of it, the company said.

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Large Cap IT major TCS is expected to report single-digit growth in revenue and profit for the December quarter (Q3FY24) as compared to last year due to higher furloughs and moderate deal wins, said analysts. 

Lower discretionary spending by clients and continued weakness in the BFSI and hi-tech segments will keep earnings performance subdued, they say. 

As per an average of six brokerage estimates, TCS is likely to report a net profit of Rs 11,617 crore for the quarter, up 7 percent from a year ago. Sequentially, this could be 2.4 percent higher.

Revenue is expected to be around Rs 60,388 crore, up 3.7 percent year-on-year (YoY) and 1.2 percent from last quarter (QoQ).

Key monitorables: Street will look out for the 2024 client budget and spending trends in key verticals like BFSI, retail and markets like the US and Europe, margin levers, ramp-up of low-margin BSNL contracts, deal pipeline for large-sized deals, client decision-making and pricing trends. 

Here’s what brokerages expect: 

Sharekhan: TCS is expected to report muted constant currency revenue growth of 0.3 percent from the last quarter due to furloughs offset by the contributions from the BSNL deal. 

EBIT margins are likely to improve by 25 bps QoQ, aided by operating efficiencies. 

Kotak Institutional Equities: It expects 0.5 percent CC quarterly growth, accounting for a $50 million contribution from the BSNL deal. 

Overall revenue growth will be muted due to furloughs in hi-tech and financial services. EBIT margin may rise 30 bps due to aggressive cost management. 

It expects moderate deal wins of $8.5-9 billion as the quantum of deals announced has been muted, especially in North America. 

Elara Capital: It expects cc revenue to fall 1 percent from last quarter. Lower working days, and the slowdown in discretionary projects, esp in North America may hit growth. 

It expects BFSI vertical to be flat and grow in energy, life sciences, and manufacturing verticals. Higher-than-usual furloughs will offset growth in Q3. 

Axis Capital: It expects 1 percent QoQ growth in cc revenue with zero cross-currency impact. 

Sees EBIT margin rising 30 bps sequentially to 24.5 percent aided by cost optimization and efficiencies despite revenue drag. 

The order bookings could be in the usual $7-9 billion range. 

Equirus Securities: It expects cc revenue to grow by 0.4 percent QoQ, driven by the commercialization of the BSNL deal in Q3. EBIT margins could improve by 28 bps QoQ due to operating leverage, cost efficiencies, and net currency benefits. 

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Bitcoin traded just below the $47,000 mark on Tuesday, as investors await a decision from regulators on whether to approve the US’s first exchange-traded fund tied directly to the token.  

The world’s largest cryptocurrency briefly swung above $47,000 late on Monday boosted by excitement over several filings revealing what potential ETF issuers planned to charge in fees for the products, should they gain the green light. Bitcoin hovered around $46,643 at 7:00 a.m. in New York, a decline of roughly 1% in the last 24 hours.

The US Securities and Exchange Commission is expected to make a decision on some Bitcoin ETF applications by Wednesday, with spectators anticipating a slew of rulings to avoid awarding a first-mover advantage. Bitwise emerged from the pack on Monday as offering the cheapest fee for its planned ETF at 0.24% after an introductory no-fee period, while Grayscale’s planned Bitcoin Trust was the most expensive at 1.5%.

Several issuers including BlackRock Inc. and VanEck filed amended S-1 forms for their ETFs early Tuesday morning, responding to comments and feedback made by the SEC on some applications on Monday. 

Bitcoin’s price has seen bouts of strong volatility since the start of the year, prompted by speculation around the proposed investment products. “We’re in for a massive week with one of the most significant events in crypto history taking place, the potential approval of a Bitcoin spot ETF,” eToro market analyst Simon Peters said in a note.

Meanwhile monthly options volume for Bitcoin last month reached $29.9 billion, its highest level since late 2021, according to a post by blockchain data analytics platform Kaiko on Tuesday. Options trading has seen “significant volume since October as traders are positioning for higher volatility ahead,” Kaiko’s Dessislava Aubert said in an email, with highs persisting through the end of 2023. 

#BTC options volume is at its highest level since 2021. pic.twitter.com/kyAiBM1lNn

— Kaiko (@KaikoData) January 9, 2024

It’s not a given that SEC approval would immediately lead to a spike in Bitcoin’s price, Peters said, with recent hikes indicating that many may have bought ahead of the event. 

“We could have a ‘sell-the-news’ situation and the price could spike lower, but I think this would only be short term,” he added in an email on Tuesday. “Or we could have a flurry of buying activity as retail traders try to front-run the future inflows from institutional investors via this approved ETF.”

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Public issues of corporate bonds this financial year rose to a four-year high owing to growing enthusiasm among retail investors and the rise in the cost of borrowing from banks, market participants said.

As of November 2023, companies and financial institutions raised Rs 13,742 crore through public issues of non-convertible debentures (NCDs), the highest since 2019-20, when Rs 15,068 crore was raised, according to the Securities and Exchange Board of India (Sebi) data.

As of November, Power Finance Corporation raised the highest amount — Rs 2,824 crore.

Last financial year, there were issues of Rs 9,211 crore.

Market participants said the issues might touch Rs 20,000 crore by the end of March.

Retail and high-net-worth (HNI) investors are increasingly gravitating towards public issues of bonds, they added.

A factor in this is the perceived lack of issuer information in private placement, particularly when investors take part in secondary-market transactions. Additionally, public issues fall under the direct watch of Sebi, providing an added layer of security. Notably, public bond issues are often backed by collateral, enhancing the appeal for risk-conscious investors.

The noticeable surge in demand from retail investors for bond instruments has been attributed primarily to changes in tax laws, affecting medium-term note issuances and debt mutual funds.

Retail investors and HNIs are actively seeking alternative investment opportunities that promise returns higher than traditional avenues like banks.

“Most of the issuers who tap the public market are with a lower credit rating and they find it difficult to garner a large amount through private placement. Considering the limited investor appetite from institutional investors, these issuers prefer to diversify their borrowing,” said Venkatakrishnan Srinivasan, bond market veteran, and founder and managing partner of Rockfort Fincap LLP.

Market participants said this trend in public bond issuances would persist next financial year. This financial year’s robust pipeline, especially in the remaining three months, indicates a continued appetite for public issuances.

“Everybody is keen to diversify and wants to assess the retail pool, which is becoming larger, and, in fact, retail is also keen to get better rates,” said Ajay Manglunia, managing director and head (of institutional fixed income), JM Financial.

The Reserve Bank of India is prodding non-banking financial companies (NBFCs) to diversify their funding requirements by lowering dependence on banks. In November, the regulator increased the risk weighting on bank loans to NBFCs by 25 percentage points in cases where it is below 100 percent, according to external ratings. This will increase NBFCs’ borrowing costs from banks. 

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