Stock market investors richer by over Rs 9.76 lakh crore in five days The five-day rally in the equity market has made investors richer by over Rs 9.76 lakh crore as the benchmark BSE Sensex jumped 2,265.8 points during this period. Driven by the continued optimism in equities, the market capitalisation of BSE-listed firms jumped Rs 9,76,749.78 crore to Rs 2,60,42,730.43 crore in five days.On Thursday, the Sensex climbed 284.42 points or 0.51 per cent to settle at 55,681.95 points.In five days, the 30-share BSE benchmark has rallied 2,265.8 points or 4.24 per cent. International oil benchmark Brent crude fell 3.58 per cent to USD 103.2 per barrel. Foreign institutional investors were net buyers on Wednesday, picking up shares worth Rs 1,780.94 crore, as per exchange data.“Investors traded with cautious optimism as gains in oil & gas, power, realty & banking stocks helped markets extend gain for the 5th straight session. “The return of FIIs into domestic equity markets in the last few sessions coupled with receding commodity prices and hopes that US Fed may not go for aggressive rate hikes in its next meeting has somewhat tempered the fears of investors,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities Ltd, said.Among the Sensex constituents, IndusInd Bank, Bajaj Finance, Bajaj Finserv, Asian Paints, Tech Mahindra, Axis Bank, Larsen & Toubro and Power Grid were the major gainers on Thursday. Shares of IndusInd Bank climbed 7.88 per cent after the company reported a 60.5 per cent jump in net profit for the quarter ended June.Dr Reddy’s Lab, Kotak Mahindra Bank, Reliance Industries and HDFC Bank were the laggards.
Services miss estimates; Software better than expected: Services business grew 0.6% q-o-q cc and missed HCLT’s Q3FY23 guidance, mainly due to a 3.8% q-o-q cc decline in the ER&D segment. Growth in the IT&BS segment moderated slightly to 1.6% q-o-qcc but was in line with estimates. BFSI and Life Sciences were the key growth drivers, while communications were the drag among verticals. Growth was led by the Americas region, while Europe and ROW posted declines.
Decline in bookings reflects delays in decision-making: HCLT won 10 large deals in services and three large deals in Software with net-new deal TCV of $2.1bn, down 8% y-o-y. Deal wins were driven by the services portfolio, were centered on cost optimisation and vendor consolidation and came mainly from BFSI, manufacturing and Life Sciences verticals. Management highlighted a ramp-down in discretionary spending in Hitech and communications verticals but pointed to a strong deal pipeline.
FY24 guidance in line with expectations: HCLT has guided for 6-8% y-o-y growth for overall business and 6.5-8.5% y-o-y cc growth in services segment and 18-19% margins in FY24—all in line with our assumptions. We maintain our FY24-25 cc revenue growth and margin estimates and expect HCLT to deliver 6.5% cc revenue growth and 18.4% margins in FY24. However, we lower our earnings forecasts by 2% to factor the higher tax rate indicated by the management.
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Raise PT: HCLT has fared better in Q4, particularly in North America and BFSI, unlike its peers. However, rising demand uncertainty as a US recession nears remains a concern. HCLT’s stock at CMP trades at 17x PE and offers a 5% yield, which in our view should limit downsides and derating. Hence, we raise our target PE to 17x (16x earlier) and raise our PT to Rs 1,125, offering 8% potential upside.