Markets remain flat, Persistent Systems plunges outpacing Nifty IT decline, Nomura downgrades BHEL

Indian Markets:

• Indian equity indices closed flat on a volatile trading day on June 6.
• Rate-sensitive stocks, including banking, auto, and realty sectors, experienced buying interest ahead of the upcoming RBI’s Monetary Policy Committee (MPC) meeting.
• Anticipation of the central bank maintaining steady interest rates, rather than a hike, spurred optimism in these rate-sensitive sectors.
• Sector-wise, both auto and realty sectors registered a gain of 1 percent.
• On the other hand, the information technology index witnessed a decline, shedding 1.5 percent of its value.

Global Markets:

• European shares declined while Asian shares ended mixed on Tuesday, with downbeat sentiment prevailing in markets across the globe. South Koreas markets were closed for a holiday.
• European Central Bank President Christine Lagarde said there were signs of moderation in core inflation in the euro zone, but emphasized that it was too early to call a peak.
• Manufacturing orders in Germany fell by 0.4% in April, according to the countrys Federal Statistical Office. New industrial orders were down 9.9% compared to the same month in 2022. Euro Zone retail sales for the month of April 2023 will be announced today.
• US stocks fell on Monday as investors weighed whether the US central bank might pause rate hikes after growth slowed in the services sector.

Stocks in Spotlight:

• Persistent Systems fell by 5% on June 6, outpacing the Nifty IT sector’s decline of 2.37%. This slump was driven by a reduced demand for IT companies, signaled by EPAM Systems’ guidance cut, making Nifty IT the day’s largest sectoral loser. The fall was particularly sharp for Persistent Systems, with analysts from Kotak Institutional Equities expecting weaker Q1FY24 revenue growth due to sluggish client demand and reduced discretionary spending.
• NELCO, a Tata Group subsidiary, saw its shares rise about 3% to Rs 756 on June 6, following its investment in Piscis Networks. NELCO initially invested Rs 99,99,100 for 1,111 equity shares, thus acquiring 9.09% of Piscis Networks’ paid-up capital. Meanwhile, NELCO’s consolidated net sales grew by 14% YoY in the March quarter, reaching Rs 81.98 crore, and its quarterly net profit surged 87% to Rs 5.66 crore.
• Despite positive market sentiment about thermal power ordering for BHEL, Nomura has downgraded it from ‘neutral’ to ‘reduce’, also lowering its target price from Rs 79 to Rs 61 due to slow cash generation. Nomura has trimmed its FY24 and FY25 EBITDA estimates by 13% and 4% respectively, considering delayed orders and weak gross margins. Nomura remains uncertain about BHEL’s EBITDA margin and cash generation prospects.

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