Moneycontrol Pro Panorama | HDFC Bank's Q1 slip has the market holding its breath

(Image: Reuters)

Dear Reader,

Usually, it’s always a toss-up on what’s keeping markets up or down. But today, the answer is staring you in the face.

At 12.45 pm, the Sensex is down by 1 percent, with HDFC Bank leading the pack of losers with a decline of 3.1 percent while its holding company HDFC is down by 2 percent.

HDFC Bank reported its results over the weekend and it appears investors are unimpressed, maybe even a tad concerned, by what they see. The bank has had a reputation for delivering consistent returns, with earnings growing by 18-20 percent over a year ago every quarter. But this quarter, it slipped to 16 percent growth, mainly due to provisions against loans turning bad.

Our research team pointed out that while its earnings growth was low relative to the usual trend, its core operating performance was strong. And, this quarter’s performance may have stumped the market, but the pandemic and the hit to its credit cards business by the RBI’s regulatory action do not affect its long-term prospects. Do read to know more.

But the bank’s results got investors in bank stocks worried today. While the market will be watching to see if other banks face similar pressures like HDFC Bank, the banking sector has another worry to tackle. The RBI has upped the ante against global payment companies who are not complying with its data storage norms. Its most recent action was a ban on fresh issuance of cards issued on the Mastercard network, for not complying with the local storage norms. This is a new headwind for banks. What’s the way forward, what do the local storage norms say and why are payment companies resisting? Here’s our take on the issue.

Asia is giving Indian markets company, as various indices such as the Hang Seng and the Nikkei 225 are flashing red. While there seems no new reasons, the spread of COVID-19 cases in Asia, inflation fears and fears on whether global growth could develop cracks are some possible reasons. In today’s FT selection, Morgan Stanley’s Ruchir Sharma writes about how cracks in the two global economic engines of growth—US and China—could pose a risk to global growth (free to read for Pro subscribers).

Investing insights from our research team

Reliance Retail Ventures: Dials Just Dial to strengthen its online initiative

Craftsman Automation: Decent Q1 FY22, a play on economic recovery

What else are we reading today?Monsoon Watch 2021 | Rainfall improves, but deficit hits sowing

Supreme Court flags the misuse of the sedition law

Can the electricity Bill switch on power supply reforms?

Chart of the Day: Coffee prices are on the boil

Massive passive: 50 years of the index fund (Republished from the FT)

Technical picks: Reliance, Bajaj Finance, Lupin and Apollo Hospitals (These are published every trading day before markets open and can be read on the app)

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Ravi Ananthanarayanan

Moneycontrol Pro