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Business News/ Mint-lounge / Mint-on-sunday/  Cognizant’s stumbles, GDP surprise and banking woes
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Cognizant’s stumbles, GDP surprise and banking woes

IT firm's revenue misses estimates; economic growth on the fast lane; and NPAs impact bank profits

Photo: MintPremium
Photo: Mint

1. Not all is good at Cognizant

IT giant Cognizant’s fourth-quarter revenue fell short of analyst expectations. More importantly, the company has said that it expects its March quarter revenue to be in the range of $3.18 billion to $3.24 billion, which means that revenues are barely going to register any growth. Weak spending by clients including global banks and healthcare firms is to blame. Recent mergers in the healthcare sector have caused problems with client expenditure, but Cognizant said it expects a large number of deals to be closed in the second half of the year.

2. Mixed report from Dr Reddy’s

Dr Reddy’s posted its third-quarter earnings, with sales growing by 3% year on year to Rs3,967.9 crore. The drug maker reported 18% growth in US generic sales, 14% growth in Europe sales and 34% increase in India sales. However, sales in many emerging markets, including Romania, Venezuela and Russia, shrank by 28%. While rouble depreciation and macroeconomic uncertainties have hurt its prospects in Russia, currency repatriation issues in Venezuela have hurt profits. The company is expecting a tough fourth quarter due to delayed launches and slowdown of injectables during the last quarter.

3. The economy powers on

Gross domestic product data from the Central Statistics Office project a growth of 7.6% in 2015-16 as opposed to the government’s expectation of 7-7.5% growth. Though GDP growth decelerated to 7.3% in the December quarter from 7.7% in the previous quarter, the optimistic growth projections are based on a pick-up in manufacturing in the third quarter. Manufacturing has benefited from the fall in global commodities prices as it has led to a decrease in input costs. However, the spurt in manufacturing in the third quarter (12.6%) and in 2015-16 (9.5%) is not reflected in the index of industrial production, which grew 3.9% during April-November.

4. Bank profits take a hit

For the 26 banks that reported earnings by midday on 11 February, gross non-performing assets (NPAs) jumped 27% between the September and December quarters to Rs2.72 trillion from Rs1.9 trillion. The country’s largest bank, State Bank of India (SBI), announced that its net profit shrank by 62% to Rs1,115 crore in the December quarter. Loan loss provisions increased 50% to Rs7,645 crore as SBI had to set money aside for troubled loans. The largest private sector lender, ICICI Bank, reported a 33% rise in gross NPAs between the September and December quarters.

5. Stock markets crash

Indian stock markets slumped to a 21-month low as public sector banks posted poor results amid increasing concern over non-performing assets. Nervousness over falling crude oil prices and a fall in European shares also added to the scare. On Thursday, the BSE Sensex ended 3.4% lower at 22,951.83 points. The Nifty also fell below 7,000 and closed 3.32% lower at 6,976.35 points, its lowest close since 9 May 2014. Both indices saw the steepest fall during intra-day trading since 24 August. On Friday, the Sensex rose 0.2%, or 34.29 points, to 22,986.12 at the close in Mumbai after changing direction at least 12 times. The Nifty rose 0.7% to 6,980.95 points.

6. Tax net widens

The government said that it expects to meet its tax collection target for financial year 2015-16. The latest collection figures till January indicate that there has been a 33.7% growth in indirect tax and 10.9% growth in direct tax collection. The centre has already received Rs10.66 trillion in revenue, or 73.5% of revenue targeted in budget estimates. While it expects a shortfall in direct tax collections, it expects a surplus in indirect tax collection to help meet its overall target. The government said that the pattern of revenue growth indicates green shoots in the economy.

7. Oyo Rooms acquires rival

In a sign of consolidation in the online budget hotel booking segment, Oyo Rooms acquired its smaller rival, Zo Rooms, for an undisclosed amount. India’s start-up sector has seen a lot of churn of late, with many firms seeing exits of senior leadership and cutting back on expansion plans. The deal leaves the founder of Zo Rooms, Zostel Hospitality Pvt. Ltd, with a 7% stake in the combined entity. Zo Rooms had failed to raise money in recent months amid a general slowdown in start-up funding.

8. Trai rules in favour of Net neutrality

In heartening news for Net neutrality activists, the Telecom Regulatory Authority of India (Trai) on Monday announced that Internet service providers will not be able to offer customers preferential tariffs to access certain content. Those violating these rules will be fined Rs50,000 per day, up to a maximum of Rs50 lakh. The move strikes a blow for Facebook’s high-profile Free Basics programme, which aimed to provide access to its website and some other sites without a data plan.

9. Bond yields hit new lows

As the flight to safe havens accelerated amid the turmoil in equity markets, the Japanese benchmark 10-year yield dropped below zero. The Bank of Japan’s decision to adopt negative interest rates to stoke inflation also drove away panicky investors. The Japanese stock market fell by 5.4% on Tuesday, the largest decline since 2013. The collapse was led by banking stocks. The yield on US government bonds also fell to the lowest level since 2012. The yield on the 10-year German government bond fell close to zero, its lowest level since April 2015.

10. Twitter’s woes continues

Twitter has been unable to shake off a cycle of bad news amid weak investor sentiment. Even as it met analyst expectations by reporting fourth-quarter earnings of 16 cents per share and revenue of $710 million, its user base remained stagnant at 320 million worldwide. Moreover, the company guided for lower revenue in the next quarter, in the range of $595 million to $610 million. Twitter has seen many high-profile exits as the company tries various strategies to expand its user base.

Graphics by Prajakta Patil/Mint.

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Published: 13 Feb 2016, 11:26 PM IST
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