Week ahead: 5G sale, auto earnings, CWG

1. 5G auctions

India is set to start its first-ever auction of 5G airwaves on Tuesday. The government will auction 73GHz spectrum across 10 bands with a validity of 20 years. Along with incumbents Reliance Jio, Bharti Airtel, and Vodafone Idea, the auction will also see Gautam Adani’s foray into the telecom space with Adani Data Networks throwing its hat in the ring.

The Adani Group has received a letter of intent from the department of telecommunications for grant of a unified licence (UL) in the Gujarat circle. Analysts expect Jio to be the top spender, followed by Airtel. The Mukesh Ambani-owned telco has already put in a whopping ₹14,000 crore as earnest money.

The government will likely rake in $13-20 billion from the auctions, according to a report by Jefferies. The rollout of 5G technology-based services could provide 10 times more speed than what is possible through the 4G services.

2. Auto earnings

The two biggest automotive giants of India, Bajaj Auto and Maruti Suzuki, will release their earnings reports for the June-ended quarter this week. Maruti Suzuki likely experienced an easing of supply chain constraints, with low channel inventory, which is likely to assist wholesales, according to analysts at Motilal Oswal Financial Services. However, higher discounts on cars and elevated raw material costs may hurt operating margins sequentially. The company could post strong earnings on a year-on-year (y-o-y) basis, primarily due to a low base. But continued semiconductor chip shortage is likely to result in a revenue drop of 4% on a sequential basis, said a report by Nirmal Bang.

Bajaj Auto is likely to see a revenue decline of 1% y-o-y and 6% sequentially because of higher raw material cost and operating deleverage, according to Nirmal Bang. Semiconductor chip shortage will continue to hurt the company’s performance, analysts said.

3. Axis Bank earnings

Axis Bank, which had reported handsome profit growth of 54% y-o-y and 17% growth in net interest income to ₹8,819 crore in the March quarter, will release its June-quarter earnings report on Monday. The bank is expected to post robust growth, largely driven by its decision to enter into an agreement to acquire Citibank’s consumer business earlier this year. According to JM Financials, June quarter is expected to be strong for the banking industry as a whole and for larger private banks in particular. It picked Axis Bank, among others, as a top performer in this quarter. Analysts at Emkay said Axis is expected to report strong credit growth in retail because of mortgages and unsecured loans. As banks, including Axis, invest in upgrading technology and on branch expansion, higher operating expenditure is likely to hurt profitability.

4. US economy

The US economy is likely to have contracted for the second quarter in a row in the April-June period. This has raised fears of an impending recession. In the March quarter, the country’s GDP had contracted 1.6% sequentially. This was the first decline since the recession that was a fallout of the covid-19 pandemic in 2020. The National Bureau of Economic Research defines recession as a situation that “involves a significant decline in economic activity that is spread across the economy and lasts more than a few months”.

GDP data for the June quarter is due on Thursday. The US economy is grappling with high inflation, an uptick in imports, and supply chains disruption since Russia’s war with Ukraine started. Inflation surged to a 40-year high of 9.1% in June, hurting consumer confidence. This could prompt the Federal Open Market Committee of the US to go for aggressive interest rate hikes again at its two-day meeting starting on Tuesday.

5. CWG 2022

A total of 72 countries are preparing to compete at the 22nd Commonwealth Games (CWG), which will begin on Thursday in Birmingham, England. India has historically performed well at the games, finishing third in the previous edition in 2018 with 66 medals, including 26 golds. Australia, a consistent top performer, finished first with 198 medals.

The Commonwealth Games Federation decided in 2019 that this year’s event won’t include archery and shooting. A few Indian athletes have expressed their disappointment with the decision, claiming that India’s medal tally will suffer as a result. The 2022 event will include four new sports: a women’s cricket tournament, 3×3 basketball, 3×3 wheelchair basketball, and para table tennis. India’s hopes rest on the over 200 athletes representing the country across 15 sports at this year’s event, following an excellent show at last year’s Tokyo Olympics.

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