Brokers trade at their computer terminals at a stock brokerage firm in Mumbai. Photo: Reuters
Snapping their five-day gaining streak, the benchmark indices ended Wednesday's choppy session in the red amid selling in IT, private banks, and consumer goods shares. Weak global markets owing to US-China tensions and a surge in coronavirus cases dented the investor sentiment.
The S&P BSE Sensex today ended 59 points or 0.16 per cent to settle at 37,872, with Axis Bank (up 7 per cent) being the top gainer and HUL (down 3 per cent) the biggest loser.
NSE's Nifty ended at 11,133, down 30 points or 0.27 per cent. India VIX, the volatility index gained over 1 per cent to 24.75 levels.
Among individual stocks, Reliance Industries (RIL) hit a fresh record high of Rs 2,010 on the BSE during the day. The stock ended at Rs 2,004, up over 1.6 per cent.
Bajaj Auto ended 0.6 per cent lower at Rs 2,986 on the BSE after the company reported a standalone net profit of Rs 528 crore for the April-June quarter of FY21 (Q1FY21), down 53 per cent, from a profit of Rs 1,125.67 crore in the year-ago period. READ MORE
Shares of Axis Bank ended over 7 per cent higher at Rs 479 on the BSE after the private sector lender reported a healthy set of April-June (Q1FY21) quarter numbers with a strong operational performance. CLICK TO READ FULL REPORT
The sectoral trend on the NSE was largely negative. The Nifty PSU Bank index declined over 1.5 per cent to 1,449.20 levels while the Nifty Auto slipped over 1.2 per cent to 7,203.95 points. The Nifty IT index fell over 1 per cent to 17,076 points. On the other hand, Nifty Bank gained nearly 0.5 per cent to 22,882.60 levels and the Nifty Pharma rose 0.21 per cent to 10,175 points.
In the broader market, the S&P BSE MidCap index gained 0.19 per cent to 13,649 while S&P BSE SmallCap index slipped 0.23 per cent to 12,917.
European shares fell on Wednesday as escalating US-China tensions and a surge in coronavirus cases dented sentiment after an EU-wide debt deal sent the region’s markets to four-month highs in the previous session.
The pan-European STOXX 600 was down nearly 1 per cent, easing from its strongest close since March 5.
US President Donald Trump warned overnight the pandemic would get worse before it got better, while a Reuters tally showed global Covid-19 infections surged past 15 million on Wednesday.
In Asia, China stocks ended higher for the fourth straight session, buoyed by Beijing’s capital market reforms, though gains were checked by ongoing Sino-US tensions. Hong Kong stocks, on the other hand, fell the most in nearly six weeks.
In commodities, oil prices fell as industry data showed a bigger-than-expected inventory build in the United States, where a surge in coronavirus cases could further dent fuel demand in the world’s biggest oil consumer.
(With inputs from Reuters)
4:08 PM IST "Nifty closed a day on a negative note after four consecutive sessions at 11,132 with loss of 30 points and formed a "Hanging Man" kind of candle pattern on the daily chart which is bearish reversal pattern by nature so any break below 11,050 can lead in more profit booking. Support for Nifty is coming near 11,050-11,000 mark. Any break below the said levels can drag down the index more and resistance is still placed at 11,200-12,240 zone. Nifty Bank closed the day at 22,883 with gains of 100 points; support for the Nifty bank comes in near 22,740-22,550 zone and resistance is seen near 23,000-23,200 levels."
4:04 PM IST "Indian indices exhibited volatility and closed in the negative, in sync with negative global cues. The spike in US-Chine tensions hit the global markets while a surge in virus infections globally also impacted sentiment. Domestically, the private banking space gained on the back of earnings numbers from Axis Bank. However, Auto, IT and PSU Banks led the losses. Volatility is expected to continue due to expiry day tomorrow".
3:36 PM IST
3:36 PM IST
3:34 PM IST >> S&P BSE Sensex ended at 37,871.52 level, down 58.81 points or 0.16%
>> Nifty50 settles at 11,132.60 level, down 30 points or 0.27%.
3:28 PM IST
3:24 PM IST The V-shaped rebound has been underpinned by gush of liquidity flooding the global financial system thanks to the balance sheet expansion, particularly by the central banks of G4. Concerns have surfaced on whether the US Federal Reserve (Fed) will stall its balance sheet expansion after rapid expansion this year, which has helped shore up markets. However, the easy money trade seems here to stay. The European Union announced a $850-billion recovery fund on Tuesday. Other G4 peers including Fed, Bank of Japan (BoJ) and Bank of England (BoE) too are expected to follow suit given the fragile economic environment. READ MORE
3:23 PM IST Speaking at the industry body FICCI’s annual capital market conference Capam, Ajay Tyagi, chairman, Securities and Exchange Board of India (Sebi) said, “Increased retail participation isn't a cause of concern.” He was alluding to the sharp increase in new account openings and increase in share of retail investors in overall market volumes. READ MORE
3:18 PM IST
3:13 PM IST Though the Covid-compelled disruption makes the already ambitious FY20-FY25 targeted plan more challenging, any success with efforts to iron out issues (which have plagued infrastructure development in India) as a part of this exercise would definitely have lasting effects for years to come, and could change the way infrastructure development is approached in India. The well-intentioned pipeline gets many matters right, but success would rest on the government’s ability to implement the plan well.
3:13 PM IST Click here for the BSE filing
3:09 PM IST Analysts and fund managers seem to have discounted Financial Year (FY) 2020-21 and they are betting on stocks based on projected FY22 and FY23 numbers. Consensus estimates peg Nifty EPS growth of 10 per cent and 39 per cent for FY2021 and FY2022, respectively, according to Credit Suisse Wealth Management, India. A nationwide surge in Covid-19 cases, states going under lockdown and limited fiscal support, however, could pose significant downside risks to these estimates. READ MORE
TECHNICAL VIEW:: Rohit Singre, Senior Technical Analyst at LKP Securities
"Nifty closed a day on a negative note after four consecutive sessions at 11,132 with loss of 30 points and formed a "Hanging Man" kind of candle pattern on the daily chart which is bearish reversal pattern by nature so any break below 11,050 can lead in more profit booking. Support for Nifty is coming near 11,050-11,000 mark. Any break below the said levels can drag down the index more and resistance is still placed at 11,200-12,240 zone. Nifty Bank closed the day at 22,883 with gains of 100 points; support for the Nifty bank comes in near 22,740-22,550 zone and resistance is seen near 23,000-23,200 levels."
MARKET COMMENT:: Vinod Nair, Head of Research at Geojit Financial Services
"Indian indices exhibited volatility and closed in the negative, in sync with negative global cues. The spike in US-Chine tensions hit the global markets while a surge in virus infections globally also impacted sentiment. Domestically, the private banking space gained on the back of earnings numbers from Axis Bank. However, Auto, IT and PSU Banks led the losses. Volatility is expected to continue due to expiry day tomorrow".
Sectoral trends on NSE at Close
Sensex Heatmap at Close
Closing Bell | Markets end volatile day in the red
>> S&P BSE Sensex ended at 37,871.52 level, down 58.81 points or 0.16%
>> Nifty50 settles at 11,132.60 level, down 30 points or 0.27%.
The V-shaped rebound has been underpinned by gush of liquidity flooding the global financial system thanks to the balance sheet expansion, particularly by the central banks of G4. Concerns have surfaced on whether the US Federal Reserve (Fed) will stall its balance sheet expansion after rapid expansion this year, which has helped shore up markets. However, the easy money trade seems here to stay. The European Union announced a $850-billion recovery fund on Tuesday. Other G4 peers including Fed, Bank of Japan (BoJ) and Bank of England (BoE) too are expected to follow suit given the fragile economic environment. READ MORE
Make gradual entry in mkts, understand risks: Sebi chief to small investors
Speaking at the industry body FICCI’s annual capital market conference Capam, Ajay Tyagi, chairman, Securities and Exchange Board of India (Sebi) said, “Increased retail participation isn't a cause of concern.” He was alluding to the sharp increase in new account openings and increase in share of retail investors in overall market volumes. READ MORE
MARKET UPDATE:: Top 5 losers on the BSE at this hour
BROKERAGE VIEW:: Anand Rathi Shares on Infrastructure sector
Though the Covid-compelled disruption makes the already ambitious FY20-FY25 targeted plan more challenging, any success with efforts to iron out issues (which have plagued infrastructure development in India) as a part of this exercise would definitely have lasting effects for years to come, and could change the way infrastructure development is approached in India. The well-intentioned pipeline gets many matters right, but success would rest on the government’s ability to implement the plan well.
Corporate Announcement :: Tata Motors changes AGM date from August 11, 2020 to Tuesday, August 25, 2020 at 2 pm
Markets nudge higher but fund managers have task cut out in assessing firms
Analysts and fund managers seem to have discounted Financial Year (FY) 2020-21 and they are betting on stocks based on projected FY22 and FY23 numbers. Consensus estimates peg Nifty EPS growth of 10 per cent and 39 per cent for FY2021 and FY2022, respectively, according to Credit Suisse Wealth Management, India. A nationwide surge in Covid-19 cases, states going under lockdown and limited fiscal support, however, could pose significant downside risks to these estimates. READ MORE
INDEX LOSER:: Tata Steel slips nearly 3%
EXPERT COMMENT:: Kishore Narne of MOFSL shares his views on gold
“We have been bullish on gold for the last couple of years and the view has played out very well, and two quarters back in Dec’19, we have revised our targets from Rs 42,000/10gms to Rs 65,000/10Gms in 18-24 months. We continue to maintain this target as the fundamental backdrop which has driven gold over the span of the last four months which is the lower interest rates, negative rates in few economies, enormous amount of liquidity, and expanded fiscal balance sheets of governments which are trying to push growth amidst Covid-19. We do expect the anaemic economic growth would cause further isolation of economies and intensify protectionist policies and further aggravate trade-war which also helped gold in the past. We expect gold to keep up the momentum with occasional corrections, and we suggest investors to use every dip to keep buying gold over medium to long term targets of Rs 65,000," says Kishore Narne, Associate Director & Head, Commodities & Currencies, Motilal Oswal Financial Services.
Banks need to be recapitalised as moratorium ends on Aug 31: SBI report
It said while raising capital is important for banks, capital conservation will also be crucial as the moratorium ends on August 31 and banks will start recognising stress.
The problem is given the one-year freeze in IBC, resolution cannot happen at the same time and it is thus imperative that public-sector banks (PSBs) are either recapitalised or given the alternative of capital conservation, as it is not certain how much fiscal space the government might have for recapitalisation, the SBI report- Ecowrap said. READ MORE
MARKET CHECK:: Sensex extends fall, now down over 300 pts
Alembic Pharma shares gain 5% to hit a new high after robust Q1 earnings
The company's net sales grew 41 per cent at Rs 1,341 crore against Rs 949 crore in the corresponding quarter of the previous fiscal. EBITDA (earnings before interest, taxes, depreciation, and amortisation) rose 108 per cent to Rs 416 crore, while margins improved to 31 per cent from 21 per cent in the previous year quarter. Analysts on an average had expected a net profit of Rs 190 crore on revenues of Rs 1,123 crore for the quarter. In the past three months, the stock has rallied 60 per cent against a 20 per cent rise in the S&P BSE Sensex. READ MORE
BROKERAGE VIEW:: Centrum Broking on HCL Tech
While the last few quarters FCF was impacted owing to IBM payouts (in June 2019/June 2020 totaling to USD1620mn) as part of the acquisition, we see a swing in free cash flow from 2QFY21 onwards. Hence, we potential for substantially upping dividends or even exploring buyback after a few quarters. This itself can bring stability in HCL P/E multiples and help re-rating. Raise TP by 19% Rs730/sh ( 15.5x June22E EPS vs 14x June22E EPS earlier). Maintain BUY.
EXPERT COMMENT:: Rahul Gupta, Head of Research- Currency, Emkay Global on rupee vs USD
‘’Overall the trend in USD/INR spot has been bearish, breaching the psychological level of 75 on weak dollar and risk-on mood. In the past, the USD/INR spot has not been able to break the crucial support of 74.50 on likely RBI buying and had bounced from there. We expect 74.50 to continue to act as crucial support until the US decides on the fresh stimulus program. However, consistent trading below 74.50 will open doors for 74.20/74.25 with 75 acting as the crucial resistance.’’
GLOBAL MARKET:: European indices trade in the red
Credit Suisse Wealth Management India on gold prices
We continue to see the environment as gold friendly. Central banks will most likely remain dovish for longer, while the early signs of a pick-up in inflation expectations should further boost the gold demand, in our view. We remain positive on gold with 3-month and 12-month forecasts of $1,850 and $1,900, respectively.
Elara Capital on sugar sector
Good rainfall and higher cane acreages this year are likely to result in higher sugar production in the upcoming season SS21. Industry estimates sugar production at 32mn tonne. Higher cane diversion toward ethanol should lower sugar production by ~1.5mn tonne as per ISMA, resulting in net sugar production of 30.5mn tonne. Domestic demand of 26.0mn tonne and exports of ~5.5mn tonne (support by higher exports subsidy) will result in closing inventory of 10.5mn tonne for SS21, which is lower by 1.0mn tonne over SS20. We retain our positive stance on the sector. Our preferred pick is Balrampur Chini.
On a roll | Matrimony.com
Shares of Matrimony.com were locked in the upper circuit limit of 20 per cent for the second straight day, at Rs 557 on the BSE on Tuesday. The stock of the country’s leading consumer Internet Company was trading higher for the fourth straight day and rallied 49 per cent during the period. READ MORE HERE
Result preview :: L&T
Larsen & Toubro (L&T), is also expected to report a dismal performance for the quarter ended June 2020 when it announces its numbers on Wednesday, July 22. However, the company's services and exports businesses are expected to cushion the overall revenue decline. Key monitorables for the period under review, according to analysts, would be pick up in ordering activity, update on supply-side and labour issues and working capital cycle READ MORE HERE
Index watch : NSE
Markets at 2pm
Market stats :: Most active stocks by volume (BSE 500)
5Paisa has been growing its customers robustly in the last three years. The lockdown further fuelled customer addition pace and, hence, aided ADTO growth. Rise in revenue may outpace growth of higher customer acquisition cost, which would lead operating leverage to kick in, thus keeping earnings positive.
We expect PAT to grow to Rs 19 crore in FY22E. Accordingly, we expect uptick in return ratios with RoE at ~12.4% in FY22E. Continued addition of new products including launch of P2P lending platform is seen enabling higher revenue in the long run. Given ~80% of customers are new to market and over 81% are from Tier II/III locations, without long experience and steep correction in recent past, burnout ratio or leakage is to be watched.
Growth prospects stay strong though recent stock price run up prompts us to maintain HOLD. The stock is currently trading at 50.6 P/E, 4.2x revenue. We value the company at 4.5x FY22E revenue, revising target price to Rs 385
Edelweiss on ICICI Pru Life
The stock offers: i) most improved pure protection revenue performance in the past four–five years (15% of FY20 APE versus ~2%); ii) distribution strengths/savings growth potential post eventual recovery; and iii) nearly complete absence of balance sheet risk. Maintain ‘BUY’ and reiterate IPru Life as our top 12-months’ sector pick; revising our target price to INR550 (INR500 earlier, multiple unchanged).
Edelweiss on HUL
Hindustan Unilever’s (HUL) Q1FY21 net sales (up 4.4% YoY), EBITDA (flat YoY) and PAT (up 7.2% YoY) surpassed our estimates. On comparable basis, domestic revenue dipped 7% YoY. Domestic volumes benefited about 6% from trade pipeline restocking however still fell 8% YoY on a base of 5%. Despite covid-19 turmoil, company gained 5% market share in 80% of its portfolio.
With impact on high-margin business (BPC), gross margin took a 233bps YoY hit; however, sharp cut in ad spends (down 397bps YoY) aided EBITDA margin a tad (down 110bps YoY). Even in such a tough economic environment, HUL has announced an interim (special) dividend of INR9.5 per share for FY21. Overall, going ahead, we remain confident of margin expansion owing to HUL’s cost savings programmes and synergies from the GSK acquisition. Maintain ‘BUY’ with TP of Rs 2,665
Centrum on Infosys
Infosys currently trades at 20x FY22E EPS which is at 16% discount to TCS. With Infosys moving to leadership quadrant on growth for second consecutive year, it can narrow valuation differential ( vs TCS). We raise TP by 22% to Rs970/sh (20.5x June22E EPS vs 18.5x June22E EPS earlier) led by P/E upgrade and EPS upgrade. Our multiple upgrade is driven by Revenue, margin and EPS upgrade as well as strong deal signing. Retain BUY.
BUZZING STOCK:: Hindustan Zinc up 5.5%
MARKET CHECK:: Sensex sees sharp slide
MARKET CHECK:: Top 5 gainers on the BSE at this hour
Matrimony.com freezes at 20% upper circuit for second straight day
Foreign portfolio investors (FPIs) have increased their stake in Matrimony.com by more than 200 basis points (bps) to 14.74 per cent in April-June 2020 quarter, according to shareholding pattern data disclosed by the company. FPIs were held 12.51 per cent stake in the company at the end of March 2020 quarter, data shows. READ MORE
Axis Bank, Bajaj Auto, HUL: Here's how to trade result-driven stocks
Axis Bank Ltd (AXISBANK): The two ways to analyse this counter are moving averages and price resistance. As the stock has moved above the 100-days moving average (DMA), the positive sentiment has grown even stronger. Axis Bank now needs to conquer Rs 500 levels to embark a new trend. The medium-term support comes in at 50-DMA, which is positioned at Rs 410 levels. The immediate support on a closing basis is at Rs 440. The overall trend looks bullish as price is moving upward with average volumes. READ MORE
MARKET CHECK:: BSE Midcap index outperforms Sensex; up 0.7%
Bajaj Auto Q1 profit tanks 53% YoY to Rs 528 cr, EBITDA margin dips to 14%
The Pune-headquarted company’s profit before tax (PBT) came in at Rs 681.67 crore compared with Rs 1,578.78 crore PBT logged in Q1FY20.
That apart, the revenue of the company tanked 60 per cent YoY to Rs 3,079 crore, as against Rs 7,755 crore earned in Q1FY20. This, too, was in line with analysts’ expectations. READ MORE
BROKERAGE VIEW:: Centrum Broking on Infosys
We believe FY21 would be the second consecutive year in which Infosys would outperform TCS on USD revenue growth on an organic basis. TCS organic US dollar revenues grew/(decline) by 5.4/(5.6)% for FY20/FY21E vs Infosys organic USD revenue growth of 7/0.5% for FY20/FY21E. Infosys is increasing its growth differential wrt to TCS in our view in FY21E ( by a whopping 600bps). Infosys could also narrow EBIT margin differential with TCS to 190bps in FY21(vs 330bps in FY20). However, TCS ROE profile at 35% for FY21 is superior to Infosys which stands at 25.5%. TCS scale is also much higher than Infosys (TCS revenue and Headcount are 1.6x and 1.85x that of Infosys). We believe Infosys discount could narrow to 10-12% that of TCS.
NEWS ALERT:: PM Modi to deliver keynote address at India Summit at 9 pm today
Oil prices fall on US inventory build, increasing coronavirus fears
In his first briefing in months focused on the pandemic, U.S. President Donald Trump said that the outbreak would probably get worse before it gets better, one of his first recent acknowledgements of the spread of the problem. Industry group American Petroleum Institute (API) reported US crude inventories rose last week by 7.5 million barrels compared with expectations for a draw of 2.1 million. READ MORE
Bajaj Auto :: Expectations
Edelweiss Securities had pegged the company’s revenues at Rs 3,099.9 crore, a decline of 60 per cent year-on-year (YoY) from Rs 7,755.8 crore logged in the corresponding quarter of FY20. Sequentially, the drop would be 54.5 per cent compared to Rs 6,815.9 crore of Q4FY20.
Bajaj Auto reacts to Q1 numbers
June Quarter Result :: Bajaj Auto's profit comes in at Rs 528 crore
>> Revenue at Rs 3,079 crore
>> EBITDA at Rs 408.5 crore
>> EBITDA margin at 13.3%
Khaitans likely to join hands with Burmans to run Eveready Industries
The Burman family — the promoters of Dabur India — may join hands with the Khaitans of Williamson Magor Group to manage the country’s largest dry cell battery maker, Eveready Industries India. A source close to the development said, “The Burmans’ shoring up their holding could pave the way for a partnership between the two families to jointly run the firm.” CLICK TO READ FULL REPORT
RIL, Muthoot Finance, Granules, JK Cements, Laurus Labs hit record highs
RIL on Tuesday, after market hours said, the board of directors of the company is scheduled to meet on Thursday, July 30, 2020, to consider unaudited financial results of the company for the quarter ended June 30, 2020 (Q1FY21). Analysts expect Jio EBITDA will increase driven by subscriber additions (10mn in Q1) and higher average revenue per user (ARPU) (Rs 135) while retail will decline due to seasonal weakness and Covid-19-led lockdown. READ MORE
BROKERAGE VIEW:: Emkay Global on Bajaj Finance
Rating: HOLD | Target Price: Rs 2,950
BAF reported a PAT of Rs9.62bn (-19.5% yoy, +1.5% qoq), which came in slightly lower than our estimate of Rs10bn, on healthy margins and lower opex (yet credit costs were elevated). BAF made additional Covid-19-related provisions of Rs14.5bn (total provision of Rs16.9bn) considering the uncertainty on the recoverability of moratorium provided.
The total contingent Covid-19-related provision now stands at Rs23.5bn. Factoring in the weak economic trends and persisting lockdowns across the country, the company has increased FY21 credit cost estimates to Rs60-65bn from Rs54-57bn earlier. The revised estimates stand 100-110% above the pre-Covid credit cost in the previous year.
Consolidated moratorium has reduced to Rs217bn (~15.7% of AUM) on a reduction in bounce rates, coupled with better collection efficiency. However, personal/business loans worth Rs36bn that were converted to flexi loans remain in a relatively grey area. Further, overall trends in collection efficiency still remain fairly lower than pre-Covid times.
We await clarity over asset quality post the completion of moratorium. Considering the front-loading of provisions, we increase earnings by ~9.3%/9.1% for FY22/23E and roll forward to Sept’22E. We increase the TP to Rs2,950 from Rs2,150 earlier (~3.5x P/B Sept’22E vs. ~3x earlier). Maintain Hold and EW stance in NBFC EAP.
AHEAD OF RESULTS | Bajaj Auto slips around 1% ahead of Q1 nos
Commodity heatmap :: Gold hits record high on MCX, tops 50K-mark
Sharp gains expected for Majesco's Indian shareholders after US sale
The decision of Majesco (India) to sell its US subsidiary to private equity player Thoma Bravo is likely to open up a cash bonanza for Indian shareholders. Given the acquirer is paying $13.1 per share (Rs 970), the deal values the Nasdaq-listed Majesco (US) at $594 million (Rs 4,430 crore). The offer is at a 72 per cent premium to the closing price on the Nasdaq. READ MORE
Hindustan Zinc charts path as metal production falls in lockdown impact
Hindustan Zinc's June quarter performance, as anticipated, was impacted by lockdown. Led by lower production days in April and reduced workforce availability due to restrictions, the company's mined metal production fell 5 per cent year-on-year and 19 per cent sequentially to 202,000 tonne. Softening base metal prices further pulled down the performance. Per tonne zinc prices on the London Metal Exchange (LME) averaged at $1,961 in the quarter, down 29 per cent year-on-year and 8 per cent sequentially. READ MORE
Hindustan Unilever: Q1 improves earnings outlook despite uncertainty
Hindustan Unilever’s (HUL’s) numbers in the first quarter of the financial year 2020-21 (Q1FY21), reported after market hours on Tuesday, beat Street estimates on the volume and operating profit fronts, and also indicated potential for earnings upgrades. This should lift sentiment for the stock, which is up 26 per cent from its March lows. READ MORE
M&M Financial jumps 10% as stock turns ex-date today for 1:1 rights issue
The board of directors of the company on Saturday, July 18, approved a 1:1 rights issue at Rs 50 per share, amounting to Rs 3,089 crore. The board has fixed Thursday, July 23, 2020, as the record date for the purpose of determining the shareholders of the company who will be eligible to receive rights entitlements in the Issue. READ MORE
There is no harm in booking some profit so long as market rally continues
For investment advisor Arun Kejriwal, the reason is clear for booking profit: “This rally can last a day or seven days or more, but we will see a sharp correction sooner than later. The initial earnings numbers comprise a clutch of companies which were more or less not impacted by the Covid-19 pandemic very badly. READ MORE
Corporate announcement | RIL to announce Q1 nos on July 30 instead of July 24; stock hits new high of Rs 2K
Rupee opens higher at 74.58 per US dollar vs Tuesday's close of 74.74/$
BROKERAGE VIEW:: Prabhudas Lilladher on HDFC Life Insurance Company
Rating: REDUCE | CMP: Rs 627 | TP: Rs 522
HDFC Life’s overall APE de-grew by 30% YoY as FYP and Single Premiums de-grew 23%YoY/38%YoY respectively. Product mix on Ind. APE basis continued its bias in Par segment from NPar (slowed SP product on higher base) which also has a drag on margins being maintained at 24.3% (flat QoQ) as individual protection business still was better. Structurally growth pullback will be stronger with better positioning on protection, digital and tech-led adoption. Although, in medium-term slower attachment rates in credit life, on-par peer positioning in term insurance rates and lower room for risks on guaranteed products will constrain margins & growth, keeping our cautious stance. We retain REDUCE with a revised TP of Rs 522 (from Rs 454) based on 3.5x Mar-22 EV (from 3.2x Mar-22 EV)
BROKERAGE VIEW:: Edelweiss Securities on metals and mining sector
Iron ore movement in Odisha suggests that secondary steel producers are resuming production gradually. Hence, we expect the supply of longs products to increase in the domestic market. However, sagging demand coupled with the seasonally weak monsoon period is likely to keep rebar prices suppressed in the near term. JSPL and SAIL are likely to bear the brunt owing to their higher proportions of longs products. JSPL would be relatively less impacted though due to cost efficiencies it reaps from utilisation of iron ore fines from the Sarda mines.
BROKERAGE VIEW:: Edelweiss Securities on ICICI Prudential Life
RATING: BUY | TARGET PRICE: Rs 550
The stock is trading at 2.5x FY21E P/EV—by far the cheapest among the Big 3 private life insurers—in the wake of its recent market share loss. I Pru Life’s balance sheet is protected by its steadfast refusal to join the deferred guarantee non-par savings bonanza last fiscal. While opinions differ on suitability and adequacy of interest rate hedges assumed by its top private competitors, the company’s balance sheet health remains assuredly indifferent to interest rate drops. We maintain ‘BUY/SO’.
BROKERAGE VIEW:: YES Securities on Axis Bank
RATING: BUY | TARGET PRICE: Rs 550
Upgrading reco from ADD to BUY. Resilient PPOP, sizeable provisioning buffer, announced capital raise and reduction in morat pool to soften the Covid impact in coming quarters. Expect sharp recovery in RoA/RoE during FY22 as growth and credit cost near normalizes. Core bank trades at 1.3x FY22E P/ABV; valuation more sensitive to FY22 outcomes and not FY21.
BROKERAGE VIEW:: ICICI Securities on Hindustan Unilever
RATING: ADD | TARGET PRICE: Rs 2,600
We like the plans to (1) cut the tail SKUs and settle at 80% of pre-COVID levels and (2) lock-in advertising at low rates without compromising on share of voice – remember Churchill’s "Never let a good crisis go to waste". That said, downtrading, although primarily to lower sized packs and not to lower priced brands (yet), and potential second order macro impact limits stock upsides. For us, HUL is an outperformer within consumer staples. ADD.
BROKERAGE VIEW:: ICICI Securities on Hindustan Zinc
RATING: ADD | TARGET PRICE: Rs 210
Hindustan Zinc (HZL) has reported higher-than-expected earnings in Q1FY21. What surprised is the distribution of silver/ zinc + lead EBIT – more heavy towards silver and highlighted the potential of silver portfolio for the company. Management expects FY21 mined metal and finished metal output between 925-950kte, higher YoY. Also, silver production has been guided at ~650te. Zinc CoP is expected to be <US$1000/te, Q1FY21 witnessed ~11% YoY reduction despite incurring start-up costs. Management refrained from commenting on media articles suggesting Hind Zinc is contemplating on raising additional debt. We currently maintain ADD with a target price of Rs 210/share.
NEWS ALERT :: Govt approves sugar export to European countries
Axis Bank gains 8% on better-than-expected June quarter earnings
Shares of Axis Bank surged 8 per cent to Rs 482.85 in the early morning trade on the BSE on Wednesday after the private sector lender reported a healthy set of April-June (Q1FY21) quarter numbers with a strong operational performance. The bank’s net interest income (NII) grew 20 per cent year-on-year (YoY) to Rs 6,985 crore from Rs 5,844 crore in the year ago quarter. Net interest margin, meanwhile, at the end of the quarter under review stood at 3.40 per cent. READ MORE
RESULT IMPACT:: Bajaj Finserv gains around 1% as Q1 net rose 43.75% YoY
L&T down around 1.4% ahead of Q1 numbers
Axis Bank trades over 3% higher post June quarter nos
RESULT IMPACT:: HUL slips around 2.5% post Q1 nos
SECTOR WATCH:: Most indices on the NSE trade in the red
FIRST TRADE:: Gainers and losers on the S&P BSE Sensex
Markets opened on a flat note. At 09:16 am, the S&P BSE Sensex was little changed at 37,929 while NSE's Nifty was trading at 11,194.55, up 32.30 points or 0.29 per cent.
Kotak Institutional Equites on Automobiles & Components/Capital Goods
Certain Indian companies in the automobile and capital goods industry have scaled up their export businesses over the past decade and are well-placed to significantly grow these businesses by gaining market shares in their segments, led by superior value offering than competitors through comparable quality at competitive pricing and excellent service levels. Key players that can benefit from scale-up in the export business are Bajaj Auto, Balkrishna Industries, Schaeffler, Timken, Bharat Forge, Cummins, Thermax and ABB.
Elara Capital on Axis Bank
We believe under the new CEO, AXIS has tightened risk management, built a strong buffer of provisions, and strengthened the digital offering. Decline in moratorium caps upside risks to credit cost and is positive. We recommend Buy with target price of Rs 550 based on target PBV of 1.5xFY22E P/BV. We build slippage of 4% in FY21E and 2% in FY22E.
Elara Capital on Bajaj Finance
Nomura on Sun TV
• We expect Sun TV to report a ~60% y-y decline in advertisement income in 1QFY21, as regional/smaller advertisers are likely to have cut ad budgets due to the weak business outlook.
• On the subscription side, we expect ~14% y-y growth in revenues due to ongoing digitisation. Overall revenues are likely to have declined 43% y-y in 1QFY21 due to the absence of IPL revenues (~23% of 1QFY20 revenues).
• EBIT margins are likely to have risen ~sharply to 58.1% on lower spends on new content in 1Q, fewer movies showcased in 1Q and better revenue mix (subscription revenue share up 20 ppts q-q to 74%)
• We maintain our Buy rating on the stock as current valuations at 10.6x FY22F EPS are attractive.
Commodity heatmap :: Gold inches towards 50,000-mark on MCX
Top gainers and losers on the S&P BSE Sensex at Pre-open
Markets at Pre-open
Markets at Pre-open
Stocks to watch: L&T, HUL, Axis Bank, Bajaj Auto, IndiaMART, Polycab India
L&T: Edelweiss Securities notes that L&T's year-on-year (YoY) numbers are not comparable as previous year does not include Mindtree. It estimates L&T's revenue to slip 22.8 per cent YoY to Rs 22,867.5 crore while earnings before interest, taxes, depreciation, and amortisation (EBITDA) is expected to see a sharp decline of 50.5 per cent at Rs 1,644.1 crore.
Bajaj Auto: With a volume decline of over 60 per cent year-on-year, analysts expect Bajaj Auto’s margins to remain under pressure for the April-June quarter earnings of financial year 2020-21 (Q1FY21). However, the decline in net profit could be cushioned by higher other income, analysts say.
HUL: FMCG major Hindustan Unilever on Tuesday reported a 5.7 per cent increase in consolidated net profit to Rs 1,897 crore for the first quarter ended June 30. The company had posted a net profit of Rs 1,795 crore in April-June quarter of the previous fiscal. READ MORE
BROKERAGE VIEW :: Motilal Oswal Financial Services on Hindustan Zinc
CMP: Rs 183 | TP: Rs 208 (+14%) | Reco: Neutral
We expect HZ’s EBITDA at 11% CAGR over FY20-22E despite lower LME, primarily on ~10% volume CAGR to 1,034kt. LME Zinc prices have recovered ~21% from the recent lows this year and are down just ~5% YTDCY20 (CMP: USD2,173/t). We have factored in LME Zinc of USD2,125/t for FY21E and USD2,250/t for FY22E. At CMP, the stock trades at 6.3x/5.0x FY21E/FY22E EV/EBITDA. We remain Neutral, with TP of INR208/share, based on 6.0x FY22E EV/EBITDA.
BROKERAGE VIEW :: Motilal Oswal Financial Services on Axis Bank
CMP: Rs 446 | TP: Rs 600 (+35%) | Reco: Buy
AXSB reported a strong quarter amidst tough macro environment. It reported a sharp decline in moratorium book while asset quality ratios improved considerably. Earnings were in line as the bank adopted conservative accounting policies and further strengthened the balance sheet by making additional provisions; however, NII growth was robust despite moderation in margins. The sharp decline in the moratorium book eases concerns on asset quality/capital erosion – similar to the loss that the bank reported in 4QFY20 – bringing back focus on potential earnings/credit cost trajectory. Though the BB & below pool witnessed slight moderation, slippages are likely to remain elevated over FY21E and would be driven by such low-rated assets besides loans under moratorium. We have increased our FY21/FY22E earnings by 12%/10% and estimate AXSB to deliver RoA/RoE of 1.0%/11.5% in FY22E. Maintain Buy with a revised target price of INR600 (1.7x FY22E ABV)
BROKERAGE VIEW :: Motilal Oswal Financial Services on HDFC Life
CMP: Rs 627 | TP: Rs 600 (-4%) | Reco: Neutral
HDFCLIFE remains focused on maintaining a balanced product mix across the Savings/Protection businesses, with emphasis on product innovation / superior customer service. However in the near term, Individual Protection/PAR segments are likely to see healthy growth while ULIP trends should remain sluggish. VNB margins have moderated over the past few quarters, and we estimate these to gradually improve to ~26% by FY22E. However, persistency trends are likely to moderate, especially in the ULIP segment, while it should remain strong in the Protection segment. Overall, we expect operating RoEV to remain steady at ~18%. HDFCLIFE currently trades at rich valuations, and thus, offers limited upside, in our view. We value the stock at INR600, corresponding to 4.1x FY22E EV. Maintain
BROKERAGE VIEW :: Motilal Oswal Financial Services on Bajaj Finance
>> BAF has guided for continued cost rationalization and focus on fees in the near term to navigate earnings pressure. AUM growth is likely to be 10–12% for FY21 (MOFSe of 12% YoY) and provisioning expenses would be INR60–63b. We bake-in provisions of INR66b (4.3% of loans) for FY21.
>> BAF reported a largely in-line quarter, barring the surprise on fee income and MTM gains. We have upgraded fees and other income estimates by ~20%, leading to a PPoP upgrade of 3–4%. However, due to an increase in provisioning estimates, PAT estimates are largely unchanged. Maintainneutral, with target price of INR3,000 (Unchanged, 4.2x FY22 BV).
BROKERAGE VIEW :: Motilal Oswal Financial Services on HUL
CMP: Rs 2,319 | TP: Rs 2,550 (+10% ) | Reco: Buy
>> The company’s earnings growth has gained further momentum in recent years (17% EPS CAGR in the past three years v/s ~12% CAGR over 10 years). This is particularly impressive given the weak mid-single-digit earnings growth posted by (much smaller) peers in recent years. HUVR’s best-of-breed analytics and execution ability (exhibited by the successful implementation of the WIMI strategy, cost-saving plans, herbals, etc.) are key factors driving the pace of earnings growth.
>> The scale of HUVR’s P&L v/s peers offers the company significant levers for superior management of costs even beyond what was already witnessed in 1QFY21. Even in FY20, the company managed to carve out as much as 7% of sales on cost savings.
>> We remain positive on HUVR from a medium-term perspective, encouraged by: a) robust earnings growth potential beyond the near term owing to its portfolio
and execution strengths and b) significant synergies in FY22E as a result of GSKCH. These factors suggest premium multiples are likely to sustain. Valuing the company at 55x Jun’22 merged EPS, we arrive at TP of INR2,550, implying a 10% upside.
Nifty view and stock call by Vinay Rajani, HDFC Securities
Nifty heading towards 11300 Target
Nifty has risen for the fourth session on the trot. The index has reached well above its 200-day simple moving average (SMA), placed at 10,865. Now, 200-day moving average (DMA) can act as a support for trading long positions. The Upward sloping trendline adjoining bottoms of Oct 2018(10,004), Aug 2019(10,637), and Sep 2019(10,670) projects the strong resistance around 11,300 in Nifty. READ MORE
Trading strategies by Religare Broking
Indian Oil Corporation Limited
IOC surged strongly on July 21, posting a fresh breakout from a month-long consolidation phase. Besides, the energy index has also witnessed a fresh breakout, which further adds to the confirmation. Put together, we are anticipating the momentum to continue ahead thus traders can initiate fresh longsin the given range. READ MORE
FII/FPI & DII trading activity on NSE, BSE and MSEI
Oil prices fall on US inventory build, increasing pandemic fears
>> Oil prices fell on Wednesday as industry data showed a bigger- than-expected inventory build in the United States where coronavirus cases continue to climb, potentially further denting demand in the world’s biggest oil consumer.
>> Brent crude fell 32 cents, or 0.7%, to $44 a barrel, and US West Texas Intermediate (WTI) crude dropped 33 cents, or 0.8%, to $41.59.
SGX Nifty hints at flat to positive start
>> At 8:12 am, the index was at 111,89 level, up 24 points or 0.22 per cent.
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