The markets ended lower on Thursday, the last day of expiry of futures & options contracts for the June series. Sentiment wasa also impacted by firm crude oil prices and the rupee that hit a record of over 69 to the US dollar. The S&P BSE Sensex ended at 35,038, down 179 points, while the Nifty50 index settled at 10,589, down 82 points.
Among sectoral indices, the Nifty PSU Bank index ended nearly 2% lower led by a fall in the shares of Punjab National Bank, Bank of India and Syndicate Bank.
The rupee fell to an all-time low against the US dollar in trade on Thursday, tracking Asian peers with weakening macro-economic fundamentals on the domestic front also weighing on the currency.
The partially convertible rupee was trading at a life low of 69.03/04 against the dollar. The Indian currency closed at 68.65/66 per dollar on Wednesday.
Asian stocks slumped to nine-month lows, as investors worried that the the Trump administration's approach to trade is harming global economic growth - even as the White House approach to Chinese investment in US technology companies appeared to be softening.
MSCI's broadest index of Asia-Pacific shares outside Japan fell as much as 0.52 per cent to hit a new near nine-month low, before it recovered some ground, while Japan's Nikkei average was flat after erasing earlier losses.
In commodities, US oil prices dipped away from three-and-a-half year highs on Thursday amid high output from Russia, the United States and Saudi Arabia, although unplanned supply disruptions elsewhere and record demand stemmed a bigger decline.
US West Texas Intermediate (WTI) crude futures were at $72.54 a barrel, down 22 cents, or 0.3 per cent from their last settlement. WTI hit its highest since November 2014 at $73.06 per barrel in the previous session. Brent crude futures were at $77.54 per barrel, down 8 cents from their last close.
Nifty remained under pressure and lost over half a percent on the F&O expiry day. Participants were already in the cautious mood from the beginning and weak global cues combined with the news of rupee trading at new record low against the US dollar further worsened the sentiment. Almost all the sectoral indices traded in line with the benchmark and closed lower.
Continuous global pressure and deteriorating macroeconomic condition on local front are responsible for the recent correction. And, we may see further pressure in the days to come. However, oversold positions may result in some rebound in between. Traders should limit leveraged trades and wait for clarity
Nifty PSU Bank index settled 1.95% lower. Top losers:
BSE Sensex: ICICI Bank, Tata Motors, RIL among top losers
Market at close
The S&P BSE Sensex ended at 35,038, down 179 points while the broader Nifty50 index settled at 10,589, down 82 points.
COMMODITY WATCH Crude oil
We have seen dramatic rise in the crude oil prices in the last couple of months due to geo-political concern. There are supply issues from Venezuela, Libya and Canada. US has asked countries to cut imports of Iranian oil from November. So the crude oil prices are moving higher in the international market.
On the other hand, the rupee has depreciated to all time low levels. As a result, crude oil prices touched Rs 5000 on the MCX yesterday. The rupee is expected to depreciate in coming sessions due to steady capital outflows and worsening macroeconomic conditions. Hence, we expect that crude oil prices might trade in a range of Rs 4800 to Rs 5200 on the MCX in coming sessions
(Source: Anand Rathi Commodities)
BSE Smallcap index hits 9-month low; 111 stocks tank over 50% in CY18
Shares of smallcap companies continue to be under pressure with the S&P BSE Smallcap index hitting nine-month low, down for the fourth straight trading day on the BSE on Thursday. Thus far in calendar year 2018 (CY18), the S&P BSE Small-cap index has underperformed by falling 18%, as compared to 14% decline in the S&P BSE Midcap and 3% rise in the S&P BSE Sensex. READ MORE
Where is the rupee headed?
The Indian rupee is set to weaken beyond 71 per dollar by June next year as the country’s current-account deficit widens on rising oil prices, said Taimur Baig, chief economist at DBS Group Holdings Ltd.
Rising US interest rates, a stronger dollar and fears of a trade war will spur flows into traditional safe-haven liquid currencies, Baig said in an interview. External funding pressures due to slowing capital flows will also keep the rupee under pressure, he added. READ MORE
US oil prices steadied on Thursday, pulling back from 3-1/2-year highs, but supply remained tight with investors concerned by the prospect of a big fall in crude exports from Iran due to U.S. sanctions.
US light crude was 15 cents lower at $72.61 per barrel, after hitting $73.06 on Wednesday, its highest since November 2014. Benchmark Brent was unchanged at $77.62 a barrel. READ MORE
COMMENT Nitasha Shankar, Sr. Vice President and Head of Research at YES Securities on rupee
The sectors that are looking good due to the fall in the rupee are of course the export oriented ones including IT and Pharma. However we believe this could mean further weakness for the oil marketing companies which have already been languishing under the pressure of higher crude prices
Vietnam's loss is India's gain as US regulates illegal shrimp imports
The US’s move to introduce measures to prevent illegal, unreported and unregulated (IUU) fishing and misrepresented seafood from entering the country is likely to help Indian shrimp exports because new regulations will hurt exports from Vietnam, India's main competitor. READ MORE
Rupee breaches 69/dollar level; mild intervention from RBI seen
The rupee fell to its lowest ever against the U.S. dollar on Thursday on the back of weak macro-economic fundamentals, broad dollar strength overnight and declining Asian peers, but mild intervention from the central bank helped stem losses. READ MORE
IndusInd Bank buys IL&FS Securities; capital market deal to boost growth
IndusInd Bank was one of the few large private banks without a major presence in the capital market business. With Tuesday’s announcement of acquiring IL&FS Securities Services (ILFS), it has partly bridged this gap. READ MORE
Lupin rises 2% on partnership with Mylan for Enbrel Biosimilar
Shares of Lupin were up 2% at Rs 910 per share on the BSE in noon deal after the company said it has partnered with Mylan to commercialize Enbrel (Etanercept) biosimilar.
Under the terms of the agreement, Lupin will receive an up-front payment of $15 million and potential commercial milestones together with an equal share in net profits of the product. READ MORE
US-China trade war drives investors to pull $5 bn from equity funds: ICI
US-China trade tensions drove investors to pull $5.16 billion from equity exchange-traded funds and mutual funds in favour of bonds for the week ended June 20, the Investment Company Institute said on Wednesday.
Cash outflows from equities were led by domestic long-term mutual funds, which ceded $3.11 billion after $1.15 billion the prior week. Equity ETFs had negative net outflows of $3.59 billion, seven days after reporting $7.54 billion of inflows. READ MORE
Reliance Securities on Aurobindo Pharma
Aurobindo Pharma'sUS biz likely to clock 11% CAGR over FY18-20E led by new launches and ramp-up in injectable portfolio. With double-digit margin in European business, we expect further improvement in margin led by transfer of products from Europe to Indian units for manufacturing (transferred 83 products out of planned 112).
Led by strong US product pipeline (117 ANDAs pending for approvals), comfortable leverage position, healthy return ratios (RoE/RoCE seen at 17%/19% by FY20E) and attractive valuation (>20% discount to its peers), we maintain our fundamental BUY recommendation on the stock with target price of Rs 712
India seeks bids from consultants for state insurance firms' merger
Three Indian state-owned non-life insurance companies, which the government plans to merge into a single company, sought interest on Thursday from consultants to advice them on the deal, according to a public notice. READ MORE
BSE Smallcap index hits 9-month low; 111 stocks tank over 50% in CY18
Shares of smallcap companies continues to be under pressure with the S&P BSE Smallcap index hitting nine-month low, down for the fourth straight trading day on the BSE on Thursday. READ MORE
Kotak Securities on Mahagar Gas (MGL)
We believe there exists a meaningful growth potential for MGL due to anticipated growth in the number of CNG operated vehicles considering cost effectiveness of CNG as a fuel, potential growth in the number of households in the areas of operation and gas supply to consumers in the Raigad district.
We expect an EPS of Rs.51.6 for FY19E and an EPS of Rs.53.5 for FY20E (earlier Rs. 53.2). Based on our estimates, at CMP is trading at 7.7x EV/EBIDTA and 15.5x P/E on FY20E earnings. We maintain BUY on MGL with an unchanged DCF based price target of Rs.948
Sugar export norms relaxed: 1 milllion tonnes outflow likely by September
The Centre issued a notification on Tuesday relaxing sugar exports norms. Sugar exports was subject to a subsidy of Rs 55 per tonne of sugar cane payable to cane farmers. However, in the earlier notification, the ministry of consumer affairs had linked the compliance of all past conditions by mills to avail subsidy on exports. READ MORE
Hiring to drive Info Edge stock performance; realty vertical to aid growth
The Info Edge stock has been under pressure due to stress on its classified jobs vertical, Naukri, which accounts for 70 per cent of the company’s revenue. The stock has lost 13 per cent since the beginning of the year.
Revenue from the recruitment segment in the March quarter was up only 3.6 per cent on a sequential basis (12 per cent over a year). The segment level margins fell 243-413 basis points (bps) to 51.8 per cent on a sequential and on year-on-year (y-o-y) basis. READ MORE
BofA's market outlook
An improvement in the NIFTY’s breadth would require not just absolute earnings growth, but also earnings beats. These seem unlikely in the near term due to elevated expectations (MSCI India FY19 EPS currently forecast to grow 25% YoY). India is relatively devoid of domestic catalysts now, though uncertainties around elections in 2019 are likely to increase through the year. combination of external shocks (accelerating foreign selling), volatile domestic inflows and strong issuance can drive downside. December 2018 Sensex fair value of 32,000. Stay Cautious
We estimate a gradual margin expansion over FY18-FY20E led by improvement in profitability of DLM business. We expect 15.5% earnings CAGR over FY18-FY20E. Stock trades at 15.5x FY20E EPS (L&T Technology Services trades at 22x FY20E EPS). Peer L&T Technologies trades at substantial premium to Cyient owing to larger vertical footprint and diversified portfolio in Engineering Design Services. We value Cyient at 18x FY20E EPS which yields a target price of Rs 880/share. Resume coverage with "BUY"
Prabhudas Lilladher on oil & gas sector
Indian oil PSUs have underperformed broader index for the last one year though the core operating performance has been strong. We view this underperformance from the general investor perception as whenever there has been an increase in global crude prices in the past, the Indian governments then have absorbed the increased cost as subsidies as well as under recoveries impacting the profit potential of both upstream and downstream companies.
We beleive recent correction offers attractive entry points. IOCL, BPCL remain our preferred picks. ONGC will also benefit from the volume growth due to new gas production coming on stream.
ICICI Bank extends fall; stock down 11% in four days
Shares of ICICI Bank have dipped nearly 4% to Rs 268 in intra-day trade, extending its 7% decline in past three trading sessions on the BSE. The private sector lender’s market capitalisation has eroded by Rs 209-billion in four trading sessions, after the bank said another whistle-blower had accused it of having lax controls over operation READ MORE
Shoppers' Stop set for ratings upgrade on back of profitable private labels
After two years of muted growth in same-store sales (SSS), Shoppers’ Stop is expected to see a revival in fortunes. The year 2017-18 was challenging, with rollout of the goods and services tax (GST), store renovations and increased competitive intensity.
In FY19, the company is confident of achieving mid to high single digit SSS growth (this measures the increase in revenue from stores in operations for at least a year) and 100 basis point margin improvement. SSS growth was two to three per cent in the past two financial years; the margin was 5.7 per cent in FY18. READ MORE
NCLAT stays order on appointment of govt nominated directors to 63 Moons
Staying a decision by the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT) has ruled that government representatives on the board of 63 Moons Technologies Ltd (earlier FTIL) will continue to have veto powers on the company’s financial decisions. This has given the ministry of corporate affairs interim relief. READ MORE
Shares of small companies witness fresh bout of selling on Wednesday
Shares of small companies witnessed a fresh bout of selling on Wednesday with the NSE Nifty Smallcap 100 index dropping 2.3 per cent even as the benchmark Nifty50 declined 0.9 per cent. The index of companies, with market capitalisation between Rs10 billion and Rs70 billion, has fallen more than a per cent in 33 of the 121 trading sessions this year — 28 per cent of the time. READ MORE
Edelweiss Research on Somany Ceramics
Somany Ceramics’ (Somany) new CFO, Mr. Saikat Mukhopadhyay, pointed out during our interaction that industry demand remains weak (singledigit) and pricing continues to be under pressure from the unorganised sector due to lack of strict surveillance following the E-way bill implementation.
Management is confident of posting low double-digit volume growth in FY19 due to a low base; however, margin expansion will be governed by the improved product mix and rising contribution of the high-margin bathware segment.
Tile margins are likely to remain tight due to greater gas cost and stiff competition, which puts our FY19E at risk. That said, we maintain ‘BUY’ with target price of Rs 822 (27x FY20E) based on our thesis that a shift in favour of organised players would benefit Somany.
Sebi panel to issue norms on handling unpublished price-sensitive info
The Securities and Exchange Board of India (Sebi)-appointed committee on fair market conduct will submit its report in the next two weeks. It will have a special chapter on handling of price-sensitive information, said sources. READ MORE
Infosys hits new high; stock surges 25% so far in 2018
Shares of Infosys hit a new high of Rs 1,298 per share, up 2% on the BSE in early morning trade in an otherwise flat market. With Rs 2.83-trillion market capitalisation, Infosys is 6% or Rs 164 billion away to touch Rs 3-trillion mark. READ MORE
The rupee fell to an all-time low against the U.S. dollar in early trade on Thursday, tracking Asian peers with weakening macro-economic fundamentals on the domestic front also weighing on the currency.
The partially convertible rupee was trading at a life low of 69.03/04 against the dollar. The unit closed at 68.65/66 per dollar on Wednesday. The rupee had touched its previous record low of 68.8650 per dollar on November 24, 2016. READ MORE
Nirmal Bang Institutional Desk on RBL Bank
We recently met Mr Jaideep Iyer, Head of Finance, Strategy and Investor Relations and Mr Ramesh Ramanathan, SVP, Investor Relations at RBL Bank (RBL), and gleaned incremental insight into the performance and outlook for RBL. (Also, see Detailed Management Meeting Takeways on page 2).
Given its FY19E/20E RoE profile of 13.1%/14.7% (offering RoE delta) and long-term scalability potential, RBL remains one of our top picks, currently trading at 2.5x FY20E P/BV. See our Initiating Coverage Report for full thesis. Find recent Result Note here. We retain Buy rating on RBL with a target price to Rs628, valuing the stock at 2.8x FY20E P/BV.
Edelweiss Research on M&M
We believe M&M is taking the right steps to address key investor concerns relating to capital allocation and UVs. We maintain ‘BUY/SO’ with a SoTP-based target price of Rs 1,040 (14x FY20E core EPS, Rs 115 cash/share and Rs 312 for listed subsidiaries). At CMP, the stock trades at FY19/20E PER of 16x/13.3x (ex subsidiaries)
Derivatives Strategy: Nifty could fall further
The Nifty continues to be range bound but background signals suggest it is now more likely to head down, rather than up. The VIX is rising, indicating increasing nervousness among traders. Breadth is negative with advances outnumbered by declines. Volumes are middling to low. READ MORE
MOTILAL OSWAL RESEARCH ON RUPEE
Rupee fell to the lowest level in 18-months against the US dollar following sharp surge in global crude oil prices and strength in the dollar against its major crosses. Post the OPEC announcement, last week, crude prices have been finding support on lower levels and subsequently keeping the currency under pressure.
Weakness in the Chinese Yuan and other emerging market currencies including the rupee are under pressure against the US dollar. On the domestic front, market participants will be keeping an eye on fiscal deficit number; lower-than-expected number could support the rupee that has been under pressure. Today, USDINR pair is expected to open higher at 69.05 and expected to quote in the range of 68.70 and 69.20
Illustration: Ajay Mohanty
ALERT Rupee breaches 69 mark against the dollar
Nifty sectoral trend
BSE Sensex heatmap
Market at open
At 9:15 AM, the S&P BSE Sensex was trading at 35,174, down 42 points while the broader Nifty50 was ruling at 10,650, down 22 points.
Today's picks: From HPCL to Tech Mahindra, hot stocks to watch today
Current price: Rs 714
Target price: Rs 728
Keep a stop at Rs 707 and go long. Add to the position between Rs 722 and Rs 725. Book profits at Rs 728.
Current price: Rs 277
Target price: Rs 272
Keep a stop at Rs 280 and go short. Add to the position between Rs 273 and Rs 274. Book profits at Rs 272. READ MORE
Top trading ideas from Prabhudas Lilladher: Buy Voltas, Radico Khaitan
CMP : Rs 535.25
TARGET : Rs 590
STOP LOSS : Rs 505
The stock has witnessed a good consolidation phase at around 520 forming a strong base near 510 levels and now has produced a positive bullish candle pattern in the daily chart to signify strength and has got the potential to rise further and take the stock to around 580-590 levels. The RSI also has indicated a steep rise with a trend reversal to signal a buy and has maintained a positive bias. With good consistent volume participation witnessed, we recommend a buy in this stock for an upside target of 590 keeping a stop loss of 505.
BUY RADICO KHAITAN
CMP : Rs 405.05
TARGET : Rs 450
STOP LOSS : 380
The stock has been consolidating for some time at around 395 forming a good base at 382 levels and currently has given a bounce to indicate a positive bias even in this weak scenario to signify strength and potential to rise further in the coming days. With the RSI recently witnessing a trend reversal and is on the rise to signal a buy and with decent volume participation witnessed, we recommend a buy in this stock for an upside target of 450 keeping a stop loss of 380. READ MORE
SECTOR WATCH Jefferies on Pharma sector
Indian pharma fundamentals are still weak. Earnings ests for the sector factor in a best case in terms of facility clearance, margin recovery and specialty ramp-up. While mgmt commentary alludes to single-digit price erosion, competition from new players remains high. Specialty investments are expected to deliver over next 18m but approval and execution risks are high. Valuations at 20x+ FY20 reported EPS also leave no room for miss. Remain cautious on sector.
Nifty outlook from Prabhudas Lilladher for today
Nifty broke the crucial support of 10,700 mark on the back of heavy selling pressure weakening the sentiment and bias as of now. The chances of some more downward slide in the coming days cannot be ruled out and for Nifty now 10,530-10,550 would be the major support level whereas for Bank Nifty the breach of 26,300 levels would disrupt the bias and further selling pressure may be triggered. However, the support for the day is seen at 10,610 while resistance is seen at 10,730.
Overall Nifty expiry till date performance has been muted with Index trading ~60bps lower since the previous expiry. However the real pain is being witnessed in mid and small caps with the indices getting hammered by 3.5% and 8.65% respectively in June month. Nifty is holding on with the help of few heavy weights. Global markets recovery will support the Indian markets for tomorrow’s trading session. For the expiry today, the Nifty may find support at 10600 which has the highest Put OI concentration of 3.15mn shares standing whereas upside 10750 could be see
(Source: Edelweiss report)
Nifty futures rollovers stand at 42% compared to the average rollovers of 47% (last three series). Nifty futures OI stands at INR 306bn (~28.7mn shares) as against the OI of INR 298bn (~28.1mn shares) on D-1 of the last series. Nifty futures roll levels (cost to long rollers) continues to witness short aggression as it went down to ~25-27bps (adjusted to dividend of 28 points) as against 28bps yesterday. Around 49.9k contracts got rolled today while ~11.2k contracts were added in the next month.
(Source: Edelweiss report)
IPO WATCH Prabhudas Lilladher on Varroc Engineering
At the upper band of the issue price, the stock will trade at 29x FY18 EPS, which is higher than the market PER but cheaper than its peers like MSS, trading at ~34x FY18 and Endurance technologies, trading at 43.5x FY18.
Given the stable business model, comprehensive product portfolio, strong OEM relationships, owned technology platforms, healthy balance sheet (D/E at 0.3x) and decent return ratios (RoCE/RoE of 14%/16%), the stock is structurally a good story. However, in the current market conditions, the same is steeply valued with nothing left on the table in terms of listing gains. We recommend "Subscribe" to the issue only with a long term investment strategy of 24 to 36 months
Fund flow update for May
India flows—listed funds saw outflows of US$1.1 bn after continued positive flows since January. ETFs witnessed outflows of US$618 mn and non-ETFs saw outflows of US$499 mn. India-dedicated funds saw outflows of US$702 mn while GEM funds saw outflows of US$370 mn.
Emerging market flows—China saw the highest inflows of US$2.4 bn, led by strong ETF flows of US$1.8 bn. Total FPI activity and EPFR activity showed similar trends for all countries except Thailand in May.
Country allocations—allocations to India and China constitute more than one-third of the average Asia ex-Japan fund portfolio. Allocation to India by Asia ex-Japan funds increased to 12.1% in May from 11.8% in the previous month. Fund allocation to India by GEM funds remained at April level at 9.8%. Allocation by Asia ex-Japan non-ETF funds to India increased to 12.8% in May from 12.4% in April. Allocation to India by GEM ETF funds dwindled to 9.3% in May from 9.9% a year ago.
(Source: Kotak Securities)
Morgan Stanley maintans Buy on IndoStar Capital Finance
The stock is among the cheapest NBFCs in terms of valuation. We forecast ROE to rise from 11% in F18 to 13% in F21 and 16%+ in F23 as operating and financial leverage set in. Our price target implies a re-rating to 1.7x F20 BV (MSe). Vehicle finance and wholesale finance will be IndoStar's key profitable segments. Downside risks to our forecasts and valuation will depend on the CV cycle and state of the real estate industry
Shares of small companies witness fresh bout of selling on Wednesday
Shares of small companies witnessed a fresh bout of selling on Wednesday with the NSE Nifty Smallcap 100 index dropping 2.3 per cent even as the benchmark Nifty50 declined 0.9 per cent. The index of companies, with market capitalisation between Rs10 billion and Rs70 billion, has fallen more than a per cent in 33 of the 121 trading sessions this year — 28 per cent of the time. It has seen a fall of 2 per cent or more on 12 occasions, with several of its components correcting 10 per cent or more in a single session regularly READ MORE
The SGX Nifty was at 10,664.50, down 0.08 per cent from the previous close.
Asian stocks slumped to nine-month lows on Thursday on growing worries the US administration’s approach to trade is harming global economic growth even as it appeared to be modifying its approach to curb Chinese investments in US technology firms.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.25 per cent to a nine-month low in early trade while Japan’s Nikkei shed 0.30 per cent.
US stocks fell on Wednesday on renewed uncertainty regarding the US stance on Chinese investments in American technology companies, reversing gains earlier in the session.
The Dow Jones Industrial Average fell 165.52 points (0.68 per cent) to 24,117.59, the S&P 500 lost 23.43 points (0.86 per cent) to 2,699.63 and the Nasdaq Composite dropped 116.54 points (1.54 per cent) to 7,445.09.
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