Sensex, Nifty settle at record closing highs; Nifty Bank ends above 25,000

The markets ended at fresh closing highs on Monday after the country's biggest lender, State Bank of India, rallied as it introduced a 2-tier savings bank interest rate, while investors awaited a rate cut by the Reserve Bank of India in its two-day policy meeting which begins on Tuesday.

Economists are divided on what action the RBI will take in its policy review that concludes on Wednesday. Of the 14 economists polled by Business Standard, five said there would be the status quo this time. In most cases where the economists said there would be a cut, they warned it was a close call. CLICK HERE FOR FULL REPORT

Meanwhile, the retail inflation rate is running well below RBI's target. It had eased to its slowest pace in over five years in June. 


Vinod Nair, Head of Research, Geojit Financial Services 
Good results from index heavyweights continue to add liquidity, while country’s largest PSU bank SBI's interest rate cut decision attracted investors to the banking stocks on expectations of more peers to follow the trend. Additionally, moderation in inflation to below RBI's target of 4% heightened the hopes of rate cut in the next monetary policy.
Q1 Earnings
Tech Mahindra reported 34.3% sequential growth in its consolidated net profit at Rs 791.8 crore against 589.7 crore reported in the same quarter of the previous fiscal year. The IT major's revenue growth in CC terms rose 2.1% to Rs 7336.1 crore, while dollar revenue growth came in at $1138 million, up 0.6% QoQ.

HEATMAP: Top Sensex gainers and losers

Source: BSE

Market breadth turns negative

The breadth, indicating the overall health of the market, turned negative. On the BSE, 1,425 shares fell and 1,255 shares rose. A total of 196 shares were unchanged.
Broader markets trail behind 
The BSE Midcap index added 0.3%, while the BSE Smallcap gained 0.1% at close.
Nifty PSU Bank (up 3.6%) was the leading sectoral gainer, led by gains in SBI (up 4.5%), Bank of Baroda (up 2.9%) and Punjab National Bank (up 2.4%). 
Nifty Bank ends above 25,000 for first time ever

Source: NSE

Markets end at record highs
The Sensex settled above 32,500 for the first time ever, while Nifty ended firmly above 10,050. At close, the Sensex quoted 32,514, up 205 points, while the Nifty50 was at 10,070, up 62 points. 
Pharma index top sectoral loser; Lupin hits 52-week low 
Shares of pharmaceutical companies continued to trade under pressure with Nifty Pharma index down more than 1% for the third straight trading sessions after firms reported a disappointing set of numbers for the quarter ended June 2017 (Q1FY18). CLICK HERE FOR MORE

Nifty Bank continues to trade above 25,000

The index is set for record closing high. SBI, Bank of Baroda, ICICI Bank top gainers.
Some of the largest investors, intermediaries and issuers in Asia Pacific are confident of India's stable economic growth in the region of 6.5% and 7.5% over the next 12-18 months, Moody's Investors Service said in a statement on Monday. CLICK HERE FOR MORE
Markets check

At 3:10 am, the Sensex was trading at 32,511, up 201 points, while the broader Nifty50 was ruling at 10,074, up 61 points. 
Volatility index VIX surged 7% to 11.95. 

Source: NSE

Global market update

European markets opened higher as investors awaited key economic data and digested earnings reports. The pan-European Stoxx 600 was up 0.33%, Germany's DAX gained 0.1%, while Britain's FTSE 100 was up 0.5%. France's CAC 40 was trading flat. 
Asian markets ended positive. MSCI's broadest index of Asia-Pacific shares outside Japan reversed early losses to rise 0.25%. Chinese shares rose, buoyed by several leading companies' forecasts for strong mid-year earnings. The blue-chip index and the Shanghai Composite both rose 0.6%. Hong Kong's Hang Seng climbed 1% to a two-year high. Japan's Nikkei bucked the trend to end 0.17% lower. 
Top Sensex gainers and losers

Source: BSE

Markets check

At 2:00 pm, the Sensex was trading at 32,492, up 182 points, while the Nifty50 was ruling at 10,061, up 47 points.
Jimeet Modi, CEO, SAMCO Securities on SBI savings bank account rate cut
SBI, unlike its private sector peers, offers vanilla savings accounts to public with minimum operating charges and hence heavily relies on interest income from such available float. The rate cut by the SBI on savings bank account is a strategic move by the bank aimed at increasing profits. The bank has an above average CASA ratio of 45.58% for the year ended March 31, 2017 which shows that it has large savings pool. This move will result in increasing its net interest margins which are currently below standards at 2.84% for the quarter ended March 31, 2017. This is purely a commercial move which will boost profitability and ratios for the bank. 
Metal stocks continue shining

Nifty Metal index gained 1.5% with all but two stocks trading in green.

Source: NSE

Seven stocks from the S&P BSE Smallcap index have rallied by more than 50% thus far in July. CLICK HERE FOR THE FULL REPORT
Dr Reddy's extends fall for third straight session

After nearly 10% fall in the last two sessions, Dr Reddy's extended losses by over 3% to Rs 2,385. The company on Thursday reported 53.21% year-on-year fall in consolidated net profit at Rs 59.10 crore for the June quarter. It witnessed double-digit price erosion in the US due to competition in key products and channel consolidation.


Shares of public sector undertakings (PSU) banks were trading higher by upto 4%, recovering from their intra-day lows, after the state-owned banking giant State Bank of India (SBI) cut saving bank interest rates READ THE STORY HERE
SBI gains over 4% on introduction of  two-tier saving bank interest rate structure

At 12:15 pm, S&P BSE Sensex was trading at 32,438, up 128 points while the broader Nifty50 index was ruling at 10,043, up 29 points.
In broader markets, erased some gains to turn flat with BSE Midcap up 0.04% and BSE Smallcap up 0.2%.

Max Financial Services (MFS), Max India and Max Life today confirmed that the proposed merger with HDFC Life has been called off. The exclusivity agreement with HDFC Life, valid till 31st July 2017, will not be renewed

Shares of public sector undertakings (PSU) banks were trading higher by upto 4%, recovering from their intra-day lows, after the state-owned banking giant State Bank of India (SBI) cut saving bank interest rates.

SBI rallied by 2.7% to Rs 307 on BSE after the bank introduced a two-tier saving bank interest rate from today, due to the decline in the rate of inflation and high real interest rates.

Click here for detailed report

LT’s Q1 FY18 results were marginally below our estimate due to lower margins in power, development projects and inventory write down in its shipbuilding subsidiary. Order inflow too was weaker than expected on account of lower orders from export market. However, domestic order inflow which has been subdued, registered robust growth of 12% yoy against 40% decline in international orders.
We believe it would be challenging task to achieve order inflow growth guidance as private ordering remains subdued and road projects are largely ordered out via hybrid model. We maintain our Accumulate rating on the stock with a target price of Rs 1,273
Akin to Bharti and Vodafone India, Idea reported flat qoq revenues while underlying subscriber addition and ARPU trend was divergent for Idea. Voice ARPU for Idea improved marginally while for Bharti it declined 3%qoq. Similarly, Data ARPU for Idea registered growth of 8.2% qoq while it decline 4% qoq for Bharti. 
Jio is expected to remain aggressive in grabbing market share. Leveraged balance sheet, sub-par return ratios, elevated capex and risk of IUC cut remains a drag. Higher rural subscriber penetration of Idea and lack of 4G presence across the circles makes it more vulnerable to Jio feature phone launch. Maintain REDUCE with revised price tarfer of Rs 74
ITC has been in focus over government’s flip flop on GST rates on cigarettes. Now that the issue is settled and the GST rates would be 8-9% higher than the pre-GST indirect tax incidence on cigarettes business. ITC has undertaken a weighted average price increase of 6-7% across most of its key brands.
Although this will have an adverse impact on volume growth, we expect the margins on cigarettes business to improve on the back of price hike. 
Expecting 9.9% revenue and 12.4% earnings CAGR through FY17-19E, we have a BUY recommendation on the stock with a SOTP-based Target Price of Rs336, which implies an upside of 16% from the current levels
Banks recover

Nifty PSU Bank index erases early-morning losses to gain over 2% in the noon deals. The gains were led by SBI, Bank of Baroda, Punjab National Bank and Canara Bank.

Source: NSE

Sugar stocks in focus

Shares of sugar companies were trading higher by up to 5% on the BSE on expectation of favourable outlook in FY2018, supported by the recent hike in import duty and a tight domestic stock situation.

Dwarikesh Sugar Industries, Uttam Sugar Mills, Avadh Sugar, Dhampur Sugar Mills, Simbhaoli Sugar and Thiru Arooran Sugars were up in the range of 4% to 5% on BSE.


Photo: Shutterstock


Key risk factors for the markets

Market valuations have risen considerably over the past few quarters both in the frontline indices like Sensex or Nifty and in the midcap/ smallcap indices. The current equity market valuations are factoring in a robust recovery in earnings growth. Retail investors are worried whether the valuations would sustain at current levels. This depends on how soon and robust the earnings recovery is and how sustainable it will be.
While optically, the markets may seem to be expensive going by historical standards, bulls say that price-to-earnings (P/E) multiples are inversely correlated with the cost of capital. 
At 10:45 am, S&P BSE Sensex was trading at 32,420, up 110 points while the broader Nifty50 index was ruling at 10,038, up 24 points.

In broader markets, erased some gains to turn flat with BSE Midcap up 0.06% and BSE Smallcap up 0.13%.
JBF Industries extends fall on credit rating downgrade

JBF Industries dipped 11% to Rs 199 on BSE in early morning trade, extending its Friday’s 13% fall, after the rating agencies downgraded the rating of the company on delays in servicing its debt obligations by JBF group. In past one week, the stock slipped 28% from Rs 278, against 0.48% rise in the S&P BSE Sensex.
HSBC Holdings on Monday said profit rose 5% in the first half of the year, beating analyst estimates, and announced its third share buyback in the past year on the back of a growing capital base.
Pretax profit reached $10.2 billion in the six months through June, from $9.7 billion in the same period a year earlier, HSBC said in a statement. 
HSBC also announced an up to $2 billion share buyback, as it uses excess capital to offset the dilutive effect of shares paid out as dividends. It completed a previously announced $1 billion buyback in April.
Nifty Pharma was the top sectoral loser dragged by losses in Sun Pharma, Dr Reddy's, Glenmark Pharma and CIpla

Nifty Bank trades in positive post Friday's loss led by gains mostly in private lenders. ICICI Bank, Federal Bank, IndusInd Bank and HDFC Bank gained between 0.2%-1% in early morning deals. Nifty Pvt Bank index was up 0.4% while the Nifty PSU Bank index fell 0.3%.
Asian Markets recover

Asian shares turned positive after solid Chinese data on Monday following a lacklustre start, while the dollar edged up but remained capped by US political uncertainty.
MSCI's broadest index of Asia-Pacific shares outside Japan reversed early losses to rise 0.1%.
Chinese shares rose, with the blue-chip index up 0.15% and the Shanghai Composite up 0.2%. Hong Kong's Hang Seng rose 0.6%. 
The official Chinese manufacturing and services purchasing managers' indices both slipped in July, but remained above the 50-point mark that separates growth from contraction on a monthly basis.
Oil & gas stocks were trading in green after oil prices rose for their sixth straight session on bigger-than-expected inventory drawdowns and signs that Saudi Arabia will reduce output further in August. ONGC, GAIL, IOC, RIL and OIL gained between 0.5%-1.5% in early morning deals.

Analyst view
Geojit Financial Services says: Futures are now back to contango, suggesting that the persistent push higher that was evident, while below 10,000 may go missing now. Volatility has also risen, as VIX has started looking higher from record lows. These indications, however do not foretell a vertical drop, but more choppiness needs to be factored in.
Dena Bank fell 3.39 % after the lender reported losses in the first quarter of this fiscal year on the back of huge loans. Dena Bank reported Rs 133 crore loss against Rs Rs 279 crore in comparable period last year. 
Larsen & Toubro (L&T) gained 3.4%, making it the top gainer on BSE Sensex after the company reported a 46% YoY rise in consolidated profit at Rs 893 crore for the June quarter. The engineering and construction major reported Rs 610 crore profit in the same quarter last year. 
Top gainers and losers on BSE Sensex

Source: BSE

Broader markets were in line with the benchmark indices with BSE Midcap and BSE Smallcap gaining 0.2% each
Benchmark indices opened flat on Monday following weakness in the global markets amid geopolitical tensions in the Korean peninsula and rising oil prices.

At 9:18 am, the S&P BSE Sensex was trading at 32,364, up 54 points while the broader Nifty50 index was ruling at 10,025 up 11 points.
The stock currently trades at ~23x FY19F consolidated EPS. We value the company at 25x average FY19-20F consolidated EPS of Rs 359.7. We expect MSIL’s FCF generation to continue to rise sharply as Suzuki would be making incremental investments for capacity expansion. This should help sustain MSIL’s premium multiples, in our view. MSIL remains our top pick in our coverage universe.

Any hike in global interest rates to impact India, other EMs, says Rakesh Tarway of Reliance Securities in an interview with Aprajita Sharma READ THE INTERVIEW HERE

Despite rally there are opportunities in markets, says Manishi Raychaudhuri of BNP Paribas in this exclusive interview READ IT HERE
Interview of the day
Manishi Raychaudhuri, Asia Pacific equity strategist and head of equity research, Asia Pacific, at BNP Paribas, tells Puneet Wadhwa that though he remains overweight, the extent of that position has reduced slightly in the past couple of months, as India’s valuation premium to Asian peers has increased markedly.
Technical check on the markets

Today the markets are likely to open on flat note. All emerging markets are trading mixed. The coming session is likely to witness a range of 9950 (Nifty) on declines and 10100 on advances: SMC Global
FPIs pump in $4 bn in July
Overseas investors have pumped a staggering $4 billion into the Indian capital market this month, primarily due to "better prospects" of economic growth as compared to other emerging markets.
The latest inflow follows net infusion of Rs 1.6 lakh crore in the previous five months (February-June). In January, they had pulled out Rs 3,496 crore.

Click here for full report
SIS IPO to hit bourses today
The Security and Intelligence Services (India) Limited is eyeing to raise Rs 3,622.50 million through initial public offering (IPO) to be opened on July 31.
The IPO, which will be closed on August 2, offers equity shares of Rs 10. The price band of the offer is fixed from Rs 805 to Rs 815 per equity share. Bids can be made for a minimum of 18 equity shares and in multiplies of 18 equity shares thereafter. Click here for more
Top trading ideas from Prabhudas Lilladher:
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Oil hits two-month high
Oil ended its strongest week this year with a surge on Friday, built on receding fears of oversupply, as US crude came within striking distance of $50 a barrel for the first time since the end of May.
SGX Nifty
The Nifty50 futures on the Singapore Stock Exchange were trading 1 point lower at 10,034 indicating a flat opening for the domestic market.
Asian Markets

Asian shares were trading mixed on Friday amid negative global cues. Investors remianed on edge investinh mostly in safe havens like gold and Yen after North Korea conducted another missile test late on Friday that it said proved its ability to strike the US mainland. The US responded by flying two bombers over the Korean peninsula on Sunday.

The MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.1% while Japan's Nikkei was little changed, with a firm yen offsetting data showing the country's industrial output rebounded in June from a decline in May.
Australian shares, on the other hand,  advanced 0.2%.
Wall Street

On Friday, the S&P and Nasdaq closed lower after earnings from companies including Amazon, Exxon Mobil and Starbucks disappointed.But the Dow Jones closed higher and set an intraday record, lifted by Chevron's strong earnings.

The Dow Jones Industrial Average rose 33.76 points, or 0.15%, to 21,830.31, the S&P 500 lost 3.32 points, or 0.13%, to 2,472.1 and the Nasdaq Composite dropped 7.51 points, or 0.12%, to 6,374.68.

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