Sensex ends 270 points lower, Nifty below 9,850 as Infosys cracks 9%

The benchmark indices snapped a three-session long winning streak, as Infosys cracked after Vishal Sikka's resignation as MD & CEO, although rivals such as Tata Consultancy Services gained.

According to a BSE filing, Sikka will be Executive Vice-Chairman while UB Pravin Rao is the Interim-MD and CEO. 
Infosys saw its sharpest decline since April 12, 2013, down 9.6% to Rs 923. In intraday trade, the stock fell as much as 13% to Rs 884.
Sentiment was also hit as Asian and European markets joined a global retreat from riskier assets on rising doubts about US President Donald Trump's ability to deliver his economic agenda.
But the domestic markets still logged their sixth weekly gain in seven, though they remained below the record highs hit on August 2.


Jayant Manglik, President, Retail Distribution, Religare Securities
Markets traded under pressure and lost over half a percent, pressurised by feeble global cues and slide in IT major Infosys. Sentiment was downbeat from the beginning on the news of terrorist attack in Spain and gloomy geo-political situation between the US and North Korea. On local front, the stock of Infosys witnessed sharp decline on the news of Vikas Sikka stepping down as CEO, which further added to negativity. 
Indications are in the favour of further slide, thus traders should add few shorts as hedge and give preference to PSU banks and pharma counters for fresh selling. Majority is facing issues due to volatility and we do not expect any relief from that front. Nifty has immediate support at 9,780 and any decisive fall below that mark will trigger fresh decline. 
Sensex heatmap at close

Source: BSE

Infosys posts its second highest turnover 

Infosys was the most traded counter on the National Stock Exchange (NSE) and BSE with the cumulative turnover of Rs 8,414 crore on Friday. A combined 90.34 million equity shares representing 3.9% of total equity of the company changed hands today.
Earlier, on December 8, 2014, Infosys had recorded a combined turnover of Rs 8,711 crore.
Infosys top loser 

Infosys ended 9.6% lower, recording its sharpest decline since April 12, 2013 on closing basis. The stock hit 52-week low of Rs 884, down as much as 13.4% in intraday trade after Vishal Sikka resigned as the Managing Director (MD) and Chief Executive Officer (CEO) of the company with immediate effect. READ FULL REPORT HERE 

Market breadth remains negative

The market breadth, indicating the overall health of the market, was strong. On the BSE, 1,534 shares declined and 1,002 shares rose. A total of 122 shares remained unchanged.
Broader markets

The BSE Midcap index settled 0.1% lower, while BSE Smallcap index shed 0.5%. 
Markets at close

The Sensex settled at 31,524, down 270 points, while the broader Nifty50 quoted 9,837, down 66 points at close.
Vishal Sikka quits as Infosys CEO: Hits and misses of his 3-year journey CLICK HERE FOR FULL REPORT
Dow futures

US equity futures signalled a weaker opening on Wall Street. Dow Futures were trading at 21,720, down 12 points or 0.06%.
Equinomics' View on Infosys
Certainly it is  a negative development, no doubt.  However, our contention is that Infosys has already emerged as an institution. Company with an annual turnover of around Rs.60,000 crore with a net profit of over Rs.13,000 crore, can manage this kind of setback easily - this is our firm view. For such a large institution, in our view, it wouldnt bet difficult to attract a talent of high order
European markets trade lower
The pan-European STOXX 600 index opened 0.9% lower. Losses were led by travel and leisure as investors reacted to the Barcelona attack by selling shares in airlines such as Ryanair, EasyJet and Spanish airport firm AENA.
France's CAC 40 has seen the widest sell off, falling 1.16% to 5,087.04. London's FTSE 100 was down 0.9% and Germany's Dax lost 0.84%.
There is misleading information being spread by certain media on IndiGo’s flight cancellations. This is to clarify that our 8 Neos are grounded. Our schedule was planned in the month of June itself pertaining to non-availability of these aircraft for the month of July, August and September. The affected passengers have already been accommodated with suitable options
Infosys stock outperforms TCS, Wipro during Sikka's tenure CLICK HERE FOR MORE
Morningstar observations on mutual funds' trends in Infosys
Domestic fund managers have been pruning exposure to the Technology sector over the last year, due to tepid growth seen in the industry due to global headwinds as well as Rupee strength. Technology sector allocation across all funds on an aggregate basis has come down dramatically to 8% from 9.75% over the last 1 year. Infosys has been the favored stock from the tech space, with ~ 40% of the MF industry’s overall Technology sector allocations being made in Infosys.
Geojit Financial Services on Vishal Sikka quitting Infosys as MD & CEO 
The resignation of Vishal Sikka triggered by “the continuous stream of distractions and disruptions over the recent months and quarters” is very unfortunate. The market has signaled its displeasure with the stock tanking by 7 % by 11. 30. The remark that “Vishal is more CTO material than CEO material” might have turned out to be the last straw.  This unfortunate incident might turn out to be an opportunity if the board quickly finds a new CEO who can lead from the front without disruptions from the promoters.
Meghmani Organics bucks trend
Meghmani Organics hit a record high of Rs 74.70, surging 14% on the National Stock Exchange (NSE) in intra-day trade on Friday, in an otherwise weak market. READ MORE

Markets check
At 2:00 am, the Sensex was trading at 31,429, down 366 points, while the broader Nifty50 was ruling at 9,804, down 100 points. 
Infosys hits fresh 52-week low 
Infosys extended fall to slip nearly 13% to Rs 884, its sharpest fall since April 2013. 

Sarabjit Kour Nangra, VP Research- IT, Angel Broking on Vishal Sikka's resignation
Vishal Sikka has resigned as the Chief Executive Officer & Managing Director of Infosys with immediate effect. While in near term it is a setback for the company; but given the strength of the board of the company, we believe that the company will overcome the setback. Given the valuations, we maintain our BUY rating with a price target of Rs 1,179.
Infosys stock outperforms TCS, Wipro during Sikka's tenure
Despite the fall today that was triggered by Sikka’s resignation as MD & CEO and concerns across the information technology industry given the slowdown in revenue from the BFSI (banking, financial services and insurance) segments, H1-B visa related issues, automation etc, Infosys has managed to outperform peers since Vishal Sikka was announced the company’s MD & CEO on June 12 , 2014.
On an absolute basis, Infosys has gained nearly 29% at the bourses – from Rs 793 levels on June 12, 2014 to Rs 1,020 levels on Thursday – a day prior to Sikka’s resignation, ACE Equity data show. By comparison, the other information technology heavyweights – TCS and Wipro – gained around 11% and 8%, respectively during this period. 

Click here for full report
Infosys extends losses

Infosys records sharpest fall in past 13 months, down over 9% in intraday at Rs 926. 
Earlier, on July 15, 2016, the stock tanked 11% in intra-day trade after the Infosys cut its revenue guidance for 2016-17.
Shareholding pattern of Infosys

Infosys Concall

Ravi Venkatesan: Will look both inside the company & outside for new CEO. Sikka will be available till the new management is in place.
Infosys Concall
Vishal Sikka:Everyone on board asked me to reconsider my resignation but there were no indications that personal attacks would slow down.
Infosys Concall

Vishal Sikka: Continuous drumbeat of allegations is 'sickening'  and that made it difficult to carry out changes. I Was constantly disturbed by the speculations & baseless allegations, they disrupted our productivity.
Infosys Concall

Vishal Sikka: $100 mn clients have increased from  12 to 19 in last 3 years. For the first time in 5 yrs, Infosys beat TCS in margin and utilisation hit 10-year high
Sikka resigns

In a new development, the board of directors blamed NRN Murthy for Sikka's resignation

"Mr. Murthy's continuous assault, including this latest letter, is the primary reason that the CEO, Dr. Vishal Sikka, has resigned despite strong Board support," the company said in a BSE filing.

Click here for BSE filing

R Seshasayee and Vishal Sikka

Market Check
Weakness in the market continued in the first hour of trade, as the Street digested news of Infosys MD & CEO Vishal Sikka stepping down with immediate effect.
At 11:30 am, the Sensex trading at 31573, down 222 points while the Nifty was at 9847, down 57 points. The market breadth was negative as 798 shares advanced against a decline of 1,340 shares, while 97 shares were unchanged.
Should you sell Infosys shares post Sikka's resignation
Markets, analysts say were taken completely by surprise by the timing of the development that comes a day ahead of Board meet to consider the proposed Rs 13,000 crore buyback programme. The stock, they feel, has overreacted to the development and will bounce back soon.
“I am not surprised by the move given the pressure he has been going through, but I am shocked at the timing of his resignation. The development comes a day ahead of the Board meet to spell out the proposed buyback terms and all the shareholders were expecting some good news from the company management,” says G Chokkalingam, founder and managing director of Equinomics Research & Advisory.

Click here ror detailed story

Emkay Global Financial extends gain post Q1 results
Emkay Global Financial Services hit a fresh 52-week high of Rs 208, up 5% on BSE in intra-day trade, surging 22% in past four trading sessions, after the company reported a strong set of numbers for the quarter ended June 2017 (Q1FY18). The stock was trading at its highest level since February 2008.
The consolidated net profit of the company in Q1FY18 has jumped more than five-fold at Rs 8.17 crore against Rs 1.60 crore in an year ago quarter. The revenues from operations grew 66% to Rs 35.52 crore from Rs 21.43 crore in the corresponding quarter of previous fiscal year.

Click here for detailed report

Photo: Shutterstock

Hits and misses of Sikka's 3-year journey
When Sikka had taken over as the CEO & MD of Infosys three years ago, Sikka was prescient in forecasting that automation would take away jobs and clients would shift their investment dollars to newer digital technologies.
He had set a goal of more than doubling Infosys' revenues to $20 billion, with margins of 30 per cent and employee productivity of $80,000.
This lofty goal broke a cardinal rule – under promise, over deliver – set by Infosys and its founding team led by N R Narayana Murthy over the past three decades.

Click here for detailed report
Srei Equipment Finance to raise Rs 2,000 cr through IPO

Srei Equipment Finance (SEF), wholly-owned subsidiary of Srei Infrastructure Finance, plans an initial public offer (IPO) of equity, to result in dilution of up to 25 per cent of the post-issue paid-up equity capital share.
The company expects to raise Rs 1,800-2,200 crore through the IPO, expected to hit the market in the last quarter of this financial year. The proceeds would be used to fund growth. The company is looking at 20-30 per cent annual growth over the next few years, said Hemant Kanoria, chairman and managing director.

Click here for full report
Nifty PSU Banks, Nifty Pharma were also trading lower in the morning trade, down 1.2% and 0.9% respectively. 
Sikka resigns

Sikka cited a continuous stream of distractions and disruptions over the recent months and quarters and  increasingly personal and negative attacks among his reasons for leaving. He said that it prevented management's ability to accelerate the Company's transformation.

Click here for the BSE filing

Vishal Sikka (Photographer: Saggere Radhakrishna)

R Seshasayee, Chairman of the Board on Sikka's resignation

Vishal has made a seminal contribution to the transformation of Infosys, and he will be remembered for infusing a refreshed sense of direction, purpose and energy in the organization. His vision for the future of the industry and the Company will remain a strong reference point as we chart the future course for Infosys in this new era in our rapidly evolving industry.
While Infosys tanked 7%, its peer TCS gained over 2% in the early-morning deals.

All sectoral indices except Nifty FMCG were trading in red on NSE

Source: NSE

Nifty IT falls 1.5% 

Nifty IT index fell over 1% as Infosys cracked post Vishal Sikka's resignation

Source: NSE

Top Sensex gainers and loser

Source: BSE

Infosys cracks

Infosys cracked over 5% after Vishal Sikka resigned as MD & CEO for the company. He will be the Executive Vice Chairman for the IT major.

Vishal Sikka

Broader Markets

Broader markets were in line with the benchmark indices with NSE Midcap and BSE Smallcap down 0.6% and 0.7% respectively
Markets open lower

At 9:17 am, the BSE S&P Sensex was trading at 31,591, down 203 points while the Nifty50 was ruling at 9,841, down 62 points
How liquidity has distorted the reality of Indian market (Source: Ambit Capital report)
The Sensex’s headline forward P/E of 20.5x (relative to a 10-year average of 16.4x) does not fully capture the extent to which abundant domestic liquidity has pushed valuations of prominent stocks to hitherto unseen levels. More importantly, these valuations seem to be unjustified unless there is a massive pick-up in earnings growth after six consecutive years of weak earnings growth. 
Banking and consumer staples sectors are the most at risk of a substantial de-rating in light of their extreme valuations vis-à-vis lacklustre earnings growth. Specifically we highlight HDFC Bank, Indusind Bank, Nestle, Marico and GCPL as the stocks most at risk
Vishal Sikka resigns as Infosys MD and CEO

According to a BSE filing, Vishal Sikka resigned as the MD and CEO of Infosys immediate effect. He has now been appointed as the Executive Vice-Chairman.

UB Pravin Rao has been appointed as the Interim-Managing Director and Chief Executive Officer

Edelweiss Research on draft pharma policy
Recently, a new draft pharma policy note has been released where the focus seems to be on self reliance and ‘Make in India’ versus earlier focus solely on affordability of drugs. Formulations produced with indigenously produced API and its intermediates will be out of price control for 5 years. 
The proposed policy does not emphasise on doctors to prescribe the salt name, except for government procurement and dispensing. Other important highlights are the principle of ‘one–company, one–drug,  one-brand name and one-price’ and restrictions on ‘loan licensing’. This is likely to usher rationalisation and much needed consolidation in the industry. Moreover, the policy proposes to fix trade margins to create a level playing field and also make marketing code mandatory
Derivative Strategy on Infosys from Motilal Oswal Securities
BUY INFY 1020 CALL @ 25
SELL INFY 1060 CALL @ 13
BEP : 1032

Click here for rationale
Nifty Bank outlook (Source: Angel Broking)
The Nifty Bank index has precisely halted its pullback move near our mentioned resistance around 24508, which is the 50% retracement of the recent corrective move from 25199 to 23822.The 'RSI' oscillator on the daily and well as the hourly chart has turned lower. This price and RSI set up is indicating a higher probability of another leg of corrective move in the index in near term.
We continue to be cautious in the Nifty Bank index and its constituents from a near-term perspective. Only if the index crosses the mentioned resistance of 24508, we will then re-access the charts and change our stance on the index. The intraday supports for the Nifty Bank index are placed around 24100 and 23950 whereas resistances are seen around 24400 and 24508. 
Top trading Ideas from Prabhudas Lilladher:
CMP: Rs 847.70         
TARGET: Rs 920           
CMP: Rs 213.30              
TARGET: Rs 226           
CMP:  Rs 105.30           
TARGET: Rs 115           

Click here for details
Nifty view from MOSL:
If Nifty sustains below 9,880, then some profit booking could drag it towards 9,820 to 9,775 zones, while a hold above 9,928-9,950 could drive the fresh up move towards 10,000-10,050 zones.
Buy BPCL, NTPC and Indiabulls Housing Finance, says Chandan Taparia

Clcik here for full story
Edelweiss Research on Prabhat Dairy
Management guided for sales of Rs 20 billion by 2019-20, led by consumer division and milk, ghee and cheese. Prabhat expects to launch new products in beverages and specialty cheese in next few years. 
Further, B2B:B2C mix should improve to 50:50, from 70:30 currently. To achieve this, Prabhat aims to double outlets from current 100k outlets in general trade by 2020, and enhance presence in modern trade from mere 140 outlets currently to having pan-India presence with 3,000 outlets
With Prabhat extending its trajectory in value-added products, we expect sales/EBIDTA/PAT CAGR at 20%/24%/32% over FY17-19. Maintain ‘BUY’ with target price of Rs 150, based on 18x FY19E EPS. At CMP, the stock trades at 15.7x FY19E EPS
Centrum Broking on Sun Pharma
We maintain our Hold rating on Sun Pharma (SPIL) and revise our target price to Rs490 (earlier Rs600) based on 26x March’19E EPS of Rs18.7. SPIL’s Q1FY18 results were below our expectations due to pricing pressure in the US and impact of GST in the domestic market. The drug maker’s revenue declined 25% YoY, margins narrowed 1,780bps to 17.6%, and net profit fell 73%. 
Sun Pharma is facing supply constraints at its Halol facility. The management has guided for a single digit decline in revenue and EBIDTA margin of 20-22% for H2FY18. Key upside risks to our assumption include higher revenues from the US market and key downside risk includes regulatory risks for its manufacturing facilities catering to the global markets
Dollar Check
The dollar was indecisive, falling against the safe haven yen but rising against the euro, with the common currency hit by meeting records from the European Central Bank that showed caution about removing monetary stimulus too soon.

A picture illustration shows a 1 euro coin on one US dollar banknotes. Photo: Reuters

SGX Nifty
The Nifty50 futures on the Singapore Stock Exchange were trading 58.50 points lower at 9825 indicating a negative opening for the domestic market.
Economy watch (Source: Pranjul Bhandari, Chief India Economist, HSBC)
India's trade deficit narrowed in July as the weakness in imports outpaced that of exports. Weaker imports reflect the sluggishness in domestic demand, and details suggest that investment is much weaker than consumption. Notwithstanding today's print, we expect the trade deficit to remain wider than last year on the back of a stronger Rupee supporting imports over exports, weak export orders and expectation of higher import demand once GST related uncertainties are put to rest
Asian Markets Weak

Asian stock investors joined a global retreat from riskier assets on Friday and the dollar wavered on growing doubts about US President Donald Trump's ability to fulfill his economic agenda.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.5% in early trade, but still looked set to gain 1.4% for the week after tensions between North Korea and the United States came off the boil.
Japan's Nikkei slid 1.2% as the yen rose, and looked set to lose 1.3% for the week.

Illustration: Ajay Mohanty

Stock recommendation: ONGC (Source: G.Chokkalingam, Founder & Managing Director, Equinomics Research)
We see three positive catalysts for ONGC over the next year: (1) continued demonstration of subsidy reduction, (2) better gas earnings on upward price revision (even at $50/bbl oil) and further volume ramp-up. We recommend a BUY on the stock with a target price of Rs.210/- (which is 10.5x its FY2019E EPS of Rs.19.9)
Market outlook (Source: SMC Global)
Today the markets are likely to open on negative note. All emerging markets are trading in red. The coming session is likely to witness a range of 9,800 on declines (Nifty) and 10,000 on advances
Spain terror attack spooks investors 
Confidence was shaken after a van mowed through crowds of tourists in Barcelona on Thursday, killing at least 13 people and injuring more than 100 in an attack authorities were treating as terrorism.
A manhunt is underway for the driver of a van that mowed through crowds of tourists on Barcelona's most famous avenue.

Wall Street 

US stocks sold off on Thursday, with the S&P 500 recording its biggest daily percentage drop in three months as escalating worries about the Trump administration's ability to push through its economic agenda rattled investors.
The Dow Jones Industrial Average ended down 274.14 points, or 1.24%, to 21,750.73, the S&P 500 lost 38.1 points, or 1.54%, to 2,430.01 and the Nasdaq Composite dropped 123.20 points, or 1.94%, to 6,221.91.
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