The frontline indices ended over 0.5 per cent lower weighed by banking and fast-moving consumer goods (FMCG) stocks.
The S&P BSE Sensex ended at 36,154, down 241 points or 0.66 per cent, while the broader Nifty50 index settled at 10,831, down 57 points or 0.53 per cent.
Among the sectoral indices, the Nifty PSU index, the top loser of day, fell 1.75 per cent led by decline in Bank of India and Union Bank. The Nifty Financial Service index, too ended 1.09 per cent lower dragged by Edelweiss Financial Services and HDFC.
In the broader market, S&P BSE MidCap index ended 9 points, or 0.06 per cent lower, while S&P BSE SmallCap index settled at 13,392. The S&P BSE SmallCap index hit a 52-week low of 13,390 on Tuesday, on the back of sharp decline in fertiliser, graphite electrode, paper and auto ancillary stocks after they reported a weak set of numbers for the quarter ended December 2018 (Q3FY19). The index has fallen below its previous low of 13,397 touched on October 9, 2018, in the intra-day trade. READ MORE
Shares of Gujarat Narmada Valley Fertilizers and Chemicals (GNFC) tanked 12 per cent to Rs 271 in the intra-day deals on the BSE on Tuesday, as the company posted 27 per cent year-on-year (YoY) decline in net profit at Rs 166 crore in December 2018 quarter (Q3FY19). The fertilizers company had reported a profit of Rs 228 crore in a year-ago quarter. The stock ended the day at Rs 275.50, down 10.45 per cent.
Aluminium producer Hindalco Industries Ltd posted a 34.4 per cent drop in third-quarter profit on Tuesday, hurt by an increase in input costs, mainly of coal and furnace oil. Revenue from operations rose 8 per cent.
Asian shares edged up on Tuesday as investors hoped a new round of US-China trade talks would help to resolve a dispute that's dented global growth and some corporate earnings.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.3 per cent. The Shanghai Composite Index rose 0.6 per cent, South Korea's KOSPI climbed 0.4 per cent and Australian shares were up 0.4 per cent. Japan's Nikkei advanced 2 per cent after a market holiday on Monday, lifted by a weaker yen.
In the absence of any major domestic and global triggers selling pressure could continue in the coming sessions, hence we maintain our cautious stance on the Indian markets in near term. The focus of investors would be on last leg of Q3FY19 earnings season. Further, market participants would closely monitor the progress of trade talks between US-China, behaviour of crude oil prices and fluctuation in currency as it would further induce volatility in the markets. We would advise Investors to stay focused on selective blue chip companies. However, considering the near term uncertainty, traders should strictly hedge their leveraged positions
Sectoral gainers and losers of the day on NSE
Gainers and losers of the day on S&P BSE Sensex
Market at close
The S&P BSE Sensex ended at 36,154, down 241 points or 0.66 per cent, while the broader Nifty50 index settled at 10,831, down 57 points or 0.53 per cent.
Hindalco third-quarter profit plunges on higher input costs
Aluminium producer Hindalco Industries Ltd posted a 34.4 percent drop in third-quarter profit on Tuesday, hurt by increase in input costs, mainly of coal and furnace oil.
Standalone net profit after tax was 2.47 billion rupees ($34.87 million)in the quarter ended Dec.31, compared with 3.77 billion rupees a year ago READ MORE
Reliance Home Finance Q3 profit up 38% at Rs 55 cr, stock down 6%
Reliance Home Finance, the housing finance arm of Reliance Capital, reported a net profit of Rs 55 crore in the quarter ended December 2018. Profits were up 37.5 per cent in the third quarter of 2018-19 over the same period last fiscal. READ MORE
JM Financial on SpiceJet
SpiceJet has aggressively stepped up fleet expansion plan with addition of 12 aircraft in 3Q and plans to add eight Boeings in 4Q. The arbitration award disallowing issue of warrants to the erstwhile promoters and fixing the maximum liability for the company has been challenged before the court by all the parties on various aspects of the award.
The Company has been recently awarded 36 new sectors under UDAN III. Aggressive utilisation levels – PLF 90%+ backed by strong regional presence and variety of aircraft to size up demand in regional routes remains key strength. We ascribe an EV/EBITDAR multiple of 6.5x to arrive at a fair value of Rs 106.
Top gainers and losers on S&P BSE Sensex
BSE SmallCap index hits 52-week low
The S&P BSE SmallCap index hit a 52-week low of 13,390 on Tuesday, on the back of sharp declines in fertiliser, graphite electrode, paper and auto ancillary stocks after they reported a weak set of numbers for the quarter ended December 2018 (Q3FY19).
The index has fallen below its previous low of 13,397 touched on October 9, 2018, in the intra-day trade. With today’s fall, the small index slipped 28 per cent from its 52-week high level of 18,672 on February 14, 2018. In comparison, the S&P MidCap index and the benchmark index S&P BSE Sensex were down 17 per cent and 7 per cent, respectively, from their 52-week high levels. READ MORE
Hindalco: PAT at Rs 713 crore, up by 47%, for Hindalco Standalone plus Utkal Alumina
Bharat-22 ETF additional sale on Feb 14, govt looks to raise Rs 3,500 cr
The government will launch an additional offering of Bharat-22 Exchange Traded Fund (ETF) on February 14 to raise at least Rs 3,500 crore, officials said Tuesday. This ETF sale would be for a single day, in which both institutions and retail investors can participate, they said. READ MORE
HEG trades nearly 3.5% down post December quarter results
HEG reports net profit at Rs 866.83 crore vs Rs 342.11 crore year ago
Held an interactive meeting with FPIs in Hongkong today. Good participation and discussion.
How a small Tamil Nadu bank beat India's largest banks in the stock market
A policy of cautious lending to the silk weavers and shopkeepers of Tamil Nadu has allowed a small local bank to outpace the largest Indian banks in terms of share price performance.
City Union Bank Ltd., a small lender based in Kumbakonam, has risen more than 27 percent over the last twelve months, the best performance of any Indian lender in the Bankex index after Axis Bank Ltd. It has beaten out larger rivals such as HDFC Bank Ltd. and State Bank of India thanks to its successful record in lending to small and medium sized enterprises, or SME sector, while keeping a lid on bad loans. READ MORE
SBI Caps Securities on SpiceJet
With the domestic market growth moderating from the earlier highs there seems to be some pricing discipline coming back into the system. This, coupled with efforts to reduce cost should drive improvement in profitability, going ahead. We maintain BUY with a target price of Rs109/share valuing the company at 8.5x FY20e EV/EBITDAR
Elara Capital on SpiceJet
We lower FY20E EPS by 8% and FY21E EPS by 11% on a lower PLF at 88% (from 92%) for FY20E and at 87% (from 89%) for FY21E on sizeable capacity addition, offset by lower fuel CASK at Rs 1.3 per seat-km from Rs 1.4 per seat-km. We lower our target price to Rs 144 from Rs 158 on 8.0x (unchanged) FY21E EV/EBITDAR. We reiterate Buy on improving fuel efficiency, falling non-fuel cost with new fleet addition, and short-haul international market opportunity with Boeing-737-8Max.
Govt push for rural consumption should help Britannia Industries stock
The share price of Britannia Industries (valued at 52 times FY20 earnings and among the highest in the FMCG segment) shed about three per cent in just two trading sessions compared to a 1.6 per cent fall in the Sensex. Despite Q3 numbers being almost in line with analysts’ expectations, the lower volume growth impacted investor sentiment.
While net sales grew by 10.5 per cent year-on-year to Rs 2,827.4 crore against analyst expectations of Rs 2879 crore, net profit was up 13.8 per cent to Rs 300.1 crore but lower than Street estimates of Rs 312 crore. READ MORE
Top gainers and losers on S&P BSE Sensex
Inter-scheme transfers likely to cross Rs 2-trillion mark in FY19
The practice of transferring corporate debt papers from one scheme to another (dubbed inter-scheme transfers) is poised to cross the Rs 2-trillion mark in FY19. This will be the highest figure since the data has been available.
At the end of January, the figure stood at Rs 1.9 trillion, which is 12 per cent higher than the previous fiscal year. Experts tracking the industry are of the opinion that there may have been instances of some fund houses transferring riskier debt papers from institutional-driven products to retail products in anticipation of stress in these papers. READ MORE
Prabhudas Lilladher on Tata Motors
CMP: Rs 153
TP: Rs 207
Concerns over sales in China are expected to persist over the near term with further dealer inventory correction expected in Q4 to reach 1.5 months of dealer inventory levels. EBIT guidance over FY20-22 also has been reduced to 3-6% (earlier 4-7%). Standalone performance for the company remains on track. We currently factor in ~5.5% volume growth for JLR over FY19-20 and maintain “BUY” with the target price of Rs207, where we value JLR at 1.5x Sept’21E EV/EBITDA and Standalone entity at 9x Sep’21E EPS.
Motilal Oswal on Motherson Sumi
CMP: Rs 133
TP: Rs 170
We cut consol. EPS estimate by 11% for FY20 and by 14% for FY21 to factor in the weak outlook for the luxury car market and the weak ordering data on US Class 8 trucks. However, with limited capex, execution of the strong order book of SMPBV and continued traction in the wiring harness business in BS6, MSS is expected to be a prime beneficiary. The stock trades at 17.6x/15.6x FY20E/21E consol. EPS. Maintain Buy with a target price of Rs 170 (20x Mar’21E consol. EPS).
Motilal Oswal on Britannia Industries
CMP: Rs 3,113
TP: Rs 3,630
Changes to the model have resulted in a 0.9%/1.2% cut in our FY19/20E EPS. We are enthused about healthy volume growth (despite a high base), rapid distribution expansion, sustained strong growth in the erstwhile weak-performing states and the rapid pace of new launches in biscuits/other packaged F&B products. Continuing premiumization, significant incremental cost savings and a moderate commodity cost outlook relative to earlier years signify bright EBITDA margin prospects. We maintain Buy with a TP of Rs 3,630 – 52x FY21E EPS, a 10% premium to three-year average, with EPS expected to grow faster (CAGR: 20.1%) over FY19-21 than over FY16-19 (12.1%).
HEG falls 20% in four trading sessions ahead of December quarter earnings
Shares of HEG were down 8 per cent to Rs 2,025 apiece on BSE in the intra-day trade on Tuesday, ahead of October-December quarter (Q3FY19) result today.
The stock of graphite electrode (GE) maker had declined 20 per cent in the past four trading days, as compared to a 1.5 per cent fall in the S&P BSE Sensex. It touched a 52-week low of Rs 1,975 on January 29, in intra-day trade. READ MORE
Nifty Metal index is trading firm led by gains in Jindal Steel & Power
Investors still fear NBFCs: 2 Indian funds' assets fell 50% in Dec quarter
Indiabulls Asset Management and DHFL Pramerica Mutual Fund have seen their assets plunge by more than half in the December quarter. That shows fears of India’s non-bank finance companies still linger. The dwindling in assets is the most among any mutual-fund company in India during the period, data compiled by Bloomberg show. While flows to the industry have slowed recently because of heightened market volatility and political uncertainty ahead of elections due by May, it also suggests investors continue to shun risk months after defaults by an infrastructure lender shocked India’s non-bank finance companies. READ MORE
Shares of Coal India trading over 1.5% ahead of Q3 earnings
Gujarat Narmada Valley Fertilizers and Chemicals tanks 12% on weak Q3 nos
Shares of Gujarat Narmada Valley Fertilizers and Chemicals (GNFC) tanked 12 per cent to Rs 271 on BSE on Tuesday as the company posted 27 per cent year-on-year (YoY) decline in net profit at Rs 166 crore in December 2018 quarter (Q3FY19). The fertilizers company had reported a profit of Rs 228 crore in a year-ago quarter. The stock trading at its 52-week low, was down 25 per cent in the past one month, as compared to a 1 per cent rise in the S&P BSE Sensex. READ MORE
Energizer, Duracell eye stake in Eveready India
US battery makers Energizer Holdings Inc and Duracell International are eyeing a controlling stake in Eveready Industries India Ltd, the Economic Times reported on Tuesday, citing people involved in the negotiations. READ MORE
Reliance General Insurance files for IPO
India's Reliance General Insurance Co Ltd has filed for an initial public offering (IPO) consisting of a fresh issue of shares worth up to 2 billion rupees ($28.15 million), parent Reliance Capital Ltd said on Tuesday. The IPO will also include an offer by Reliance Capital to sell up to 79.5 million shares, Reliance Capital said. READ MORE
Shares of Reliance Capital are trading around 4% lower
PI Industries surges 9% on strong December quarter results
Shares of PI Industries surged 9 per cent to Rs 914 per share on the BSE in early trade on Tuesday, after the company reported strong growth of 33 per cent in net profit at Rs 107 crore in December 2018 quarter (Q3FY19). The agrochemicals company had a profit of Rs 81 crore in the year-ago quarter. Revenues during the quarter under review grew 32 per cent at Rs 708 crore against Rs 538 crore in the corresponding quarter of previous fiscal. READ MORE
ICICI Securities on DLF
We retain our BUY rating with an unchanged target price of Rs280/share based on 1x FY19E NAV. As we have highlighted earlier, with the shift to the project completion method under INDAS 115 from Q1FY19, DLF is rebooking revenues and profits as projects complete and hence the income statement analysis is irrelevant and investors should focus on underlying cash flows of the different business verticals.
Airline stocks are trading lower on the back of rise in crude prices
Nifty IT index is trading lower
Sebi cloud on Etihad open offer waiver for Jet Airways shareholders
The Securities and Exchange Board of India (Sebi) has expressed reservations over granting exemption to Etihad Airways in connection with an open offer to the minority shareholders of Jet Airways, sources in the know said. Exemption for making an open offer was among the key conditions set by Etihad to offer a lifeline to the debt-laden domestic carrier. READ MORE
Derivative insights :: Geojit Financial Services
Nifty index futures closed 47.65 points lower at 10,909.60 on Monday. Open interest increased by 7.82 lakh contracts and the total open interest at the end of the day was 2.17 crore contracts. The premium rose to 20.80 from previous day's close of 13.65. Nifty PCR OI moved lower to 1.47 from 1.58 meanwhile nifty put option open interest rose by 3.18% whereas nifty call option open interest rose by 11.27%. India VIX closed higher at 15.84 from previous day's close of 15.56.
Sectoral trend on NSE
Opening gainers and losers on S&P BSE Sensex
Market at open
At 9:15 AM, the S&P BSE Sensex was trading at 36,365, down 30 points, while the broader Nifty50 was ruling at 10,875, down 14 points.
(Image source: Nirmal bang report)
Market at pre-open
Rupee opens at 71.17/$ vs its previous close of 71.18 against the US dollar
Jefferies on Apollo Hospitals
While we expect improvement in margins going forward, we believe that competitive risks are still high and that the valuations leave no room for upside. We expect mature-hospital margin improvement to be gradual as competitive intensity from Fortis and others increases. We expect EBITDA CAGR of 17% over FY18-21 led by 160bps margin improvement. Retain Hold with SOTP-based price target of Rs1,180 implying FY20 EV/EBITDA of 15.8x and valuing the hospital business at a 10% discount to the historical average multiple at 15x
INTERVIEW OF THE DAY Abhijit Bhave of Karvy Wealth
HNIs are looking at international diversification: Abhijit Bhave
Do you think the wealth management segment is getting overcrowded and the margins will get thinner going ahead?
India is on the growth trajectory where projections of a $10 trillion economy over eight years are being made. This leads to a lot of potential for wealth management companies to grow and the sector will not get saturated anytime soon. In the short-term, there may seem to be some overcrowding in this space. That said, there is huge potential to grow over the long term READ MORE HERE
Edelweiss on Britannia
Britannia posted in-line YoY Q3FY19 revenue, EBITDA and PAT growth of 10.5%, 13.4% and 14%, respectively. Domestic volume grew 7% YoY, translating to three-year average volume growth of 7% (highest so far in consumer space; Dabur recorded 6.8% and HUL 5.7%). This coupled with a price hike of 2% and a favourable mix of 2% aided overall sales growth.
Price hikes, better inventory management and change in accounting for the breads business lifted gross margin by 252bps YoY. Building in initial expansion expenditure at the Ranjangaon facility, employee cost and other expenditure were high – up 24.9% YoY and 20.7% YoY, respectively. Hence, EBITDA margin grew only 38bps YoY. Britannia’s journey towards becoming a total foods company is gaining flavor with entry into new categories and geographies and rising share of premium products that will keep the company in good stead. Maintain ‘BUY
Edelweiss on Max Financial Services
Max Financial Services (MFS; holding company for life insurance) clocked a mixed Q3FY19 performance. Growth came in below trend (individual APE up 13% YoY) due to the tilt towards lower-ticket, higher-margin protection business (individual protection at 6% versus 4% in 9MFY18) and a diversified portfolio (ULIPs’ proportion down to 40%). The company delivered across critical metrics, viz., persistency, AUM accretion and distribution diversification. It reported embedded value of INR82.5bn with an NBM of 20.4% (post-cost overrun) and operating RoEV of 18.8% supported by an improving protection mix. We expect growth acceleration and sustained improvement in underlying metrics to drive the rerating ahead. Maintain ‘BUY’
Edelweiss on Thermax
Thermax’s (TMX) Q3FY19 revenue surpassed estimate riding healthy order backlog, while price pressure led to margin belying it. Key highlights: a) order inflow rose mere 5% in the absence of large order finalisation. Management expects small orders in ethanol, waste heat recovery & Sox Nox to drive FY20 order inflow, along with three major orders anticipated in the refinery segment by Q2FY20; b) stability in commodity prices & pick up in contract awarding remain key for margin expansion; and c) though liquidity situation is improving, it is expected to be gradual.
In our view, lack of large orders in the domestic market and incremental growth from international market continue to pose challenges for full fledged growth and margin expansion. We trim FY20E EPS 7% given muted YTD19 order intake and maintain ‘REDUCE’ with Rs 700 target price, as we roll forward to June 2020 valuation, maintaining 16x PE
Jefferies maintains BUY rating on Eicher Motors
Royal Enfield's 3Q revenue and EBITDA performance surprised positively in the backdrop of muted volume growth due to higher realization (up 10% YoY and 6% QoQ). Most of the increase in 3Q was on account of shift to rear disc brake; in 4Q shift to ABS should drive up realization even more. VECV margin shrunk sharply YoY and QoQ. Despite near-term headwinds around volume growth and increased competition we maintain Buy noting strong medium to long-term prospects
At 8:00 a.m. IST, the SGX Nifty Futures was trading at 10,907.00, which is 0.2% lower than its previous close. It is at a premium to the Nifty’s previous closing of 10,888.8.
On Monday, FIIs/FPIs sold stocks worth Rs 125.1 crore and DIIs sold stocks worth Rs 232.6 crore.
Global stock markets: Nikkei +2.0%, KOSPI +0.2%, Hang Seng -0.2%, NASDAQ +0.1%, S&P 500 +0.1%, Dow 30 -0.2%.
Q3 results today: COAL INDIA, BATA INDIA, HINDALCO, and HEG
Eicher Motors reported its Q3 FY 2019 results yesterday. Net profit met the market expectations with 2.4% y/y growth. Revenues of the Royal Enfield units grew 3.2% and met market expectations. However, the margins shrank on account of higher raw material cost.
According to a filing, the government is planning to raise ~Rs 5,300 crores by sale of stake in Axis Bank through SUUTI. The offer will start from February 12 and the government intends to sell 3% equity stake through the process.
Reliance Power’s board has accused L&T Finance and Edelweiss through a regulatory filing of unlawfully invoking the Company’s shares and selling it in the open market, which has led to a sharp fall in its stock price. The Company has written to the SEBI in the matter.
(Source: William O’Neil report)
Derivatives strategies: Short-term trend likely to be negative
The Nifty made a failed breakout to above 11,000 and then reacted down quite sharply. It’s back in the trading range of 10,700-11,000 even though the RBI made a surprise rate cut and changed policy stance to “neutral” from “calibrated tightening”. The index is again taking support from its own 200-Day Moving Average (DMA).
Until and unless, there’s another breakout or breakdown, judging intermediate trend will be impossible. The short term trend seems negative. Volumes continue to be low. READ MORE
Corporation Bank's slippages at Rs 4,068.4 crore in Q3FY19
Corporation Bank has recovered more than Rs 3,000 crore in 9MFY19, as per CNBC TV18 report
Current price: Rs 138
Target price: Rs 134
Keep a stop at Rs 140 and go short. Add to the position between Rs 135 and Rs 136. Book profits at Rs 134.
Current price: Rs 481
Target price: Rs 489
Keep a stop at Rs 477 and go long. Add to the position between Rs 486 and Rs 488. Book profits at Rs 489. READ MORE
The rupee strengthened by 13 paise to close at 71.18 against the US dollar Monday on easing crude oil prices, even as the greenback strengthened vis-a-vis other major currencies.
Oil rises on OPEC cuts, US sanctions on Iran and Venezuela
Oil prices rose on Tuesday amid OPEC-led supply cuts and US sanctions against Iran and Venezuela, although surging US production and concerns over economic growth kept markets in check.
US West Texas Intermediate (WTI) crude oil futures were at $52.50 per barrel, up 9 cents, or 0.2 per cent, from their last close. International Brent crude futures were up 18 cents, or 0.3 per cent, at $61.69 per barrel.
Nifty futures on Singapore Exchange (SGX) were trading at 10,914.50, down 16.50 points or 0.15 per cent in early trade.
Asian stocks subdued, focus on new round of Sino-US talks
Asian shares barely budged on Tuesday with investors looking to a new round of Sino-US trade talks as the world’s two largest economies try to resolve a tariff dispute that has put a dent on global growth and corporate earnings.
MSCI’s broadest index of Asia-Pacific shares outside Japan was unchanged in early trade. Japan’s Nikkei was up 1.1 per cent after a market holiday on Monday.
Wall Street check
On Wall Street, the Dow Jones Industrial Average fell 53.22 points, or 0.21 per cent, to 25,053.11, the S&P 500 gained 1.92 points, or 0.07 per cent, to 2,709.8 and the Nasdaq Composite added 9.71 points, or 0.13 per cent, to 7,307.91.
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