Nifty ends below 10,500, Sensex down nearly 300 pts; PSU bank index dips 2%

A share broker monitors market fluctuation
The benchmark indices ended weak on Friday amid absence of major domestic and global cues. The Sensex and Nifty opened firm, with Nifty testing 10,600 levels. Both indices, however, trimmed gains as trade progressed.

The Indian indices declined sharply in the last hour of trade with Nifty PSU bank index falling over 2 per cent. Among the major losers, Bank of Baroda lost over 3% while State Bank of India, IDBI and Syndicate Bank ended 2-3% lower in the banking segment. Punjab National Bank shed 1.5%.

In other market news, global index provider MSCI has slammed Indian exchanges’ decision to terminate licensing and data-feed agreements with their global counterparts. MSCI, whose indices, widely used by passive investors, help channel billions of dollars into Indian markets, said the concerted announcement by three domestic exchanges was “anti-completive” and would restrict access to the Indian market.

According to reports, National Stock exchange (NSE) is keen to buy a 25 per cent stake in Dhaka Stock Exchange, rivaling an offer from a Chinese bourse

In the global markets, most Asian indices were shut on Friday due to Lunar New Year holidays. However, Japan’s Nikkei rose 1.2 per cent. US dollar slipped below its January low against a basket of major currencies to reach its lowest since late 2014.

(with wire inputs)


Sectoral trend (Image source: NSE)

Market watch (Image source: BSE)

Market at close
The S&P BSE Sensex ended at 34,010, down 286 points while the broader Nifty50 index settled at 10,452, down 93 points.
PNB scam won't affect recap plan, bank can take Rs 114-bn hit: Govt sources
The Finance Ministry sources on Friday said that Punjab National Bank (PNB) is fully capable of taking the entire hit of Rs 114 billion fraud.
The state-owned corporation, which had earlier detected a $1.77 billion scam including jeweller Nirav Modi acquired fraudulent letters said that the role of other 4 banks will be probed, and the will have to bear consequences if found to have defaulted the norms. CLICK HERE FOR FULL STORY
MUST READ Bank vulnerabilities: PNB fraud exposes failure of systems and oversight

Punjab National Bank, owned by the Union government, has admitted that fraud of Rs 114 billion has occurred within a Mumbai branch. False letters of undertaking were used as a basis for branches abroad of other Indian banks to transfer funds in dollars on behalf of PNB. The letters were issued for accounts related to gems and jewellery companies controlled by Nirav Modi and his relatives. It has been revealed that Mr Modi left India in early January, well before the original first information report in this case was filed with the police. READ MORE

Market Check

S&P BSE Sensex 33,978.78 -0.93%
Nifty 50 10,447.15 -0.93%
S&P BSE 200 4,568.18 -1.07%
Nifty 500 9,223.15 -1.08%
S&P BSE Mid-Cap 16,568.10 -1.40%
S&P BSE Small-Cap 17,976.14 -1.54%

PNB's FY17 fund-based exposure to jewellery sector at 0.6% of loan book

Punjab National Bank (PNB) that has been at the centre of the Rs 114 billion fraud perpetrated by Nirav Modi had a fund and non-fund based exposure (as a percentage of loan book) at 0.6% and 0.1% respectively in FY17, suggests a recent Edelweiss Securities report on the sector co-authored by Kunal Shah and Prakhar Agarwal.
Bank of India (BoI), State Bank of India (SBI), Canara Bank and IDBI Bank are among those that highest fund-based exposure to the sector as a percentage of total loan book among the public sector (PSU) during this period. READ MORE
After Nirav Modi scam at PNB, fear of sweetheart deals at other banks too

These are early days in the Nirav Modi saga, but top financial sector officials are not ruling out more such sweetheart deals at other banks, given that the overseas bill discounting business that traders deal in is highly porous.
The present case has surfaced because an innocuous rule change by the Reserve Bank of India (RBI) in early January forced Punjab National Bank (PNB) to tap Nirav Modi and other importers for more margin money. Another trigger, it would seem, was an alleged query from RBI seeking the bank’s response over one of its officials allegedly demanding favours from Modi’s company in return for issuing the next Letter of Undertaking, or buyer’s credit. CLICK HERE FOR FULL STORY

Ending licences anti-competitive: Index provider MSCI slams Indian bourses

Global index provider MSCI has slammed Indian exchanges’ decision to terminate licensing and data-feed agreements with their global counterparts.
MSCI, whose indices, widely used by passive investors, help channel billions of dollars into Indian markets, said the concerted announcement by three domestic exchanges was “anti-completive” and would restrict access to the Indian market. READ MORE
Market Check

S&P BSE Sensex 34,038.69 -0.75%
Nifty 50 10,469.60 -0.72%
S&P BSE 200 4,575.43 -0.91%
Nifty 500 9,241.70 -0.88%
S&P BSE Mid-Cap 16,594.55 -1.24%
S&P BSE Small-Cap 17,993.28 -1.45%

Shareholders okay RCom asset monetisation plan for servicing Rs 450-bn debt

Debt-ridden telecom operator RCom on Friday said its shareholders have approved an asset monetisation plan which will be used to repay dues. READ MORE
A man opens the shutter of a shop painted with an advertisement of Reliance Communications in Mumbai. Photo: Reuters

Fortis Healthcare under pressure after SC allows FIs to sell pledged shares
Fortis Healthcare has slipped 20% to Rs 115 in noon deal trade, falling 24% from its intra-day high on BSE on back of heavy volumes after the Supreme Court (SC) allowed financial institutions to sell pledged shares of the company. CLICK HERE FOR MORE
Nifty PSU Bank hits over three-month low; down 26% from 52-week high

Shares of public sector banks continues to trade lower for the fifth straight trading session with the Nifty PSU Bank index hitting an over three-month low after the Reserve Bank of India (RBI’s) revised framework on resolution of stressed assets and the detection of about Rs 144 billion fraudulent and unauthorised transactions by the Punjab National Bank (PNB) at one of its branches in Mumbai. READ MORE
Axis AMC to venture into realty funds, hires Balaji Rao as business head

Axis Asset Management Company (AMC), a unit of Axis Bank, is padding up to foray into the real estate funds business through the alternative investment fund (AIF) route.
It has hired real estate funds veteran Balaji Rao to head the business and build a core team of eight to 10 people in the investment and asset management verticals. READ MORE
Market Check

S&P BSE Sensex 34,186.98 -0.32%
Nifty 50 10,507.20 -0.36%
S&P BSE 200 4,596.45 -0.46%
Nifty 500 9,279.90 -0.47%
S&P BSE Mid-Cap 16,666.27 -0.82%
S&P BSE Small-Cap 18,094.43 -0.90%

Ending licences anti-competitive: Index provider MSCI slams Indian bourses

Global index provider MSCI has slammed Indian exchanges’ decision to terminate licensing and data-feed agreements with their global counterparts.
MSCI, whose indices, widely used by passive investors, help channel billions of dollars into Indian markets, said the concerted announcement by three domestic exchanges was “anti-completive” and would restrict access to the Indian market. READ MORE
Motherson Sumi falls 12% in three days post December quarter results

Motherson Sumi Systems has fallen 6% to Rs 321 on BSE in intra-day trade, extending its past two days 6% decline after the auto ancillary company reported a weak operational performance in December 2017 (Q3FY18) quarter.
The company’s consolidated net profit grew 5% to Rs 4.37 billion due to higher depreciation and tax outgo. Total sales during the quarter rose 36% to Rs 143 billion over the previous year quarter. READ MORE
Nifty PSU Banks crack: PNB slips nearly 6%

Sensex gainers and losers

Market Check

S&P BSE Sensex 34,288.26 -0.03%
Nifty 50 10,555.85 0.10%
S&P BSE 200 4,612.64 -0.11%
Nifty 500 9,321.20 -0.03%
S&P BSE Mid-Cap 16,735.44 -0.40%
S&P BSE Small-Cap 18,182.29 -0.42%

PNB scam: How Nirav Modi, one of India's richest men executed a $2 bn fraud

On Valentine’s Day, one of India’s biggest banks disclosed an almost $2 billion fraud allegedly by one of the country’s richest men, who deals in pearls and diamonds.
Shares of the lender, Punjab National Bank, plunged on the news, dragging down other lenders when it said the scam may extend to multiple banks.

With several questions still unanswered, click here’s to know about the case
Sectoral Watch: Nifty PSU Banks down over 1%

Market Comment
The recent small correction in the market notwithstanding, valuations of the Indian market are still quite stiff. The Nifty-50 Index trades at 17.9X FY2019E ‘EPS’ (free-float basis) and we build in 25.6% growth in the net profits of the Nifty-50 Index in FY2019. Notwithstanding the usual issues regarding the quantum of earnings growth, the quality of earnings growth is also quite poor with 60% of the incremental profits of the Nifty-50 Index for FY2019 coming from sectors such as PSU banks, metals & mining, oil & gas and utilities, which should logically trade at low multiples
(Source: Kotak Securities)
INTERVIEW OF THE DAY: I am cautious on public sector banks now: Saibal Ghosh

Public sector banks have been in the limelight once again with the country’s second-largest public sector bank, Punjab National Bank unearthing fraudulent transactions. SAIBAL GHOSH, chief investment officer at Aegon Life Insurance in conversation with Puneet Wadhwa says he is remains cautious on the banking sector. Nifty earnings should grow at around 17% - 18% in FY19, he says. READ MORE
Saibal Ghosh, CIO, Aegon Life Insurance

Sebi suspects price rigging by PSBs, examines stock trading pattern

The Securities and Exchange Board of India (Sebi) is examining the trading pattern in the stocks of state-run banks, following the announcement of the government’s recapitalisation programme on January 25.According to sources, the market regulator suspects price rigging by a group of investors.
On January 25, the Nifty PSU Bank index, a gauge of the public sector bank (PSB) shares’ performance, had declined 6 per cent. Sources said the government raised the issue of declining share prices of top PSBs, despite providing capital to revive growth. READ MORE
NSE keen to buy 25% stake in Dhaka stock exchange to rival China

India’s biggest stock exchange is keen to buy a 25 per cent stake in Dhaka Stock Exchange, rivaling an offer from a Chinese bourse. READ MORE

8K Miles surges 10% on launch of Blockchain Platform - 8K Health Edge

8K Miles Software Services has surged 10% to Rs 867 on BSE in intra-day trade in otherwise subdued session after the company announced that it is launching 8K Health Edge, a proprietary Blockchain platform which, may translate into solutions for some of the most complex problems in global healthcare. READ MORE
Emkay Global on auto sector
We believe that the stage is set for strong growth in automobile demand in FY19, led by: 1) increase in Government infrastructure spending and focus on rural economy, 2) strong rural demand and higher disposable income in view of 7th Pay Commission awards, and 3) new launches. Our top picks are Ashok Leyland, Mahindra & Mahindra, Hero MotoCorp, Tata Motors and Exide Industries
Edelweiss on Apollo Hospitals
Apollo Hospitals’ (APHS) Q3FY18 consolidated revenue grew 12%, EBITDA rose 17% YoY and margin improved 40bps YoY. 
Key highlights of the quarter were: 1) 6% YTD growth in Tamil Nadu region, which includes the Chennai cluster, where growth was subdued last year; 2) capex intensity down to Rs 3.8bn, but debt jumped by Rs 2bn in 9mFY18 on Rs 1bn dividend payment; 3) started oncology centre at the Navi Mumbai hospital leading to one-time advertising spend of Rs 15mn; overall losses at Rs 105mn; and 4) AHLL’s losses remained at Rs 250mn. 
We believe, capex peaked in FY17 and is likely to decline 50% from FY18. This, we estimate, to lead to ~200bps margin improvement over FY18-20. Maintain ‘BUY’ with TP of Rs 1,700
Market Check
S&P BSE Sensex 34,351.55 0.16%
Nifty 50 10,568.40 0.22%
S&P BSE 200 4,620.75 0.07%
Nifty 500 9,334.10 0.11%
S&P BSE Mid-Cap 16,770.98 -0.19%
S&P BSE Small-Cap 18,243.22 -0.08%

Not into cryptos? Your phone may already be mining one without you knowing
There’s a chance your computer or phone is quietly producing a cryptocurrency called Monero. Criminals looking to commandeer massive processing power to unlock new Monero coins have unleashed an epidemic of malicious software that burrows deep into victims’ web browsers to surreptitiously run calculations READ MORE
PNB Housing Finance to raise $400 million through issue of masala bonds

PNB Housing Finance (PNB HFL) is planning to raise $400 million through its maiden issue of masala bonds. The money will be utilised to finance retail buyers/developers of affordable housing as well as developers of green buildings. IFC proposes to invest upto $150 million in PNB HFL by subscribing to the company's 5-year Masala Bonds. READ MORE
MUST READ Slowdown on the horizon: Why does inflation make stock prices fall?
Pundits have offered many reasons for the biggest stock market swoon in two years. One of the most frequently blamed culprits was the threat of inflation, which loosely means an increase in consumer prices over time CLICK HERE FOR MORE
Edelweiss on Max India
Management is recalibrating its business model by restructuring certain practices: 1) stopping unsustainable short-term practices; 2) plugging leakages; and 3) improving overall compliance status. Hence, we anticipate FY19 to be a year of transformation wherein the company will sharpen focus on making structural changes to strengthen long-term business fundamentals. 
We feel this could impact short-term performance, but will improve long-term prospects. Even though we continue to perceive Max as a compelling bet on the tertiary care market in the NCR region, with potential upside from health insurance, we downgrade to ‘HOLD’. We revise down FY18/FY19E EBITDA by 20%/34% and roll forward to FY20 estimates, implying a price target of Rs 110
Gitanjali tanks 20% for second straight day; PNB hits fresh 52-week low

Gitanjali Gems is locked in lower circuit for the second straight day, down 20% at Rs 37.55, its fresh 52-week low on BSE, after the media report suggested that the Enforcement Directorate (ED) conducted searches and sealed some premises owned by the company and Nirav Modi in related to the Rs 114 billion Punjab National Bank (PNB) fraud. CLICK HERE FOR FULL STORY
BSE smallcap gainers and losers

PNB fraud: What India's biggest sham transaction means for banking sector?
India’s Punjab National Bank, the second-biggest state-run lender, stunned the country’s financial sector when it announced this week it had discovered fraudulent transactions worth $1.77 billion at a single branch in Mumbai.
The fraud, by far the biggest ever detected by an Indian bank, comes to light at a time when lenders - especially the state-run banks - are hobbled by $147 billion in soured loans on their books, a problem that has choked new lending and hurt the country’s economic recovery. READ MORE
Sensex mid-cap gainers and losers

PNB drifts lower in trade (Source: NSE)

CLSA on Pakistan market
Pakistan is an interesting market. After rallying dramatically for more than eight years, it corrected in US dollar terms after entering the MSCI Emerging Markets Index at the beginning of June 2017. The country is a major beneficiary of China’s ambitious “One Belt One Road” strategy. The increasingly close relations between China and Pakistan were also evident from an announcement by the State Bank of Pakistan on 2 January allowing companies to use renminbi for denominating foreign currency transactions for bilateral trade and investment
(Source: GREED & fear, Chris Wood's weekly newsletter)

Chris Wood of CLSA cuts weight on India
A further 1ppt each will be added to the weightings in Hong Kong and Malaysia in the Asia Pacific ex-Japan relative-return portfolio, while a 1ppt allocation will be introduced in Pakistan. This will be paid for by reducing the overweight in India by a further 3ppt.
Realty stocks continue to surge

Sectoral Trend
Sensex losers and gainers

Market at open
At 9:18 am, the S&P BSE Sensex was trading at 34,504, up 207 points while the broader Nifty50 was ruling at 10,593, up 47 points.
Trading ideas by Prabhudas Lilladher

CMP: Rs 475.90
TARGET: Rs 515
The stock has more or less made a double bottom formation in the daily chart and has given a good revival maintaining a positive bias. The indicators are all favourable with the MACD indicating a trend reversal and also the RSI has been in a positive trending mode to signify strength in the stock for still further more rise in the coming days. With good volume participation witnessed, we recommend a buy in this stock for an upside target of 515 keeping a stop loss of 458. READ MORE
Nifty outlook by Prabhudas Lilladher

Nifty more or less continues to sustain above 10500 levels, however there is not much to talk about the clarity in trend unless we move past 10630 levels or a break of 10400 levels. The support for the day is seen at 10480 while resistance is seen at 10600. Bank Nifty continues to struggle with all ongoing domestic issues & hence this sector should take a while to stabilize.
Derivative Strategy for Manappuram Finance by HDFC Securities
Buy Manappuram Finance February 110 call at Rs 2.5 
Stop loss: Rs 1.5 
Target: Rs 5
Rationale: We have seen long positions being built in Manappuram Finance futures today where we have seen open interest addition of 2% with price rise of 2%. In the option segment, 112.5 and 115 call added 42,000 Shares (117% Rise in Open Interest) and 66,000 Shares (10% Rise in Open Interest) in open interest today suggesting higher possibility of sharp price from here.
Recently Stock price has bounced back from 200 day moving average with higher volumes. Primary trend of the stock is bullish with higher tops and higher bottoms on the weekly charts.
IDBI Capital on Eicher Motor
We expect growth of 17% in Royal Enfield sales over FY17-20E as we believe volume growth would be lower due to high base and lower demand from fewer states. However we strongly believe that RE’s brand appeal, consumer preference for premium bikes, 650 twin launches, and higher export volumes would certainly help the company to increase their sales in coming years. 
However, we do expect some margin pressure for coming quarters due recent increase in commodity prices. We expect consolidated revenue and earnings to grow ~22% and ~24% CAGR over FY17-FY20E with RoE of ~34% and average free cash flow generation of ~Rs22bn. We resume our coverage with BUY rating with target price of Rs 32,550
IDBI Capital on Repco Home Finance
Given that the company is going through a transitionary rough phase, we have assigned a multiple of 2.7x (-2 standard deviation). We have a BUY rating on the stock with a target price of Rs 745
Sebi suspects price rigging by PSBs, examines stock trading pattern

The Securities and Exchange Board of India (Sebi) is examining the trading pattern in the stocks of state-run banks, following the announcement of the government’s recapitalisation programme on January 25. READ MORE
Photo: Reuters

PNB sheds Rs 81 bn in market value in 2 days; stock falls 12% on Thursday
Shares of state-owned Punjab National Bank dropped 12% on Thursday to Rs 128.4. The lender, in the epicentre of a $1.77-billion scam, has seen a market capitalisation erosion of Rs 81 billion in two days. Its stock has shed 21% — its worst two-day decline since May 2004.
Besides the government, which holds 57% stake in the bank, Life Insurance Corporation of India holds nearly 14% stake. It has affected other institutional investors like HDFC Mutual Fund and Lazard Emerging Markets. Small investors hold nearly 4% stake in the bank. READ MORE

Equirus on Aurobindo Pharma
Management commentary (as well peers) over slowing tapering price erosion with price bottom in the US seems to be positive for the industry and could particulary help Aurobindo go grow going forward with 1) Injectable pipeline guided to grow at 30% and 25 products lined up in Oral side to be launched. We reiterate Long rating on the stock with Mar’19 target price of Rs 773 , set by ascribing 20P/E
COMMENT: Jayant Manglik, president, Religare Broking
Markets have been struggling in a broader range for last six sessions and it shows indecisiveness among the participants. The government along with apex bank is trying every step to resolve issues in public sector banks but some negative news comes in every now and then, derailing the recovery. Trading becomes very difficult in such scenario due to erratic swings. We suggest keeping a close watch on global markets for cues and limiting leveraged positions until some clarity emerges
MPC to stand pat on rates at least through 1HCY18
For policy perspective, CPI continues to remain the focus for the MPC. We expect MPC to maintain status quo, at least through 1HCY18, as it awaits clarity on monsoons, MSP hike decisions and sustainability of high crude oil prices post the winter squeeze. CPI inflation outturns in 1HFY19 will be crucial in assessing RBI’s next move. 
We expect CPI inflation to head towards 5.85% by June 2018 (as against 5.6% peak estimated by RBI). Overall, even as MPC has sounded vigilant on upside risks, we reckon that amid still-subdued capacity utilization levels, and ‘need to carefully nurture’ the nascent recovery, the MPC will be in wait-and-watch mode in the near term
(Source: Kotak Securities)
Edelweiss on Solar Industries
We expect the stock to continue to fetch premium valuations with the impending uptick in return ratios - RoCE of 32% by FY20E (21% in FY18E). We raise our target multiple to 30x (earlier 22x to core business and NPV-based valuation for defence at 24x) and revise our target price to Rs 1,244 (Rs 842 earlier)
Commodity picks by Tradebulls
Buy Zinc
MCX Zinc rallied from Rs 198.55 to Rs 229.85 within span of 2 months and then retraced back to Rs 216.60. The recent support of Rs 216.60 it took is exactly at 61.8% retracement and from there; again we are witnessing the positive momentum and is on the cusp of Rs 229.80. The momentum looks strong and it is trading well above its short term moving average of 20 days so we would recommend long position with stop loss of Rs 225 and target of Rs 238. CLICK HERE FOR MORE
Jan export growth rate dips to 9.07%; trade deficit widens to 56-month high
Growth in exports reduced in January to 9.07%, from 12.03% in December.
With exports of $24.38 billion, the growth rate in January dipped to a single digit for the first time in three months. The rate in December more than halved to 12.4%, from November’s 30.5%. READ MORE
ICRA comments on trade data
With the merchandise trade deficit for January 2018 being sharply higher than expected, we have revised our forecast for the FY2018 current account deficit to US$47-50 billion or nearly 2.0% of GDP, from the earlier expectation of US$ 42-44 billion
Commodities Outlook by Tradebulls
The Commodity market is trading counter intuitive. All commodities barring natural gas exploded on higher US inflation data. Usually higher inflation means more aggressive US Fed. Higher inflation means higher interest rate from US Fed which pushes dollar stronger and lower gold prices. But yesterday commodity market, as well as stock market exploded which only means market perceives that US Fed will remain behind the curve.

The sharp price appreciation in bullions also comes from weak handed shorts in future markets who were forced to cover their bets. Gold is already trading above its important moving average and its next near term target is January’s high of $1365.87. Gold's next longer term upside price objective is the 2016 high of $1,377.50. With yesterday’s positive movement, more gains are likely in near term. READ MORE
Wall Street

Wall Street surged on Thursday to notch its fifth straight session of gains, led by Apple and other technology stocks as investors shrugged off recent inflation worries that sent the market into a sell-off at the start of the month.

The Dow Jones Industrial Average rose 306.88 points, or 1.23%, to 25,200.37, the S&P 500 gained 32.57 points, or 1.21%, to 2,731.2 and the Nasdaq Composite added 112.82 points, or 1.58%, to 7,256.43.

Pay retail investors for failure in IPO allotment: Sebi tells bankers
Investment bankers handling initial public offerings (IPOs) will have to compensate retail investors —those investing up to Rs 200,000—if they fail to get an allotment due to mishandling. In a circular released on Thursday, the market regulator directed banks to provide compensation to investors if any failure on their part results in non-allotment of shares to retail applicants READ MORE

Representative Image (Photo: Shutterstock)

Aster DM Healthcare's Rs 9.8-billion IPO gets lukewarm response
Aster DM Healthcare's Rs 9.8-billion initial public offering (IPO) garnered just 1.33 times subscription.
The high net worth individual (HNI) portion of the IPO was subscribed only 60 per cent, institutional investor portion saw 2.14 times subscription and retail portion was subscribed 1.33 times as on 5 pm
Today's picks: From Airtel to Hindalco, hot stocks to watch on Friday
Nifty Current: 10,545 (fut: 10,557) Target: NA Stop-long positions at 10,475. Stop-short positions at 10,630. Big moves could go till 10,425, 10,680. A long 10,500p (66), short 10,400p (40) could gain 15-20 if the futures drops below 10,475.
Bank Nifty Current: 25,424 (fut: 25,440) Target: NA Stop-long positions at 25,325. Stop-short positions at 25,575.
Markets on Thursday

Index Current Pt. Change % Change
S&P BSE SENSEX 34,297.47 +141.52 +0.41
S&P BSE SENSEX 50 11,003.66 +48.16 +0.44
S&P BSE SENSEX Next 50 34,601.95 -302.24 -0.87
S&P BSE 100 10,937.42 +25.19 +0.23
S&P BSE Bharat 22 Index 3,682.22 +6.01 +0.16

SGX Nifty

SGX Nifty was trading at 10,590, up 0.3% from the previous close.
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