Vinod Nair, Head of Research, Geojit Financial Services: Despite weak Q1 GDP growth of 5.7% the market continued to stay on a positive terrain due to better auto sales and encouraging manufacturing data for the month of August. On the other hand, investors are expecting knee jerk reaction from government to uplift the growth and they are largely focusing on long term benefit from GST than transitory hiccups.
3:45 PM Realty Index gained 2.6%
3:38 PM Sectoral Trend
3:37 PM Top gainers and losers on BSE Sensex
3:35 PM Broader Markets
Broader markets outperformed tjhe benchmark indices with BSE Midcap and BSE Smallcap up 0.9% and 0.8% respectively
3:33 PM Markets at close
Benchmark indices rose on Friday and gaining for a third straight week after much weaker-than-expected economic growth data raised hopes the central bank would cut interest rates at its next policy meeting in October.
The S&P BSE Sensex ended at 31,892 up 161 points while the broader Nifty50 index settled at 9,974, up 56 points. Bothe the indices were up 1% for the week.
GDP to grow?
NITI Aayog's new Vice-Chairman Rajiv Kumar pegged gross domestic product (GDP) expansion at 7-7.5% in the second quarter of the current financial year, a day after the country's economic growth in the first quarter fell to its lowest at 5.7 per cent in the three years of the Modi government.
Attributing subdued GDP growth in the first quarter to destocking in the pre-goods and services tax period, higher WPI deflator, and base effect, Kumar said a turnaround in corporate investments was already happening. He stressed that the first quarter GDP figures were not a trend.
Shares of Gravita India touched 52-week high of Rs 134.65, rising 11% intraday on the back of strong Q1 numbers.
The company’s Q1FY18 consolidated net profit increased 47.3% at Rs 10.9 crore against Rs 7.4 crore, in a year ago period.
Strides Shasun gains
Drug firm Strides Shasun gains 2% after the pharma firm received an Establishment Inspection Report (EIR) from the US health regulator for its formulations facility at Bengaluru.
"The company's formulations facility (KRSG Gardens) in Bengaluru which was inspected by the USFDA in May 2017 has received the EIR, thereby confirming the closure of the inspection," Strides said in a BSE filing.
2:56 PM Oil Check
Oil prices fell on Friday in the wake of Hurricane Harvey, which has killed more than 40 people and brought record flooding to the oil heartland of Texas, paralyzing over a quarter of the US refining industry.
Benchmark Brent crude for November was down 40 cents at $52.46 a barrel. The Brent contract for October, which expired on Thursday, closed up $1.52, or 2.99%, at $52.38.
2:46 PM Nifty IT was the biggest sectoral laggard, down 0.7%, deagged by TCS, Tech Mahindra and Wipro.
HSBC on GDP data
April-June (1Q FY18) GDP growth came in at a three-year low. Manufacturing, at a five-year low, stood out most. Thursday's weak data can be attributed to some specific factors such as GST related destocking, auto-correction in growth prints as prices normalize, rupee appreciation, weaker agriculture and higher subsidy payout. While some of these could reverse over the next few quarters, others may not. Growth has been moderating since the middle of 2016 and we see downside risks to our below consensus growth forecast of 7.1% for FY18
Asian equities followed Wall Street’s gains overnight and edged higher on Friday while the dollar’s advance slowed ahead of the US jobs report due later in the session.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%.
Australian shares added 0.2% while South Korea’s KOSPI and Japan’s Nikkei were little changed.
Shanghai was up 0.5% and Hong Kong’s Hang Seng rose 0.3%.
Escorts continued to post solid growth in tractors sales in August, following a 34.3% growth in July YoY.
The Faridabad-based tractor maker sold 4,587 units in month gone by, a growth of 23.2% compared with 3,722 units in same month last year.
2:03 PM Among other gainers
Shankara Building Products rose 4.81% to Rs 1,242 on BSE after the company announced that it has started new processing facility in Secunderabad.
COMMENT: Christopher Wood of CLSA
The attention of investors will again switch to Washington next week when Congress returns from summer holidays on 5 September. The immediate focus will be on the debt ceiling and the risk of a potential government shutdown given the looming deadlines at the end of September.
GREED & fear’s base case is that these deadlines will be successfully navigated, though there appears to be greater nervousness on this score than normal. The Trump administration will then be free to refocus its energies on tax reform, an effort likely to be led by National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin.
The issue will remain whether fiscally conservative Republicans in Congress will continue to insist on a “revenue neutral” tax reform in which case meaningful tax reform becomes very difficult. GREED & fear’s guess is that Cohn and Mnuchin will be arguing for a dilution, if not abandonment, of this revenue principle.
GREED & fear would certainly not abandon all hope of tax reform, nor should investors, given that markets have now effectively given up on the Trumponomics trade. This is primarily because both the Trump administration and Congressional Republicans need to see some concrete tax reform implemented ahead of the November 2018 congressional elections.
(Source: Chris Wood's weekly newsletter, GREED & fear)
Nomura on manufacturing PMI
India’s manufacturing PMI moved back into the expansion zone in August, led by a rise in domestic orders and output, suggesting that disruptions related to the new good and services tax (GST) seen in June and July appear to be getting resolved.
Given that the Q2 GDP disappointment was mainly due to GST-effects on the manufacturing sector, this is good news as cash-intensive services sectors have already started to recover. We remain comfortable with our view that growth is headed higher and we expect real GDP growth to average 7.4% y-o-y in H2 2017 from 5.9% in H1 2017, as the economy recovers from the last nine months of disruptions
Economy will grow 7% despite lower GDP growth in Q1: T V Mohandas Pai
Former Infosys CFO T V Mohandas Pai on Wednesday shared optimism with Finance Minister Arun Jaitley's remarks that the economy would grow at seven per cent, despite lower GDP growth in Q1, 'due to pre-GST destocking of goods.'
"I share the optimism (of Jaitley's remarks that the Indian economy will grow seven per cent, inspite of lower GDP growth in Q1. Q1 was impacted by GST destocking," he told PTI.
Pai, who is now Managing Director of Aarin Capital, said India has seen a positive GST impact in the first month of the second quarter. READ MORE
1:28 PM Buzzing Stock
Shares of IRB Infrastructure Developers rose 3% intraday as the company has decided to sale of its special purpose vehicle to IRB InvIT Fund.
"The InvIT Committee of the company at its meeting held on August 31, has approved the proposed sale of IRB Pathankot Amritsar Toll Road (IPATRL) to the IRB InvIT Fund (Trust), at an enterprise value of Rs 1569.33 crore, as per company release.
European markets started slightly higher as investors geared up for more data releases, while taking note of the positive trading seen overseas.
The pan-European Stoxx 600 was 0.37% higher with every sector moving in positive territory.
Sentiment appears to have been boosted somewhat, following a positive close on Wall Street on Thursday, and a upbeat session from Asia.
Risk aversion halts surge in EMs
Risk aversion among global fund managers due to geopolitical tensions has applied brakes on the stellar run seen in the emerging markets (EMs) this year. Foreign funds pulled out over $4 billion from EMs, weighing on the performance of key markets such as India and South Korea. READ FULL REPORT
Ashok Leyland rose over 4% to Rs 112 on BSE after the company's total sales rose 25% to 13,634 units in August 2017 over August 2016.
CRISIL downgrades Union Bank, Corp Bank's tier I, II bonds
Ratings agency CRISIL has downgraded the rating on Union Bank of India and Corporation Bank’s tier I and II bonds. The asset quality and income profile and profitability of public sector lenders are expected to remain under pressure. READ REPORT
Kotak Securities on GDP
We believe growth has likely bottomed out in 1QFY18. We expect the economy to gradually show signs of recovery on the back of continued remonetization, expected restocking, easy financial conditions and improving rural demand from higher wages and good monsoons.
But there are enough lingering factors which may keep overall FY2018 outlook sober: (1) possibly lower general government expenditure growth, (2) GST-led transient disruptions, (3) sluggish urban wage growth, (4) lack of private sector investment growth amid excess slack and overleveraged corporate balance sheet and (5) relatively weak external sector dynamics.
We maintain our FY2018 real GVA growth estimate at 6.8% and maintain a watch on the extent of buoyancy across sectors in 2QFY18 for any downward revisions to our estimates
Wipro sets share buyback price
Wipro has announced its buyback plan at Rs 320 a share. The company said it would buyback up to 343.75 million fully paid-up equity shares representing 7.06 per cent of the total paid-up equity share capital at a price of Rs 320 totalling up to Rs 11000 crore. READ MORE
UBS on Indian economy
We are revising down our forecasts for India's GDP growth to 6.6% YoY and 7.4% YoY in FY18 and FY19, respectively (vs. our earlier estimates of 7.2% and 7.7%). We expect growth to pick up in the coming quarters as economic activity normalises post GST implementation.
That said, we continue to see a lopsided growth recovery in India largely led by consumption as exports stabilise. We do not expect an investment cycle recovery led by the private corporate sector before FY19, as capacity utilization in key industries is currently at a multi-year low.
11:52 AM R Seshasayee issues statement against Murthy
Rebutting allegations made by Infosys co-founder N R Narayana Murthy, former company chairman R Seshasayee in a statement on Friday said he could not understand the reason behind the persistent vendetta against him.
In his statement, Seshasayee said it was patently offensive to quote unnamed whistle blowers, adding that he had always been candid and truthful in his communications about Infosys.
A disappointing growth story
The gross domestic product (GDP) growth number for April-June quarter of FY18 comes in as a disappointment, with a low of 5.7% being recorded against expectations of growth in the region of 6.5%. Curiously, some of the key reforms that have been implemented by the government in the last 9 months or so have left their shadows on this performance. READ FULL ANALYSIS
11:17 AM Auto stocks trade higher
Auto stocks were buzzing in trade with the Nifty Auto index gaining 1% against a marginal 0.4% rise on the benchmark Nifty50 index after two auto majors Maruti Suzuki and Bajaj Auto reported robust sales in August. READ MORE
11:03 AM Markets check
At 11:00 am, the Sensex was trading at 31,868, up 138 points, while the broader Nifty50 was ruling at 9,959, up 41 points.
Morgan Stanley on GDP data
GDP growth decelerated to 5.7% YoY in June 2017, a downside surprise to us and consensus. The primary and manufacturing sectors were the key drags, along with net external demand.
We continue to anticipate further acceleration in growth in the coming quarters and maintain our constructive view on the macro outlook. The economy has been affected by the idiosyncratic factors of the currency replacement program and implementation of GST, but these events are now in the rear view mirror.
Moreover, despite the impact of GST-related destocking on production, underlying demand has remained strong, as evident in the robust growth in discretionary consumption items such as two-wheeler sales.
The impact from GST should be transitory once the one-time adjustment to the new tax regime has been made. Hence, as the impact of these factors wears off, underlying economic growth should recover. The key risks to the outlook are the impact of weaker monsoon on agricultural output; the pace of NPL resolution, which would affect credit growth; and private capex and global trade conditions.
Bajaj Auto gained 3% to Rs 2887 after the total sales of the auto major jumped 3% to 335,031 units in August 2017 compared to 325,347 units reported in the same month of last year. Total sales included domestic sales of 200,659 units and exports of 134,372 units in August 2017.
Nikkei PMI for August
Up from July’s 101-month low of 47.9 to 51.2 in August, the Nikkei India Manufacturing Purchasing Managers’ Index signalled a renewed improvement in the health of the sector. The upturn reflected resumed growth of new orders, production and employment.
RBI warns govt on farm loan waivers
Terming farm loan waivers a "quick-fix", the RBI again voiced its concern, saying they will lead to a lasting adverse impact on farm productivity. States including Uttar Pradesh and Maharashtra have announced farm loan waivers adding up to Rs 1.3 trillion or 0.8 per cent of GDP this fiscal. READ FULL REPORT HERE
GDP forecast (Souce: CARE Ratings)
We expect growth for the year to be between 7.1-7.3% as against 7.6-7.8% earlier. This growth is premised on acceleration in the next three quarters
There was significantly lower open interest rolled over to the next series, along with incremental short index futures positioning from FIIs. Nifty ended August series at 9,918 levels, snapping the winning streak of seven consecutive positive expiry gains, recording a loss of ~1.06% on (expiry-on-expiry) eoe basis. Private Banks showed discernible signs of fatigue, as was evident from Bank Nifty's under-performance which lost 2.49% eoe.
Bank of America-Merrill Lynch (BofA-ML) on GDP data
We grow more confident of our December 6 25 basis point (bps) RBI rate cut call after lower-than-expected June quarter GVA growth of 5.6% (vs a still-anemic 6.2% consensus, 6.7% BAMLe) in new series and about 5% in old series. We cut our FY18 GVA growth forecast to 6.9% from 7.2% in new series and 5.7% from 6% in old series, well below our 7% old GDP potential.
Although inflation is turning up to 3.1% in August on rising tomato and onion prices and 4.6-4.9% in 1H18, it is still well within the RBI's 2-6% inflation target. Meanwhile, investment continued to slip to 27.5% of GDP in June 2017 from 29.2% in June 2016 with high lending rates curtailing demand and sustaining excess capacity. This supports our standing call that investors play consumption over investment
Emkay Global on GDP data
We expect gradual recovery in H2FY18 on the back of higher government spending, continued remonetisation and stabilizing GST related dislocations. Investment activities are likely to remain muted in Q2-Q3FY18, as re-pricing of government contracts due to GST might lead to lower new order activity. Government revenue expenditure has been the primary growth driver in FY17; trend is likely to continue in FY18 as well
10:16 AM New kid on the block
Shares of Aditya Birla Capital, the newly formed financial services company of the Aditya Birla Group, got listed at Rs 250 on NSE and were trading 5% lower over its listing price. READ FULL REPORT
Kumar Mangalam Birla, chairman of Aditya Birla Group
Nomura on GDP data
We see three insights. (1) Cash-intensive sectors have rebounded with remonetisation. (2) The pace of recovery was dampened by GST-related challenges in Q2, particularly for manufacturing. (3) The adverse impact of lower food prices on rural incomes is weighing on growth (agriculture value addition and rural consumption).
Overall, the data suggest that the growth profile remains uneven with still lacklustre industry/investment demand but steady services/consumption demand. Even as headline GDP data have disappointed, the turnaround in private services suggests that the growth cycle will head higher once the GST effects fade.
Looking ahead, the key question is how soon the economy will recover from the GST-led disruptions. While both the manufacturing and services PMI contracted in July, the future output index remained elevated. Nomura’s Composite Leading Index for India is also signaling a growth recovery in the coming quarters
9:59 AM Sectoral trend
All but two sectors were trading with gains
JP Associates up 3% on plans to raise Rs 2,000 crore
Debt-ridden Jaiprakash Associates gained over 3% to Rs 24 after the company said its proposed sale of entire 74% stake in Bhilai Jaypee Cement for an enterprise value of Rs 1,450 crore is expected to be concluded by year-end and plans to raise up to Rs2,000 crore through sale of securities.
Nifty's earnings growth to take off from September quarter
Expect Nifty earnings growth to move to double digits from the September 2017 quarter onwards, foreign brokerage CLSA has said. The brokerage said the macroeconomic environment is improving as “disruptive forces” such as demonetisation, goods and services tax (GST) and bad loan recognition are fading. READ DETAILS HERE
9:30 AM DRL top Sensex gainer
Dr Reddy's Laboratories rallied over 7% to Rs 2167 after the drugmaker reached a settlement with nasdaq-listed Vivus Inc over a long-pending patent litigation related to weight management capsule Qsymia.
9:24 AM Top Sensex gainers and losers
The BSE Midcap and the BSE Smallcap indices outperformed to gain 0.4% each.
9:19 AM Markets at open
At 9:18 am, the Sensex was trading at 31,723, down 6 points, while the broader Nifty50 was ruling at 9,913, down 4 points.
GDP growth hits 3-year low
Economic growth plunged to 5.7 per cent in April-June of the current financial year (FY18), the lowest in the three-year rule of the Modi government due to demonetisation and destocking by companies following pre-goods and services tax (GST) jitters.
Gross value-added (GVA) grew by 5.6 per cent in April-June, the same rate as in January-March, according to the data released by the Central Statistics Office. READ FULL REPORT
The Sensex was trading at 31,769, up 38 points, while the broader Nifty50 was ruling at 9,937, up 19 points in pre-open trade.
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Devangshu Datta on Bank Nifty
Chandan Taparia of Motilal Oswal Securities suggests a 'buy' on Maruti Suzuki, Escorts and LIC Housing Finance. CLICK HERE FOR DETAILS
Rollovers and OI in Nifty lowest in CY 2017: Angel Broking
It was indeed a historical series for our market as the benchmark index registered a new lifetime high during initial part of August series. However, selling got attracted thereafter, which lead market correcting towards 9,700 mark; followed by a range-bound move for the later part of the series. August series had begun with lowest open interest in calendar year 2017, gradually we saw good amount of open interest addition, out of which majority of the positions formed were on short side.
On options front, 10,000 calls of September series has highest OI, suggesting strong hurdle placed near 9,950-10,000 levels. While, looking at the open interest concentration in puts, 9,700 seems to act as a base for September series as well.
Rollovers to September series
Data showed market-wide rollover of positions stood at 78%, in line with the 78% average rollover seen in last three series. Nifty rollovers stood at 58%, which was far less than the average rollover of 72% seen in last three series.
8:56 AM Asian markets
Asian markets were trading higher. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%. Australian shares added 0.15%, while South Korea’s KOSPI gave back earlier gains to dip 0.2%. Japan’s Nikkei climbed 0.2%.
Chinese shares gained after the private Caixin manufacturing purchasing managers index showed the country’s August manufacturing activity expanded at the fastest pace in six months. Shanghai was up 0.4% and Hong Kong’s Hang Seng rose 0.3%.
8:55 AM Wall Street update
Wall Street shares closed higher overnight as investors responded to strong economic data and drew some cautious hope from the Trump administration’s latest promises for long-awaited details of a tax reform plan.
The Dow Jones Industrial Average rose 59.92 points, or 0.27% to 21,952, while the S&P500 index gained 13.94 points, or 0.57% to 2,471 and the Nasdaq Composite 60.35 points, or 0.95% to 6,428.
At 8:50 am, SGX Nifty, Nifty futures being traded on Singapore Stock Exchange was trading at 9,940, up 2 points or 0.02%.
8:51 AM Good Morning!
Welcome to Business Standard's market liveblog.
First Published: Fri, September 01 2017. 15:31 IST