Yogesh Mehta,VP- Retail Research, Motilal Oswal Securities
The Nifty showed fireworks a week before Diwali and cheered the street by touching a new life high at 10,192, crossing its earlier high of 10,179. The strong rally was pushed by buoyant global markets. Market opened with a mild gap-up on better CPI number and strong IIP announced on Thursday, rallied further with strong Q2 results by TCS which gained over 2%, Nifty settled at record high closing of 10,164 gaining 0.66% Bharti Airtel gained the most by 7.6% on Tata Teleservices acquisition announcement. Major gainers were Tata steel (2.7%), Ultratech (2.2%), HDFC Bank (1.7%), and ICICI Bank (1.36%).
3:54 PM Sensex heatmap at close
The market breadth, indicating the overall health of the market, turned negative. On BSE, 1,426 shares declined and 1,300 shares rose. A total of 128 shares remained unchanged.
3:46 PM Broader markets underperform
Broader markets underperformed with the BSE Smallcap adding just 0.1%, while the BSE Midcap remained little changed.
Markets at close
The Nifty50 settled at its record closing high of 10,167, up 71 points, surpassing its previous closing high of 10,153 hit on September 18. Sensex, meanwhile, closed at 32,432, up 250 points, 75 points away from its closing high of 32575 hit on August 1.
Market commentary by VK Sharma, Head Private Client Group and Capital Market Strategy at HDFC Securities
The Nifty scaling a new life time high is no news as we are only following the American, European and other Asian markets. The corporate results, globally are going to be better. The minutes of the last Fed meeting were also dovish. With domestic investors dipping their toes in the equity markets at an accelerated pace , the process of making new highs in the markets is likely to continue beyond the immediate highs.
While the Nifty has made a new high in September , the Sensex has not. So the markets are waiting for the Sensex to cross the new highs made in August. With the festive mood in the air, markets are likely to do well in the October month, which has historically been the weakest
BSE Metal index hits 6-year high; Tata Steel, Jindal Steel hit 52-wk highs
Shares of metal companies were in focus with the S&P BSE Metal index hitting six-year high on expectations of strong earnings growth in July-September quarter (Q2FY18). Tata Steel, Jindal Steel & Power (JSPL) and National Aluminium hit their respective fresh 52-week highs, while Hindalco touched a new high on the BSE in intra-day trade on Friday. READ THE FULL STORY HERE
JM Financial on Bajaj Corp
Bajaj Corp reported another weak result with a double-digit decline in operating profit for the second consecutive quarter. However, its flagship Bajaj Almond Drops’ (BAD) volume trajectory recovered posting a growth of 6.5% relative to 4-7% decline seen over past 3 quarters - a key positive.
The quarter’s volume growth was marginally ahead of retail offtakes (+5%) - this, to us, indicates that recovery is led by underlying demand and not merely restocking; sales realisation, though, fell 2% which, as per our workings, is attributable to higher tax incidence under GST. Weakness on earnings side was surprisingly led by higher A&P and Staff costs while the expansion in GPM was aided by tax credits now available on inputs.
The company continued to grow its market share and outperform the LHO category growth. We expect volume growth to recover to double-digit level in the latter half of FY18, aided in part by a favourable comparator – this should aid stock performance especially given a steep 45%+ discount to the sector’s 12M forward multiple (ex-ITC).
We recommend 'buy' on the stock with a target price of Rs 475.
Oil prices firmed as strong Chinese oil import data and turmoil in the Middle East boosted bulls in a market that has already shown signs of rebalancing after years of excess.
Brent was at $57.23, up 98 cents. US West Texas Intermediate (WTI) crude was at $51.41 per barrel, up 81 cents from its last settlement. The contracts were on track for weekly gains of more than 2% and 4% respectively.
European shares rose to their highest level in nearly four months, helped by some well-received earnings updates. The pan-European STOXX600 rose 0.3% and was set for its fifth straight week of gains as were world stocks.
Germany’s DAX index was flat, just below the fresh all-time high hit in the previous session, while Britain’s FTSE eased back 0.4 percent after a record close on Thursday.
Merger a win-win deal for Bharti Airtel, Tata Tele
On the face of it, one can call it a sweet deal for both the parties. N Chandra always wanted to get rid of the unviable mobile telephony business and that will allow him to concentrate the Tata Group’s capital in places where it really matters. For Bharti Airtel, it gives them access to a captive client base, which is likely to increase its overall client base by 12-14 per cent without taking on too much of additional debt. But, first, let's look at the contours of the deal. READ FULL ANALYSIS
2:56 PM Sectoral trend in last leg of trade
Stock Reco: Manappuram Finance
While gold loans comprise the major portion of assets under management (AUM) at 81% for FY17, the company has re-calibrated its products from traditional long term loans to several shorter term lending products to increase cushion from fluctuation in gold prices and improve growth.
While FY17 had its own challenges in terms of demonetization led decline in disbursements, non-recoveries of loans resulting in higher NPAs and overall weakness in profitability, MFL has maintained healthy growth in AUM and profitability along with a limited impact on NPAs.
Going ahead, the overall AUM is expected to witness a 24% growth with healthy return ratios of 5.8% RoA and 25.9% RoE by FY19E. Considering the robust financial growth expected from re-alignment of business strategies by increasing presence in high-growth segments, we are positive on the stock of MFL which trades at 1.8x its FY19E ABV. We initiate coverage on MFL with a Buy rating and a target price of Rs140, valuing the stock at 2.4x its FY19E ABV.
(Source: Centrum Wealth Research)
Will the RBI cut rates now?
September’s CPI reading reaffirmed our position that the future inflation trajectory could be lower than RBI’s projected path. While IIP data for August signalled a revival in industrial activity post the GST shock in July, it is too early to read this as a sustainable trend. Overall, we expect the central bank to be surprised on the downside on both growth and inflation fronts this year. This should open up room for one last rate cut by the end of FY18. For markets, since investors remain divided on future monetary policy action, lower inflation readings are unlikely to translate into substantial downward movement in yields. Because of a rise in interest rates globally and uncertainty surrounding domestic rate cycle, the benchmark yield could settle at current levels and continue to trade in the range of 6.6% to 6.8%.
(Source: Abheek Barua, chief economist, HDFC Bank)
Cyient hits 52-week high post Q2
Cyient rallied 9% to Rs 569 on the BSE in intra-day trade after the company said it expect to deliver a double digit earnings growth in the financial year 2017-18 (FY18). READ MORE
2:25 PM Market watch
Review: Samvat 2073
India continues to remain a popular investment destination and is an overweight in most global portfolios. However, over the past one year, it has underperformed other Asian indices like Hang Seng (up 24%) and Nikkei (up 19%). Indian Equity markets are waiting for revival of corporate earnings after a very flattish performance over the last 4-5 years. Sub-par performance on corporate earnings front coupled with rally in equity markets have taken the valuation to almost all time highs in India. There is a fundamental transition underway in the economy with several first time steps taken during the last one year.
On the macro front, economic growth momentum has been modest with India hitting relatively low GDP growth of 5.7% in 1QFY18. India’s reform momentum has been ongoing at a fairly brisk pace, in absolute and relative terms. Samvat 2073 saw the introduction of GST, one of the biggest tax reforms in the post-independent India. Introduction of GST has been disruptive for the corporate earnings in the short term due to de-stocking in the first quarter of current fiscal.
(Source: Reliance Securities)
Nifty at new high: Market outlook for Samvat 2074 from Kotak Securities
All-in-all, we expect returns in Samvat 2074 to moderate in view of weak near term earnings growth and higher than average valuations. The upmove in Indian equities have been supported by strong macro-economic factors (GDP growth, reducing Current account deficit and benign inflation etc). However, there has be some deterioration on these counts in recent times. Inflation concerns have resurfaced as reflected by the RBI guv’s take on monetary policy stance. Plus, earnings growth in FY18 is likely to be subdued.
In our view, further upsides from the current levels would be contingent on revival of earnings growth and resolution of stressed banking assets. Having said that, we believe, there would be continued investor interest in mid and small caps.
2:16 PM Markets check
At 2:15 pm, the S&P BSE Sensex was trading at 32,473, up 291 points, while the broader Nifty50 was ruling at 10,177, up 81 points.
Market outlook: HDFC Securities
Our markets seem fairly valued at this point of time, given the delay in revival of corporate earnings, which may happen only after one-tw quarters. Liquidity withdrawal and its strong signs by US, Japan and lately UK and Eurozone could create jitters among the equity investors who have entered into arbitrage trade. Flows follow returns, not the other way around. Hence, we will have to track the progress of the flows when markets don’t provide any meaningful return over 3-4 quarters.
Market outlook: Dinesh Thakkar, CMD, Angel Broking
Sensex is currently trading at 18.8x of its FY2019E earnings which is ~8% premium to its 10 year average PE of 17.4x. We believe that the Indian economy is primed for sustained growth momentum with strong macros and improving rural economy. As interest rates are likely to remain lower, equities will remain attractive asset class and domestic inflows will be supportive of liquidity and valuations. We continue our bottom-up stock picking approach and recommend stocks which will benefit from affordable housing scheme, consumption pick-up, banking, etc.
2:05 PM Banking stocks on a roll
1:54 PM Advance-decline ratio
There were 31 advances against 19 declines on the Nifty50.
Nifty hits record high
The Nifty50 index hit fresh high of 10,179.25, surpassing its previous peak of 10178.95 touched on September 19, 2017.
RIL hits record high ahead of Q2
Reliance Industries hit record high for second day in a row ahead of its September quarter earnings due later in the day post market hours. WHAT BROKERAGES EXPECT FROM Q2
1:46 PM Market in late noon deals
General Insurance Corporation Of India - IPO fully subscribed on Day 3
Update at 01:20 pm: Overall 1.05x, Retail subscribed 0.33x, QIB 1.84x, NII 0.06x and Employee 0.65x
1:41 PM Reliance Securities on HDFC Bank
Despite adverse operating environment, HDFC Bank continued to deliver strong performance on business growth as well as operating fronts.
The Bank has delivered a healthy performance on business growth and operating front in 1QFY18. Despite a mere 6.1% YoY
growth in banking industry loan, its loan book grew by 23.4%YoY and 4.8% QoQ. This outperformance on loan growth front with a huge margin vs the industry is really commendable as it is the second largest bank in India in terms of loan book size.
We have revised our loan growth target to 20-21% from earlier estimate of 17-18% led by relatively higher loan growth over last two quarters.
As a result, we have upwardly revised our earnings estimates by 1.9% and 3.1% for FY18E & FY19E, respectively. We maintain our BUY recommendation on the stock with an upwardly revised Target Price of Rs 1,940 (from Rs 1,833 earlier) based on 4x FY19E Adjusted Book Value.
Gujarat Borosil zooms 61% in four days
Gujarat Borosil moved higher to its record high at Rs 135, up 18% in intra-day trade, extending its last three-day long gains on theBSE, after the company opened its new glass melting and production facility for 2mm fully tempered solar glass. READ MORE
Inflow in balanced MFs rises fourfold in first half of FY18
Balanced funds continue to remain the flavour of the season. Interest and inflow into balanced funds have continued to grow with the category seeing a fourfold jump in inflows in the first half of the current financial year. READ MORE DETAILS
12:53 PM Sectoral trend in noon deals
Brokerage views on Bharti Airtel - Tata Tele deal
Analysts say the development is positive for both players as it not only provides an easy exit to Tata's from the loss making telecom venture, Bharti Airtel too will gain subscribers in the process. READ FULL REPORT
HDFC Securities on IndusInd Bank
IIB has been a master in execution across planning cycles, despite weak macros. We derive confidence from the mgt’s ability to beat ambitious targets consistently across parameters. The bank is making all the right moves on either side of the B/S, to deliver best-in -class return ratios (1.8% over FY18-20E) for the foreseeable future.
The Q2 numbers further vindicate our positive stance, given healthy all-round credit growth (+24%), robust fee growth (+23%), stable NIMs and controlled asset quality (stable G/NNPA QoQ). An exposure of merely ~Rs 3.9bn to a/cs in RBI’s second list, and conservative provisioning (65%) for the same provide additional comfort.
Near-term outlook: Healthy growth, steady NIM, and immaculate asset quality is expected to keep the stock buoyant. Merger details will be keenly watched.
12:17 PM IPO watch: GIC Re
GIC subscription updates at12 noon on day 3: Subscribed: Overall 0.94x, Retail 0.27x, QIB 1.68x, NII 0.03x and Employee 0.60x
12:16 PM Markets check
At 12:15 pm, the S&P BSE Sensex was trading at 32,409, up 227 points, while the broader Nifty50 was ruling at 10,160, up 63 points.
HDFC Securities on Bharti Airtel
Bharti Airtel is set to acquire the wireless business of the Tata Group. Though the transaction is not significant from the financial point of view for Airtel, it bolsters its leadership position through acquisition of customers, spectrum & fiber and provides additional muscle to combat competition from Reliance Jio. We foresee the acquisition to be earnings accretive post integration besides improving its subscriber and revenue market share by 300-400 bps, narrowing the gap with Vodafone-Idea combined. We view the acquisition as positive.
PSBs recover from intraday lows
Shares of public sector banks (PSBs) erased their intra-day losses and recovered up to 5% in late morning deals on the National Stock Exchange (NSE).
Bank of India, Indian Overseas Bank, Central Bank of India, Bank of Baroda, Oriental Bank of Commerce and Punjab National Bank recovered in the range of 2% to 5% from their respective intraday lows. READ MORE
Risk of combined (centre and states) fiscal deficit (FD) widening in FY18
We see the risk of combined FD widening to 6.7% of GDP in FY18, from 6.5% of GDP in FY17. This compares with government’s budget estimate of 5.8% for FY18. We believe the central government will likely breach the FY18 FD target of 3.2% of GDP by ~0.5% of GDP on lower revenues collections (excise duty cuts, lower telecom collections, lower RBI dividend transfer etc) and higher expenditure (front loading of spending and possible stimulus to boost domestic demand). State governments are also trying to fund additional spending needs (including farm loan waivers, higher wages and salaries under the 7th pay commission awards, etc.), which are likely to put further pressure on their already stretched finances.
(Source: UBS report)
SIP inflows grow 50% in one year
Inflow into mutual funds (MFs) through systematic investment plans (SIPs) has hit another historic high in September. The sector collected Rs 5,516 crore during the month as the number of SIP accounts touched 16.6 million, compared with 13.5 million at the beginning of this financial year. READ DETAILED REPORT
11:06 AM Nifty nears record high: Top five stocks boosting the rally
TCS turns flat after gaining over 2%
Tata Consultancy Services, country’s largest software services firm, gained over 2% to Rs 2,605 in intraday trade on Friday after the company reported 2.16% year-on-year drop in net profit at Rs 6,446 crore, while revenue grew 4.3% to Rs 30,541 crore. READ MORE
How Tata Tele-Bharti Airtel deal was done in 5 days
The deal between Bharti group and Tata Teleservices is yet another example of how swiftly things can change in business. A collapsed deal was brought back to life in the last five days, people close to the transaction said. READ FULL REPORT
Merger to give Airtel more subscribers, Tata Tele an easy exit: Analysts
Analysts have given a thumbs-up to the Tata Teleservices – Bharti Airtel deal, as they feel the move provides an exit route to the already bleeding Tata-owned company. As on March 31, 2017, the combined debt of Tata Teleservices Limited (TTSL) and Tata Teleservices Maharashtra Limited (TTML) stood at Rs 34,089 crore, excluding deferred payment liabilities to the government for spectrum, according to a CRISIL report. READ FULL REPORT
10:13 AM Top Sensex gainers and losers
10:01 AM Markets at 10am
Sector watch: Telecom
As of July 2017, Bharti Airtel had holds a market share of 23.7% which represents a subscriber base of 281.3 million users. This is followed by Vodafone, Idea, Reliance Jio that hold respective market share of 17.7%, 16.3%, and 10.8% representing subscriber base of 210.5 million, 193.9 million and 128.5 million, respectively. Reliance Jio had launched its services in September 2016. The total wireless subscriber base stood at 1,186.79 million as on July 2017
(Source: CARE Ratings report)
Bharti Airtel, Tata Teleservices surge up to 10% on merger plan
Shares of telecom companies, Bharti Airtel and Tata Teleservices (Maharashtra), have rallied by up to 10% after Sunil Mittal - owned Bharti Airtel agreed to take over Tata Group’s mobile services business CLICK HERE FOR MORE
India Equity Strategy: Nomura
Bottom-up analysts' expectations suggest 9.2% y-y growth in sales and 7.6% y-y growth in EBITDA for our core universe. In this report, we present sector-wise and company-wise details on our earnings expectations for 2QFY18F. Ex oil and gas and financials, we project revenue growth of 9.2% y-y, EBITDA growth of 7.6% y-y and net profit growth of 0.9% y-y.
For most of the sectors, y-y growth has improved on a sequential basis. Autos and the Consumer sectors are the biggest drivers of earnings for our coverage universe. Pharmaceuticals continue to be the biggest laggard, though we expect some improvement q-q. For corporate banks, we expect slippages to come down significantly, though provisioning will likely remain high as banks provide for National Company Law Tribunal cases. The core PPOP of corporate banks has been weak, with low loan growth and NIM pressure. Core PPOP growth is unlikely to surprise positively in this quarter
9:24 AM Sector watch at 9:20am
9:19 AM Market snapshot at open
Tech view on the markets
A strong corrective move on Wednesday was followed by a positive opening in our market. As expected, index corrected sharply in the initial hour. But, a strong buying at lower levels pulled the index higher and in fact, the accelerated momentum pushed the index to retest the 10100 mark.
Yesterday's buying interest in last couple of hours has certainly surprised us. It has become very difficult to predict movement in the index and hence, we would rather look to focus on individual stocks. For the coming session, 10135 - 10178 are the levels to watch out for and on the downside, 10035 - 9980 would be seen as immediate support levels.
(Source: Angel Broking)
9:14 AM Nifty outlook by Angel Broking
It has become very difficult to predict movement in the index and hence, we would rather look to focus on individual stocks. For the coming session, 10135 - 10178 are the levels to watch out for and on the downside, 10035 -9980 would be seen as immediate support levels.
COMMENT: Christopher Wood, managing director and equity strategist at CLSA
GREED & fear’s base case for now is that the Fed will reverse course sooner rather than later. It is still assumed for now that core inflation in America has already peaked in this cycle. If this is indeed the case, then the Fed is likely to reconsider its outlook if inflation continues to come in below expectations during 1H18, most particularly if the average hourly earnings growth slows down again.
If the Fed chairmanship is taken over by someone prioritising “normalisation” over “data dependency”, and prioritising targeting inflated asset prices over core CPI or PCE inflation, then the immediate consequences for asset markets will be much more negative. But for now the base case is that the Fed will remain in traditional “inflationary targeting” mode.
(Source: Excerpted from Wood's weekly newsletter, GREED & fear)
Stock view: Zensar Technologies
We expect the Indian rupee to come under pressures in the short-term. We do believe that the US ultimately may not opt for stringent protectionism for the Indian IT exports considering the political realignment happening at the global level. We also expect the momentum in the consolidation of mid-sized IT companies to continue as the large IT companies are unlikely to grow their revenue base in double digits even in rupee terms. Hence, we consider betting on beaten-down mid-sized IT companies like Zensar could be an attractive opportunity. Hence, we initiate our BUY on the stock with a target price of Rs.900, which is 13.8x its FY2019E EPS of Rs 65
(Source: Equinomics Research)
RIL: Focus will be on Jio numbers in September quarter
Reliance Industries’ (RIL’s) financials for the quarter-ended September (Q2) to be announced on Friday are being looked at with great expectations. While the Street has high hopes from the core refining business, given the benchmark Singapore gross refining margins (GRMs) hitting a high recently, the numbers of telecom venture Jio would be closely monitored CLICK HERE FOR THE FULL STORY
Devangshu Datta on Nifty, Bank Nifty, Hindustan Unilever, Infosys, Sun Pharma
BUY GULSHAN POLY
CMP: Rs 85.85
TARGET: Rs 98
STOP LOSS: Rs 81
CLICK HERE FOR MORE TECHNICAL CALLS
Corpporate news nugget
· Tata and Bharti Airtel to combine consumer telecom business in cash-free, debt-free deal
· Sun Pharma to increase shareholding in Ranbaxy Malaysia to 79.5% from 71.2%
· DHFL loan to Manpreet Estates under tax scan
· Indiabulls Housing Finance's U.K. subsidiary OakNorth Bank gets £154mn investment
· Piramal Enterprises approves raising Rs. 2,000cr through a rights issue
· Shriram EPC: Wins Rs. 349cr of multiple orders
How Tata Tele-Bharti Airtel deal was done in 5 days
The deal between Bharti group and Tata Teleservices is yet another example of how swiftly things can change in business. A collapsed deal was brought back to life in the last five days, people close to the transaction said.
The talks between the Tatas and Bharti had begun a few months ago but by the end of August the negotiations were not going anywhere. Sources in both companies indicated till the end of September that no deal was possible. Meanwhile, there were talks with other groups as well including Reliance Jio for a possible merger deal. That too didn’t work. The Tatas were now clearly looking at a closure of the telecom business and had begun sounding out customers and employees last month READ THE FULL STORY HERE
Merger to give Airtel more subscribers, Tata Tele an easy exit: Analysts
By running the show, Tata Teleservices would have continued to bleed on the financial front. The deal will ensure further losses are arrested, they say CLICK HERE FOR THE FULL STORY
ICRA on CPI data
The staggered impact on the housing index of the CPI, of the revision in HRA of central government employees, is likely to push up housing inflation further over the coming year. Moreover, the pass-through of the goods and services tax (GST) to final prices of various goods and services may not be complete. Overall, we expect the CPI inflation to cross 4.0% in the ongoing quarter and exceed 4.5% in March 2018
Emkay Global on macro data
Aug’17 IIP unexpectedly grew by 4.3% yoy, which was largely broad based, from a subdued growth of 0.9% in Jul’17. The divergence in the growth estimate was largely due to unexpected growth in capital goods and consumer non-durables sector. Inventory buildup on upcoming festival season and re-stocking post the GST roll-out might have shown sharp uptick in IIP growth which might continue in Sep’17 as well.
On the other hand, CPI remained stagnant at 3.3% in Sep’17, we were expecting the inflationary pressure to further buildup to 3.6%. Although, the headline CPI remained constant, the increase in inflationary pressure was broad based as indicated by the diffusion index. Core inflationary pressure has intensified due to impact of HRA implementation. Implementation of 7th pay commission by the states and PSU’s is likely to increase the CPI by another 100-150bps in 18-24 months. We maintain our view of hardening inflation outlook (4.2-4.5% with an upside bias) and RBI refraining from any further rate cuts.
Asian stocks held firm near a 10-year high on Friday thanks to expectations of brisk global growth. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1% having gained 3.4% so far this month. Japan's Nikkei was little changed.
Wall Street shares dipped slightly on Thursday, pulled down by a fall in AT&T after the telecoms company reported subscriber losses in its cable TV business.
But MSCI’s broadest gauge of the world stocks exchanges covering 47 markets hit another record high, extending its gains so far this year to 17%.
8:44 AM Singapore Nifty
At 8:40 am, SGX Nifty was trading at 10,127, up 1 point or 0.01%.
8:22 AM Good Morning!
Welcome to Business Standard's market liveblog.
First Published: Fri, October 13 2017. 15:34 IST