Nifty rejig announcement: Divi's Lab hits all-time high, SBI Life gains 4%

Shares of Divi's Laboratories and SBI Life Insurance rallied on Friday, a day after the NSE Indices, a subsidiary of the National Stock Exchange (NSE) announced that both the stocks will enter the benchmark index Nifty50 from September 25, 2020. 

The stock of Divi's Laboratories hit an all-time high of Rs 3,331 in the early trade, up nearly 4.5 per cent against Thursday's close of Rs 3,189.30 with the market capitalisation (m-cap) nearing Rs 90,000 crore.

At 09:41 AM, Divi's Laboratories was trading over 4 per cent higher at Rs 3,327.45 on the NSE. Meanwhile, SBI Life Insurance was quoting 3.5 per cent higher at Rs 882.65 levels, before hitting a high of Rs 889.80. 

On the other hand, ZEE Entertainment Enterprises (ZEEL) was trading at Rs 200, up 0.4 per cent while Bharti Infratel was flat at Rs 199.65, up 0.2 per cent. Both these stocks will be dropped from the Nifty50 index, NSE Indices said in a statement. READ MORE

For the quarter ended June 2020, Divi's Lab reported a net profit of Rs 492.06 crore on account of robust sales. In comparison, the company had logged a profit of Rs 272.44 crore in the year-ago same period, Divi's Laboratories said in a filing to BSE. Total income stood at Rs 1,747.80 crore during the quarter under review as against Rs 1,193.20 crore in April-June 2019-20, it added.
 

"We believe that the API sector is in strong structural tailwinds as most global companies look to cut their dependence on China and Divi's is best positioned to benefit from this, given its strong execution, client relationships, low-cost India centric manufacturing base, astute product selection and fungibility of manufacturing facilities. Further, a large part of capex (Rs 18bn by H2FY21) is done and should drive strong growth over the next few years," analysts at Emkay Global Financial Services said in a result review note issued on August 8. The brokerage has a "BUY" rating on the stock with the target price of Rs 3,500. 

SBI Life, on the other hand, reported a 5 per cent increase in net profit at Rs 390 crore for the first quarter of the current fiscal. The company's gross written premium during Q1 FY21 rose by 14 per cent to Rs 7,640 crore as against Rs 6,690 crore in the same quarter of the preceding fiscal. READ MORE

"We believe that incrementally competitive protection pricing has the potential to boost margins through product mix. This adds 100bps on a sustainable basis to our earlier estimated ‘steady-state return on embedded value (RoEV)' of 18%. While persistency ratios have held up in ULIPs so far, it remains a key parameter to watch out for both operating leverage and embedded value accretion," Edelweiss Securities had said in a result review note.

It has a "BUY" rating on the stock with the target price of Rs 1,010.