MARKET WRAP: Sensex tanks 540 pts in broad-based sell-off, India VIX up 5%
All that happened in the markets today
 "Markets")
In the broader market, the S&P BSE MidCap index tumbled 1.77 per cent while the S&P BSE SmallCap index fell 0.88 per cent.
9:10 AM
Commodity Heatmap
9:08 AM
NEWS ALERT :: Alembic Pharma gets US FDA nod for Timolol Maleate Ophthalmic Gel
>> It is used to treat increased pressure inside the eye
9:07 AM
Top gainers and losers on the S&P BSE Sensex at Pre-open
9:06 AM
Markets at Pre-open
9:04 AM
Markets at Pre-open
9:00 AM
BROKERAGE VIEW :: MOFSL on Tech Mahindra
CMP: Rs 848 | TP: Rs 940 (+11%) | Reco: Neutral
>> TechM’s high exposure to Communications vertical remains a potential opportunity as the broader 5G rollout can lead to a new spending cycle in the space. But, the segment continues to deliver tepid growth (flat growth in 2QFY21), which has resulted in overall growth being stuck in single digits.
>> Also, while the company has delivered robust improvement in EBITDA margin, it has maintained the 15% guidance band (although with upside bias). In our view, there is limited room for EBITDA margin expansion (v/s FY21 guidance) as the company needs to invest back into the business (utilization, employee wage
>> We expect TechM to deliver single-digit growth in FY22 (unlike double-digit growth from its peers), which would lead to a lower P/E multiple. Hence, we value the stock at 20x FY22E EPS, at 25% discount to our target P/E for TCS. Remain Neutral.
>> TechM’s high exposure to Communications vertical remains a potential opportunity as the broader 5G rollout can lead to a new spending cycle in the space. But, the segment continues to deliver tepid growth (flat growth in 2QFY21), which has resulted in overall growth being stuck in single digits.
>> Also, while the company has delivered robust improvement in EBITDA margin, it has maintained the 15% guidance band (although with upside bias). In our view, there is limited room for EBITDA margin expansion (v/s FY21 guidance) as the company needs to invest back into the business (utilization, employee wage
hikes, etc.) after keeping a tight leash on them during 1HFY21.
>> We expect TechM to deliver single-digit growth in FY22 (unlike double-digit growth from its peers), which would lead to a lower P/E multiple. Hence, we value the stock at 20x FY22E EPS, at 25% discount to our target P/E for TCS. Remain Neutral.
8:58 AM
BROKERAGE VIEW :: MOFSL on Nestle
CMP: Rs 15,863 | TP: Rs 16,440 (+4%) | Reco: Neutral
>> Despite the good results, there is a 3-4% reduction in erstwhile EPS forecasts for the next two years. This is attributable to the incremental capex announced, which has led to higher depreciation forecasts and lower other income forecasts.
>> The capex (INR26b over the next 3–4 years) would boost longer term growth prospects. However, it also signifies an end to the sweet spot that the company enjoyed until CY19, when it was able to take advantage of erstwhile significantly underutilized capacity. It benefited particularly after the resumption of strong sales growth, driven by a change in leadership post the Maggi crisis in 2015. Gross FATR increased to 3.4x in CY19 from 1.9x in CY14 (the year before the Maggi crisis). Similarly, Net FATR increased to 5.1x from 2.8x over this period. Sales/EBITDA grew at a 10.6%/12.5% CAGR over CY16 (the year after the Maggi crisis) to CY19. Meanwhile, PBT grew 15.8% as depreciation actually reduced and corporate tax cuts meant PAT was even better at 18.7% CAGR during this period.
>> The longer term narrative for NEST’s topline and earnings growth remains extremely attractive. Not only is the successful implementation of its growth strategy in recent years a positive, but the Packaged Foods segment in India also offers immense growth opportunities. This is particularly true for a company with a strong pedigree and distribution strength. In the near term, the stock offers better resilience at the top line v/s peers owing to the nature of its portfolio and its superior efficiency.
>> However, current valuations of 64.9x CY21E EPS and 55.9x CY22E EPS appear to completely factor in upside for the next year. We value the company at 60xSep’22E EPS to arrive at TP of INR16,440. Maintain Neutral.
>> Despite the good results, there is a 3-4% reduction in erstwhile EPS forecasts for the next two years. This is attributable to the incremental capex announced, which has led to higher depreciation forecasts and lower other income forecasts.
>> The capex (INR26b over the next 3–4 years) would boost longer term growth prospects. However, it also signifies an end to the sweet spot that the company enjoyed until CY19, when it was able to take advantage of erstwhile significantly underutilized capacity. It benefited particularly after the resumption of strong sales growth, driven by a change in leadership post the Maggi crisis in 2015. Gross FATR increased to 3.4x in CY19 from 1.9x in CY14 (the year before the Maggi crisis). Similarly, Net FATR increased to 5.1x from 2.8x over this period. Sales/EBITDA grew at a 10.6%/12.5% CAGR over CY16 (the year after the Maggi crisis) to CY19. Meanwhile, PBT grew 15.8% as depreciation actually reduced and corporate tax cuts meant PAT was even better at 18.7% CAGR during this period.
>> The longer term narrative for NEST’s topline and earnings growth remains extremely attractive. Not only is the successful implementation of its growth strategy in recent years a positive, but the Packaged Foods segment in India also offers immense growth opportunities. This is particularly true for a company with a strong pedigree and distribution strength. In the near term, the stock offers better resilience at the top line v/s peers owing to the nature of its portfolio and its superior efficiency.
>> However, current valuations of 64.9x CY21E EPS and 55.9x CY22E EPS appear to completely factor in upside for the next year. We value the company at 60xSep’22E EPS to arrive at TP of INR16,440. Maintain Neutral.
8:53 AM
BROKERAGE VIEW :: MOFSL on JSW Steel
CMP: Rs 321 | TP: Rs 372 (+16%) | Reco: Buy
>> JSW Steel (JSTL)’s 2QFY21 results were impressive as consol EBITDA grew 85% YoY to INR42.5b, beating our estimates by 24%. The beat was led by lower costs, leading to standalone EBITDA/t of INR10,136 (est. INR8,754).
>> We expect 3QFY21 margins to be even stronger as higher steel prices (HRC price currently is INR4,000/t higher than 2Q) and upward revision in fixed price contracts should lead to higher realization. We raise our FY21E/FY22E EBITDA by 25%/5% to factor in higher realization. Maintain Buy
>> JSW Steel (JSTL)’s 2QFY21 results were impressive as consol EBITDA grew 85% YoY to INR42.5b, beating our estimates by 24%. The beat was led by lower costs, leading to standalone EBITDA/t of INR10,136 (est. INR8,754).
>> We expect 3QFY21 margins to be even stronger as higher steel prices (HRC price currently is INR4,000/t higher than 2Q) and upward revision in fixed price contracts should lead to higher realization. We raise our FY21E/FY22E EBITDA by 25%/5% to factor in higher realization. Maintain Buy
8:50 AM
Stocks in focus today
Kotak Mahindra Bank, IndusInd Bank: According to a Bloomberg report, Kotak Mahindra Bank is exploring a takeover of smaller rival IndusInd Bank, a move that would create the nation’s eighth-largest financial firm by assets.
Nestle: Beating street estimates, fast-moving consumer goods (FMGC) major Nestle India reported a 12.4 per cent growth in its profit before tax (PBT) for the July-September quarter. The Gurgaon-headquartered firm posted Rs 787 crore PBT, compared to Rs 700 crore in the corresponding quarter last year.
JSW Steel: Sajjan Jindal-led JSW Steel reported a consolidated net profit of Rs 1,595 crore in the September quarter, down 37 per cent from same period last year as tax expenses ate into the profits despite higher sales. READ MORE
8:48 AM
'Nifty needs to hold 11,800 for further upside'
As per weekly option data, handful of put writing on lower strikes ranging from 11,700 to 11,900 is witnessed which shows Nifty would face firm support in the sub 11,800 zone. The level of 11,800 will act as support as maximum put open interest (OI) is placed here. We can witness short-covering move along with addition of fresh position only if Nifty breaches 12,000. Therefore, traders should try to create long position keeping close eye on 11,800. READ MORE
8:47 AM
Stock recommendation by Prabhudas Lilladher
BUY MOTHERSON SUMI | CMP: Rs 110.45 | Target: Rs 130-135 | Stop Loss: Rs 100
The stock has formed a decent base near 102 levels, almost making a double bottom pattern, and has currently given a spurt to indicate strength. The improved bias suggests for further upside movement in the coming days. The RSI has also indicated a trend reversal to signal a buy and with the chart looking attractive. We suggest to buy and accumulate the stock for an upside target of Rs 130-135, keeping the stop loss near Rs 100 levels. READ MORE
8:43 AM
FII/FPI & DII trading activity on NSE, BSE and MSEI
8:42 AM
Rupee check
Source: Reuters
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First Published: Oct 26 2020 | 7:55 AM IST
