MARKET WRAP: Indices rally for 5th straight day, Sensex ends 187 pts higher

All that happened in the markets today

12:51 PM

BROKERAGE VIEW :: Edelweiss on IT sector

We estimate the top-5 Indian IT players—Infosys, TECHM, HCLT, TCS and Wipro—to report 3.7-7.5% QoQ revenue decline in Constant Currency in Q1FY21. A weakening GBP/ROW versus USD is likely to further negatively impact USD growth 50–80bps, in our view. We expect margins of the top-5 companies to decline 20-110bps QoQ despite the USD/INR benefit.

We believe Q1FY21 is the peak pain quarter as already lockdowns have been relaxed to a certain extent in India and abroad as well. While new deal wins will be challenging until economies open up completely, we believe Q2FY21 onwards revenue growth will stabilise and Q3/Q4 will probably be quarters of recovery and that too stronger than historical averages.  We will keep an eye on: i) demand commentary on new deal wins; ii) digital growth; and iii) commentary on cloud migration opportunity. Maintain ‘BUY’ on HCLT, Infosys, TECHM & TCS and ‘HOLD’ on Wipro

12:49 PM

BROKERAGE VIEW :: IIFL on gas utility companies

During online interactions with investors, DK Sarraf – Chairman PNGRB, shared his perspective on the need to introduce a common carrier (competition) in CGDs and also heard out investor concerns. Mr Sarraf plans to publish draft regulations in Jul-20 and believes all legal impediments are behind. Investors requested the PNGRB to focus more on infrastructure development vs introducing untimely competition in the sector.

We are less worried about the introduction of competition, as: 1) it is limited only to 10-20% of the network capacity, and CGDs will be compensated by open access tariffs; 2) competition typically gets introduced on a level playing field, to avoid cherry picking; 3) risk of competition forces incumbents to improve efficiency, for ensuring minimum revenue loss. Rather, we are concerned about the execution challenges and faster penetration of alternatives (e.g. EVs) that can derail the volume growth trajectory & compress valuation multiples. Any correction in CGD stocks − on news flow on open access etc − would be a good entry point.

12:49 PM

BROKERAGE VIEW :: IIFL on Persistent Systems

We upgrade Persistent Systems (PSYS) to BUY, with a 12-mth target price of Rs830, implying 27% potential upside. We believe the combination of improved revenue visibility, steady margin improvement over the next three years and attractive valuations makes it a compelling story. After years of underperformance, PSYS’ turnaround is firmly in place, driven by the new management whose services-focused and large deal-driven strategy is bearing fruit in the form of improved revenue visibility, even in these uncertain times. PSYS is trading at 10.6x FY22 P/E, at a 20% discount to mid-cap peers, offering 20% EPS Cagr over FY20-23ii. Net cash balance of Rs14.8bn (~30% of M-Cap) offers valuation support. PSYS is now one of our top mid-cap picks.

12:46 PM

Multiple risks may cap uptick in TVS Motor stock as Covid, crude weigh

The TVS Motor stock has gained about 33 per cent since its lows in mid-March on a better-than-expected operating performance in Q4FY20, rising dispatches and recovery in export markets. Some of the optimism is reflected in two-wheeler sales in June. Total two-wheeler sales at 191,000 units have now reached about 67 per cent of the year-ago levels. READ MORE

12:35 PM

United Breweries' outperformance unlikely to sustain in the near term

While there is little doubt that volume recovery would be challenging for the liquor segment, investors seem to be in favour of beer than whiskey if the stock performance of the two listed alcoholic beverage companies has anything to go by. The stock of United Breweries (UBL) has gained 4 per cent in the last one month versus 0.5 per cent rise in the stock of United Spirits (UNSL). READ MORE

12:23 PM

Bandhan Bank, Bajaj Auto, PVR: Trading strategies for news-driven stocks

Benchmark indices, S&P BSE Sensex and Nifty50, were trading flat in the intra-day session on Tuesday; however, a number of stocks were trading actively in the trade, owing to their respective business and corporate developments. For instance, Bajaj Finance rallied 4 per cent post its quarterly update while Bandhan Bank advanced over 5 per cent after the lender reported healthy loan and deposit growth in the April-June quarter on a yearly basis despite a nationwide Covid-19-induced lockdown. READ MORE

12:14 PM

Covid-19 hit Chinese economy on a slow path to recovery, says UBS

While two-thirds of respondents reported income decline and 62 per cent reduced consumption in the past three months, 61 per cent expected income to rise and 58 per cent expect consumption to increase in the next three months. For the next 12 months, 60 per cent of respondents expect salary to increase with an average increase of 4.7 per cent, the UBS report said. READ MORE

12:05 PM

Top losers on BSE at this hour

COMPANY	PRICE(rs)	CHG(%)
INDRAPRASTHA GAS	418.85	-5.11
IDBI BANK	50.45	-4.99
SUZLON ENERGY	5.33	-4.99
FUTURE RETAIL	123.30	-4.97
OMAXE	93.00	-4.96

11:51 AM

Hotel stocks gain as Maharashtra govt eases lockdown restrictions

Shares of companies engaged in hotels and restaurants business rallied by up to 20 per cent on the BSE on Tuesday after the Maharashtra government allowed hotels to reopen from Wednesday. Kamat Hotels (India) shares were locked in upper circuit of 20 per cent at Rs 35.03 on the BSE while Royal Orchid Hotels, Speciality Restaurants, Chalet Hotels, EIH Associated Hotels, and Indian Hotels were up by more than 6 per cent on the BSE. READ MORE

11:40 AM

Investors advised caution, shouldn't be gung-ho about banks' Q1 updates

The June quarter (Q1) updates of three private banks — HDFC Bank, IndusInd Bank, and Federal Bank — announced in the last few days enthused investors on Monday. With 2-3 per cent gains in stock prices, HDFC Bank and IndusInd Bank were among the top gainers on the Nifty Bank Index, which was up 1.6 per cent on Monday, while Federal Bank was up 1.4 per cent. READ MORE

11:32 AM

BROKERAGE VIEW:: Axis Securities on Minda Industries

RATING: BUY |  TARGET PRICE: Rs 318

Minda industries has a superior product suit catering to most industry trends. Indigenization and anti-China rhetoric will also benefit the company (esp. alloy wheels and sensor business) while its traditional products (switches, lighting, acoustics) are on a strong footing and have long term visibility. Further, its long term strategy to focus on building integrated solutions that support a connected and autonomous vehicle augurs well for its long term growth.

We recommend Buy with target price of Rs 318.

11:23 AM

BROKERAGE VIEW:: HDFC Securities on Auto & Transportation

While capex has been cut by 30-70% across the board, companies have also allocated capital better by exiting loss-making global segments and seeking alliances with partners for sub-scale businesses. The NIFTY AUTO index has, resultantly, rallied ~50% from its lows due to the above and a pick-up in volumes for entry-level and rural-centric products (tractors, 2Ws and ‘A’ segment cars). We have a BUY on Maruti, Hero and Escorts and are cautious on CVs (Ashok Leyland) and premium discretionary (Eicher).

11:20 AM

BROKERAGE VIEW:: Geojit Financial Services on GAIL (INDIA)

GAIL(India) Limited

 

Rating: Buy | CMP: Rs 104 | Target Price: Rs 119

 

GAIL India’s Q4FY20 standalone revenue declined 5.4% YoY to Rs. 17,755cr, impacted by weaker pricing and nationwide lockdown. EBITDA rose 47.0% YoY to Rs. 2,475cr, along with expansion of EBITDA margin by 497bps YoY to 13.9%. EBITDA growth was majorly driven by lower operating costs. Reported PAT grew 168.9% YoY to Rs. 3,018cr, further helped by deferred tax reversal of Rs. 1,588cr. We expect commodity price and economy revival post lockdown to pick up along with the withdrawal of claim by DoT. Given current upside potential, we upgrade our rating to BUY on the stock with a revised target price of Rs. 119 based on SOTP valuation

11:18 AM

BROKERAGE VIEW:: ICICI Securities on Prism Johnson

Prism Johnson (PRSMJ) has announced the divestment of its entire 51% stake in Raheja QBE General Insurance Company for an aggregate consideration of Rs 2.9 bn by Mar’21. The divestment of loss-making subsidiary would result in increased consolidated EBITDA from FY22E and lower debt. The company was able to reduce standalone net debt by Rs2.7bn during Q1FY21 backed by improved collections across all three businesses. Factoring lower growth in TBK/ RMC, we cut our FY21E EBITDA by 18%, while we raise FY22E EBITDA by 9% owing to divestment of loss making insurance subsidiary and increase our target price to Rs 52/share (earlier: Rs 37) based on 6xFY22E EV/E also aided by lower debt. Maintain ADD.

11:15 AM

BROKERAGE VIEW:: ICICI Securities on JSW Steel

RATING: ADD | TARGET PRICE: Rs 214

We downgrade JSW Steel (JSWS) to ADD from BUY given the run-up in the stock price (~35% from Mar, ’20 end). Highlights from the company’s FY20 annual

report: i) Increasing support from standalone business to help overseas subsidiaries, as many of them continue to incur losses, ii) related-party transactions are limited – some support extended to JSPL, while JSW International Tradecorp is helping JSWS with receivables, iii) captive iron ore mines are adding to integration while increasing other expenses – royalty from Karnataka mines is ~Rs6.5bn in FY20, iv) JSWS is focused on setting up pipe conveyor to transport ore from the recently won Odisha mines; pipe conveyor in Karnataka helped dispatch 3.39mnte in FY20, v) significant capex remains in the pipeline; ND/EBITDA expanded to 4.5x and vi) Bhushan Power acquisition hearings are yet to complete in the Supreme Court.