MARKET WRAP: Indices end lower, Nifty fails to hold 10700; bank stocks fall

Benchmark indices edged lower on Friday as losses in financials offset gains in auto stock

10:26 AM

TOP SENSEX GAINERS TODAY

COMPANY	LATEST	CHG(RS)	CHG(%)	FREE FLOAT MKT CAP (RS CR)	WEIGHT IN INDEX (%)
BAJAJ AUTO	2834.95	82.80	3.01	41837.82	1.50
ICICI BANK	291.95	6.35	2.22	187715.08	6.12
MARUTI SUZUKI	8689.95	155.00	1.82	115502.64	2.51
TATA MOTORS	287.90	5.00	1.77	55694.96	2.99
LARSEN & TOUBRO	1387.25	19.65	1.44	194430.02	4.92

10:25 AM

Emkay Global on Apar Industries

Apar Industries (Apar) reported Q4FY18 earnings below our estimate. While revenue increased by 35.9% yoy to Rs17.7bn, PAT declined by 16.2% yoy to Rs400mn due to higher Raw Material prices, stiff competition and increased interest expenses.

We have trimmed our earnings estimates to factor in declining margins in the Conductors segment due to higher raw material prices and heightened competition. Accordingly, we have cut our target price to Rs879 (14XFY20E EPS) vs Rs929 earlier. However, we reiterate BUY, as the stock has corrected recently and provides a potential 24% upside from CMP.

10:13 AM

Edelweiss on SAIL

We expect limited cash flow accretion owing to capex commitments and potentially higher employee cost as there could be fresh wage hikes as the company’s performance improves. Taking cognizance of Q4FY18 numbers, we revise up FY19E EBITDA 2%, while keeping FY20E EBITDA broadly unchanged.

Despite signs of turning around, SAIL’s relative performance is expected to remain subdued owing to higher conversion cost and leverage playing spoilsport. Maintain ‘REDUCE’ with revised target price of Rs 72 (earlier Rs 70). 

10:05 AM

Nomura on GDP data

GDP growth rose to 7.7% y-o-y in Q1 from 7% in Q4, above consensus expectations, but in line with our forecast. The strong pick-up in private consumption and investment, higher import demand and still-high output growth in non-agriculture sectors are all signals of a strengthening cyclical recovery. Our proprietary indicators suggest that the momentum is likely to be sustained through Q2. However, we expect tighter financing conditions, rising oil prices and slower investments in the run-up to elections to slow GDP growth later in the year. Overall, we expect GDP growth to remain strong at 7.8% y-o-y in Q2, before slowing to an average of 7.1% in H2 2018. 

 

The Q1 GDP data should give the monetary policy committee enough comfort (on growth) to focus on upside inflation risks. We expect these risks to tilt the RBI’s current “neutral” stance to “withdrawal of accommodation” at the 6 June policy meeting, followed by rate hikes of 25bp each in the meetings on 1 August and 4 October. The June policy decision is a close call; we assign a 40% probability to the MPC voting for a 25bp hike in June itself, followed by another 25bp hike in August.

10:00 AM

Market Check

 

S&P BSE Sensex	35,400.38		0.22%
Nifty 50	10,762.45		0.25%
S&P BSE 200	4,662.79		0.18%
Nifty 500	9,329.55		0.15%
S&P BSE Mid-Cap	15,971.03		-0.27%
S&P BSE Small-Cap	17,221.15		-0.16%

9:48 AM

Ajanta Pharma: Reduction in Africa biz may offset branded generic sales

The Ajanta Pharma stock has shed over 28 per cent in May on the back of brokerage downgrades triggered by a muted 2018-19 outlook, especially in the African tender (malaria) business, and higher costs. In 2017-18, the Africa institutional anti-malaria business accounted for 20 per cent of Ajanta Pharma's sales and recorded a decline of 13 per cent year-on-year (y-o-y). READ MORE
 

9:32 AM

RBI monetary policy: Economists see rate hike latest by August

A rate hike is certain, and the August policy could be the best time for it, but June too looks good, say analysts. Nine out of the 10 economists polled by Business Standard expect the monetary policy committee (MPC) to favour rates to harden by August. Four of them expect the repo rate to become 6.25 per cent from 6 per cent now in June itself. READ MORE
 

9:22 AM

Ranen Banerjee, Partner and Leader - Public Finance and Economics, PwC India on GDP

 

The high growth rate reported in quarter is on expected lines for us as the high frequency data on PMI and IIP as well as rural demand were all indicating a revival. We should however be wary of the headwinds the economy faces in the coming quarters from higher crude prices feeding into inflation and rising inflation expectations. We hope the Monetary Policy Committee would not press the panic button that could create further friction on growth rate and would continue to hold on to the interest rates

 

9:21 AM

MUST READ Govt not keen on excise cut, may ask ONGC to bear subsidy cut

 

The government may ask state-owned Oil and Natural Gas Corp (ONGC) to bear fuel subsidy to help cut petrol and diesel prices, sources said on Thursday.

 

The government does not want to cut excise duty and is looking at alternative means to reduce petrol and diesel prices that had on Tuesday touched an all-time high of Rs 78.43 per litre and Rs 69.31 a litre respectively. READ MORE

Stock Impact

 

9:19 AM

MARKET COMMENT Chris Wood of CLSA

With the dollar still strong, the message sent out by Fed chairman Jerome Powell at the next FOMC meeting in mid-June will be more important than usual. GREED & fear’s base case is that Powell will maintain a tougher line than his predecessors in the face of recent market “volatility”, in terms of a continuing commitment to gradual tightening. Such an outcome means that the best way to hedge long equity positions globally remains to be short credit.
 

Yields in the fixed income world have risen much more than spreads so far this year. This is why there is a lot of scope for spreads to play catch up, most particularly if the Fed continues to tighten. Meanwhile, the yield curve in America has flattened again after the past week’s bond rally.

For many years after the global financial crisis it was the case that the actions, or lack of them, by central banks were the main drivers of financial markets. While central banks are still important it has become evident, most particularly since The Donald’s election, that politics is becoming increasingly relevant in the “new world disorder”.

(Source: Wood's weekly newsletter to investors, GREED & fear)

CLSA Managing Director & Equity Strategist Christopher Wood

9:18 AM

Sectoral Trend

9:17 AM

Top Sensex gainers and losers

9:16 AM

Stocks in News

Mahindra signs MOUs with Government of Maharashtra for electric vehicle manufacture and deployment
 

Infosys extends alliance with Microsoft for cloud-based digital transformation solutions.

TCS recognized as a leader in manufacturing supply chain execution by two IDC MarketScapes

Sudarshan Chemical Industries board meeting on June 1 to consider and approve the sale of shareholding in Prescient Color

Mindtree makes strategic commitment to SAP Leonardo with new package of offerings designed to accelerate adoption

The assessing office at SEBI has passed an order against DLF by imposing a penalty of Rs. 10 lakhs under the SCRA act on the disclosure pertaining to utilization of IPO proceeds made by the Co in its quarterly filing for 30th September 2007. Source: BSE announcement.

Idea Cellular completes sale of 9,900 standalone towers to ATC for Rs 4,000 crore.

Cochin Shipyard signs agreement with Government of Kerala for procurement of marine ambulance for fisheries department.

Maruti Suzuki targets to sell over two lakh automatic cars in 2018-19.

Fortis Healthcare says unit sold off 1.8 crore units of RHT Health Trust for 13.65 million Singapore dollars.

Cholamandalam Investment and Finance to invest Rs 50 crore in its subsidiary Cholamandalam Home Finance.

PNC Infratech declared L1 for Nagpur-Mumbai Expressway project worth Rs 2,100 crore.

Bodal Chemicals to acquire additional 17 percent stake in Trion chemicals for Rs 3 crore.

Life Care, backed by private equity firm KKR submitted an expression of interest (EoI) for Fortis Healthcare

Ashiana Housing has acquired 6.67 acres land in Rajasthan to develop a group housing project with 6.15 lakh square feet area.

Dilip Buildcon has been declared L-1 for new EPC project valued at Rs. 1750.05Cr by MSRDC. The Bid project cost declared by MSRDC is Rs. 1560Cr. The construction is to be completed within 30 months and 45.65 Km need to be constructed. Source: BSE

(Source: Nirmal Bang report)

9:16 AM

Market at open

At 9:16 am, the S&P BSE Sensex was trading 35,277, down 44 points while the broader Nifty50 index was ruling at 10, 718, down 18 points

9:13 AM

Nomura on by-election outcome and govt policy

These results will not affect the existing power structure, either at the centre or in the states, but they do underline the effective tactic being increasingly adopted to consolidate into successful non-BJP fronts for electoral gains. We expect a similar result in the 2019 general election, led by the national-level opposition party, the Indian National Congress (INC).

The elections also highlight the uneasiness present among the BJP and its allies, particularly with Shiv Sena, with which it locked horns in Maharashtra. Finally, while these by-elections are weak leading political indicators – and one year is a long time in politics, (the general election is not being held until Q2 2019) – the results do suggest that anti-incumbency may be building. It confirms a recent “Mood of the Nation” opinion poll that pointed to the BJP’s waning popularity, especially in Uttar Pradesh.

We expect political uncertainty to remain elevated in the run-up to the election. Due to the heavy election calendar (Chhattisgarh, Madhya Pradesh and Rajasthan are next in Q4), we expect the government to focus on farmers and the “common man” via higher minimum support prices, farm loan waivers (in specific states),

social sector spending and the universal healthcare programme.