MARKETS ON THURSDAY: Sensex up 578 pts; RBI holds rates; inflation outlook cut

All that happened in the markets today

11:45 AM

Near-term overhang for Alkem Laboratories' fast growing US business

 

The Alkem Laboratories stock has shed about 9 per cent over the last few trading sessions after it received 13 observations from the US Food and Drug Administration (FDA) for its Daman formulations plant. The facility contributes about 30 per cent to the company's US revenues and accounts for 25-30 pending abbreviated new drug applications (ANDAs) out of a total pipeline of 60 ANDAs. READ MORE

11:37 AM

Kotak Securities on banks, NBFCs

We expect the banks under coverage to report decline in earnings led by increase in loan-loss provisions, lower contribution from treasury income and weak NII growth. We see an improvement in loan growth (~10% yoy) but high slippages and margin pressure leading to weak NII growth (5% yoy), which coupled with decline in contribution from treasury would result in muted revenue growth (2% yoy). Banks, especially PSUs, will benefit from recent RBI dispensation to amortize investment provisions over four quarters. Retail-oriented assets such as HDFC Bank, IndusInd Bank, City Union and Federal Bank are likely to report stable/better performance while other banks should report weak performance.

We expect most NBFCs to deliver 18-53% yoy growth in core PBT supported by improving loan growth, margins and asset quality. Strong rural cash flows, high growth in CV/construction equipment, increasing momentum in housing and reducing borrowing costs during 1HFY18 are key drivers. High loan growth will provide a boost to PNBHF (PAT up 53%) and Bajaj Finance (PAT up 35%). Better NIM and control over expenses will drive earnings for L&T Finance and Cholamandalam while lower credit costs will be the key driver for Shriram Transport Finance. HDFC’s strong earnings growth is backed by improving momentum in retail business and float income of recent capital issuance.

11:35 AM

Reliance Securities on Ramkrishna Forgings

Ramkrishna Forgings (RFL) gained over 4% in yesterday’s sell off market on the expectations of healthy improvement in earnings in coming quarters led by visible improvement in automobiles volume especially in CV segment.
 

RFL is the second largest forging company in India after Bharat Forge with an installed capacity of 150,000MT. RFL derives >80% of its total revenue from Automotive segment (including exports) as auto volumes had been favourable over the years.
 

RFL has concluded its major expansion drive and is currently in the process of improving the utilisation of newly commissioned facility. We expect RFL to generate free cash flow of Rs4.6bn over FY18-FY20E aided by low capex requirement and healthy margins. We maintain our BUY rating on the stock with a Target Price of Rs 975.

11:33 AM

HDFC Securities on Symphony

Our bullishness on Symphony is based on (1) Rising demand for cooling products driven by growing disposable incomes, cheaper financing options and increasing up-country penetration of electricity, (2) A large unorganised air cooler market, (3) Symphony’s consistent product innovation, (4) Growing distribution reach (40,000 dealers targeted vs. 30,000 now) over the next 2 years (dealer reach grew at 24% CAGR over FY10-17) and (5) Untapped opportunities in RoW markets.

 

We model revenue/EBITDA/APAT CAGR of 22/28/29% over FY18E-FY20E, driven mostly by premiumisation. Symphony’s high RoCE >100%, market leadership and multi-year growth visibility warrants high valuations. The stock has consistently traded at a premium to AC/appliance companies. Our valuation is based on 45x Mar-20 EPS, yielding a TP of Rs 2,150. Initiate coverage with a BUY.

11:32 AM

IDFC Securities on Eicher Motors

A surge in Royal Enfield’s (RE) volumes (CAGR of 36% over FY15-18) raises concerns on whether a less exclusive bike could damage RE’s brand equity (and consequently volumes) going forward. To counter check these concerns we commissioned a survey of RE owners (in cities where its marketshare is >10%). While the survey suggests a perceptible loss of exclusivity, the higher PARC (population of vehicles on the road) seems to be a positive influence on the purchase decision of an RE.

We believe RE’s dealership-led penetration in a number of states too would add to the volume growth over next few years. Notwithstanding our estimate of a relative slowdown in volumes (18% CAGR over FY18-FY20E), RE will continue to outpace the industry growth. A contraction (from ~100% in FY15 to 27% at present) in RE’s premium valuation (over peers) more than adequately reflects the relative slowdown in volume growth. Maintain an Outperformer rating on Eicher Motors with a target price of Rs35,000 (upside of 25%).

11:30 AM

Idea worst hit in Q4 among telcos, to report a five fold increase in losses

 

Despite higher subscriber additions, the March quarter is expected to be weak for a majority of telecom service providers. Downtrading of high-value customers on the back of price cuts and fall in international terminal rates from February 1, 2018, will result in lower revenues and profits for the operators.

 

On a sequential basis, revenues for Bharti and Idea are expected to fall by 6-8 per cent, while operating profit drop is expected to be 15-22 per cent lower on higher network costs and muted revenues. READ MORE

11:26 AM

Salman Khan blackbuck poaching case

The Mandhana Retail Ventures Limited trades firm ahead of verdict

11:19 AM

VOLUME TOPPERS

COMPANY	PRICE()	CHG()	CHG(%)	VOLUME
UNITECH	6.93	0.20	2.97	3321753
EIH	168.70	6.70	4.14	2825900
KWALITY	59.20	0.10	0.17	2060333
REL. COMM.	22.75	0.40	1.79	2010195
IDBI BANK	71.95	2.05	2.93	1845355

11:01 AM

Interest rate sensitive stocks gain upto 4% ahead of RBI policy

 

Shares of interest-rate sensitive sectors such as auto, banking and realty were trading higher by up 4% on the National Stock Exchange (NSE) ahead of the Reserve Bank of India's (RBI) first bi-monthly monetary policy for the financial year 2018-19 (FY19) today.

 

The public and private sector banking share indices - Nifty PSU Bank, Nifty Private Bank, automobile index Nifty Auto and real estate sector index Nifty Realty, were trading 2% higher as compared to 1.6% rise in the benchmark Nifty 50 index. READ MORE

10:50 AM

Index Watch (Image source: BSE)

10:42 AM

NEWS ALERT Nikkei India Services PMI

The seasonally adjusted Nikkei India Services Business Activity Index fell from 47.8 in February to 50.3. This signalled that business activity stabilised at the end of the quarter, following the decline seen in February. Where an increase was reported, firms commented on an improvement in market demand. Companies that saw reduced activity attributed this to intense competition.
 

The headline seasonally adjusted Nikkei India Composite PMI Output Index rose from 49.7 in February to 50.8 in March, driven by growth in both the manufacturing and service sectors. The index was consistent with a marginal increase in overall output

(Source: IHS Markit Release)

 

10:38 AM

SECTOR RESEARCH – Indian Auto Component Sector

 

Auto component stocks suffered a sharp correction in the recent past despite no major change in the fundamental growth story. We believe revenue growth for most sector players is set to pick up given 1) likely strong vehicle sales across 2W, passenger vehicle, CV, 3W and tractor segments, 2) global OEMs more than keen to source from low-cost countries like India, 3) strong domestic replacement demand post GST rollout, and led by growing trend of vehicle servicing at authorized service centres and 4) expected growth in content per vehicle due to changing emission and safety norms.

Even the flip side is blessed with a silver lining given that 1) mounting raw material costs would be partially offset by operating leverage benefits and 2) India’s slowing vehicle exports, we believe, is a transient phenomenon considering plans of key OEMs including Hyundai, Nissan and Honda.

(Source: IIFL report)

10:37 AM

Stocks in News

Reliance Industries to sell select Eagle Ford shale assets in U.S. for $100mn

 

·         SBI allots shares to government for Rs. 8,800cr capital infusion

 

·         GSK Consumer says parent is initiating a ‘strategic review’ of Horlicks, other products and 72.45% shareholding in the company

 

·         Indoco Remedies gets seven observations (three critical and four major) for Goa drug manufacturing plant from UK-MHRA

 

·         MT Educare allots 3.19 crore equity shares at Rs 62.57 per share to Zee Learn

 

·         Mercator raises Rs. 100cr via private placement of bonds to UTI. It is seeking to raise an additional Rs. 100cr via bond issuance

 

·         Tejas Networks gets expansion order of Rs. 336cr from BSNL for BharatNet

 

·         Sical Logistcs says JV has won contract from Damodar Valley Corporation for tubed Coal Mine

 

·         Majesco gets deal from Tier 1 global insurer for billing software

 

·         Orchid Pharma says resolution professional has sought turnaround plans by April 10

 

·         Bodal Chemicals starts commercial production at Gujarat plant

 

·         MEP Infra JV gets NHAI order for 3 projects in Maharashtra worth Rs. 2,922.73cr

 

·         IDBI Bank says found lapses in some loan disbursals in Andhra Pradesh

 

·         Bhansali Engineering Polymers says it has cleared all outstanding dues amounting to Rs. 216.5cr

 

·         Avanti Feeds starts commercial production of the additional capacity of 1,75,000 million tonne shrimp feed plant at Andhra


(Source: IIFL report)

10:33 AM

Smartlink Network Systems surges 15% as board mulls share buyback proposal

Shares of Smartlink Network Systems have surged 15% to Rs 103 per share on the BSE in early morning trade on Thursday after the IT networking equipment firm said that its board will meet on Saturday, April 7, 2018 to consider the share buyback proposal. READ MORE

10:19 AM

TOP CONTRIBUTORS TO SENSEX'S GAIN TODAY

COMPANY	LATEST	CHG(RS)	CHG(%)	CONTRIBUTION (POINTS)
HDFC BANK	1900.80	16.00	0.85	41.38
H D F C	1821.50	18.25	1.01	37.91
TATA MOTORS	367.00	11.30	3.18	28.78
LARSEN & TOUBRO	1319.30	22.95	1.77	28.12
ICICI BANK	272.10	3.65	1.36	27.91
INFOSYS	1134.95	10.40	0.92	27.36
RELIANCE INDS.	906.50	11.40	1.27	26.73