MARKET WRAP: Sensex ends 318 pts higher, Nifty holds 10,500; IT stocks gain
Benchmark indices rose on Thursday, driven by IT stocks such as Infosys and TCS on the back of a weak rupee
 "Stock Markets, BSE, NSE, Nifty, Sensex")
Bonds, Stock markets, Shares, Trading
9:42 AM
Edelweiss on HPCL
Hindustan Petroleum Corporation (HPCL) reported strong core EBITDA (ex. inventory) of INR28bn (up 26% YoY, 60% QoQ, 18% ahead of our estimates) on robust all-round performance. Key highlights: 1) core GRM at USD6.6/bbl (vs. IOCL at USD6.1/bbl) came 8% ahead, consequently core refining EBITDA (up 9% QoQ) stood 9% ahead; and 2) core marketing EBITDA also came 40% ahead, despite slightly slower-than-industry sales volume growth.
While marketing margins improved post the Gujarat elections, rising international fuel prices amidst an election-heavy calendar continue to weigh on OMCs’ marketing business. Factoring in lower marketing margin, we cut FY19/20E earnings by 6%/2%. Maintain ‘HOLD’ with revised SoTP-based TP of Rs 348 (Rs 440 earlier), as we lower EV/EBITDA multiple for the marketing business (5x FY20E vs. 5.5x earlier) due to perceived risk to free pricing
Hindustan Petroleum Corporation (HPCL) reported strong core EBITDA (ex. inventory) of INR28bn (up 26% YoY, 60% QoQ, 18% ahead of our estimates) on robust all-round performance. Key highlights: 1) core GRM at USD6.6/bbl (vs. IOCL at USD6.1/bbl) came 8% ahead, consequently core refining EBITDA (up 9% QoQ) stood 9% ahead; and 2) core marketing EBITDA also came 40% ahead, despite slightly slower-than-industry sales volume growth.
While marketing margins improved post the Gujarat elections, rising international fuel prices amidst an election-heavy calendar continue to weigh on OMCs’ marketing business. Factoring in lower marketing margin, we cut FY19/20E earnings by 6%/2%. Maintain ‘HOLD’ with revised SoTP-based TP of Rs 348 (Rs 440 earlier), as we lower EV/EBITDA multiple for the marketing business (5x FY20E vs. 5.5x earlier) due to perceived risk to free pricing
9:33 AM
BS Special Lower agriculture input costs to contain food inflation
The government’s annual budget for fiscal year 2019 provides support for prices of agricultural produce to be increased to 50% mark-up over costs. That has made the Reserve Bank of India and other market participants wary about the risks to food inflation. Bloomberg Economics’ agriculture input cost index shows that these concerns might be overdone. READ MORE
9:19 AM
Sectoral Trend
9:18 AM
Top Sensex gainers and losers
9:16 AM
Markets at Open
At 9:16 am, the S&P BSE Sensex was trading at 34,440, up 95 points while the broader Nifty50 index was ruling at 10,461, up 31 points
At 9:16 am, the S&P BSE Sensex was trading at 34,440, up 95 points while the broader Nifty50 index was ruling at 10,461, up 31 points
9:05 AM
Emkay Global on Ramco Cements Limited
We raise FY19/20E EBITDA estimates by 6.5%/6.7% due to higher volume assumptions. We expect EBITDA CAGR of 12.6% over FY18-FY20E. We upgrade the rating to ACCUMULATE with a target price of Rs864, (15x FY20E EV/EBITDA)
We raise FY19/20E EBITDA estimates by 6.5%/6.7% due to higher volume assumptions. We expect EBITDA CAGR of 12.6% over FY18-FY20E. We upgrade the rating to ACCUMULATE with a target price of Rs864, (15x FY20E EV/EBITDA)
9:04 AM
MARKET COMMENT
The minutes of the May 01-02 meeting of the FOMC, in which the target range for the federal funds rate was left unchanged and only a few tweaks to the monetary policy statement were made, shed some light on why the FOMC decided to emphasize the symmetrical nature of its inflation target.
Our interpretation of this remains that the FOMC may eventually see the need for some wiggle room. There is a good chance that inflation will move to above target levels for at least a couple of months due to cost push factors, while wage pressures are most likely to remain modest.
We continue to think that the majority within the FOMC is inclined to hike at every quarterly meeting – i.e. March, June, September and December – if market conditions and economic data tolerate. This would mean that there are three more hikes in the pipeline for this year, even though the dot plot currently still points at two.
(Source: Rabobank International report)
The minutes of the May 01-02 meeting of the FOMC, in which the target range for the federal funds rate was left unchanged and only a few tweaks to the monetary policy statement were made, shed some light on why the FOMC decided to emphasize the symmetrical nature of its inflation target.
Our interpretation of this remains that the FOMC may eventually see the need for some wiggle room. There is a good chance that inflation will move to above target levels for at least a couple of months due to cost push factors, while wage pressures are most likely to remain modest.
We continue to think that the majority within the FOMC is inclined to hike at every quarterly meeting – i.e. March, June, September and December – if market conditions and economic data tolerate. This would mean that there are three more hikes in the pipeline for this year, even though the dot plot currently still points at two.
(Source: Rabobank International report)
File photo of US Federal Reserve. Photo: Shutterstock
9:02 AM
Anand Rathi Institutional Research on Dalmia Bharat
Benefiting from its dominant position in the East and continuously surpassing industry volume growth, Dalmia reported its highest ever PAT. Further, its proposed capacity expansion, various cost-optimising measures and synergies from the OCL merger would lead to expanding of its bottomline and return ratios. As one of our top picks, we retain our Buy recommendation on Dalmia, with a target of Rs 3,402
Benefiting from its dominant position in the East and continuously surpassing industry volume growth, Dalmia reported its highest ever PAT. Further, its proposed capacity expansion, various cost-optimising measures and synergies from the OCL merger would lead to expanding of its bottomline and return ratios. As one of our top picks, we retain our Buy recommendation on Dalmia, with a target of Rs 3,402
9:01 AM
Anand Rathi Institutional Research on Sonata Software
IT services growth is likely to persist through FY19. Margins are likely to inch up further due to currency. For IT products, growth is uneven but the RoCE and absolute EBITDA growth would be maintained. We raise our target to Rs 380 (15x FY20e PE), reflecting changes to our currency assumptions, resulting in higher earnings estimates. Also, we retain a Hold as the prevailing price leaves little room for execution error. Awaiting a better entry price. Risk. High client concentration.
IT services growth is likely to persist through FY19. Margins are likely to inch up further due to currency. For IT products, growth is uneven but the RoCE and absolute EBITDA growth would be maintained. We raise our target to Rs 380 (15x FY20e PE), reflecting changes to our currency assumptions, resulting in higher earnings estimates. Also, we retain a Hold as the prevailing price leaves little room for execution error. Awaiting a better entry price. Risk. High client concentration.
9:01 AM
Markets at pre-open
(Source: BSE)
| Index | Current | Pt. Change | % Change |
| S&P BSE SENSEX | 34,419.70 | +74.79 | +0.22 |
| S&P BSE SENSEX 50 | 10,918.68 | -111.35 | -1.01 |
| S&P BSE SENSEX Next 50 | 32,159.50 | -243.61 | -0.75 |
| S&P BSE 100 | 10,743.83 | -105.33 | -0.97 |
| S&P BSE Bharat 22 Index | 3,478.08 | -32.31 | -0.92 |
(Source: BSE)
8:54 AM
Edelweiss on Motherson Sumi
Motherson Sumi’s (MSS) Q4FY18 consolidated EBITDA at Rs 12.6bn missed our estimate by 10% due to: (1) disappointment in SMR (weak revenue impacted by adverse currency & margin); and (2) lower-than-expected margin for standalone, PKC & SMP. We expect SMP’s margin to improve in FY19 and FY20 as the new plants at Mexico, Kecskemet and Tuscaloosa (potential revenue of EUR1bn at full capacity) ramp up in FY19.
Lower capex guidance of Rs 17-20bn for FY19 (Rs 30bn in FY18), we believe, will boost free cash flows (FCF). We have lowered our FY19 EBITDA by 4% but our EPS is revised down by 10% to Rs 11.8 to factor in lower profits from associates. We marginally tweak FY20E EPS by 2% to Rs 15. Maintain ‘BUY’ with SOTP-based revised target price of Rs 365 (Rs 375 earlier)
Motherson Sumi’s (MSS) Q4FY18 consolidated EBITDA at Rs 12.6bn missed our estimate by 10% due to: (1) disappointment in SMR (weak revenue impacted by adverse currency & margin); and (2) lower-than-expected margin for standalone, PKC & SMP. We expect SMP’s margin to improve in FY19 and FY20 as the new plants at Mexico, Kecskemet and Tuscaloosa (potential revenue of EUR1bn at full capacity) ramp up in FY19.
Lower capex guidance of Rs 17-20bn for FY19 (Rs 30bn in FY18), we believe, will boost free cash flows (FCF). We have lowered our FY19 EBITDA by 4% but our EPS is revised down by 10% to Rs 11.8 to factor in lower profits from associates. We marginally tweak FY20E EPS by 2% to Rs 15. Maintain ‘BUY’ with SOTP-based revised target price of Rs 365 (Rs 375 earlier)
8:47 AM
Keep a stop at Rs 255 and go short. Add to the position between Rs 250 and Rs 251. Book profits at Rs 249.
Today's picks: From Vedanta to HPCL, hot stocks to watch on Thursday
Vedanta
Current price: Rs 253
Target price: Rs 249
Keep a stop at Rs 255 and go short. Add to the position between Rs 250 and Rs 251. Book profits at Rs 249.
HPCL
Current price: Rs 287
Target price: Rs 282
Keep a stop at Rs 290 and go short. Add to the position between Rs 283-284. Book profits at Rs 282. READ MORE
8:43 AM
Nifty outlook and top trading ideas by Tradebulls for today
Nifty resumed its weakness after a brief pause in yesterday’s trading session as weakness intensified below the level of 10,470. The crossover in short term averages still indicates further room towards 10,325 zone which is the 61.8% retracement support of its previous up move from 9,950-10,929. The ongoing momentum could only see a reversal incase 10,580 is breach, else expect further weakness during the week.
Hence traders should retain shorts until 10,580 is defended with an expectation of an immediate extension towards 10,325. READ MORE
8:39 AM
Markets on Wednesday
| S&P BSE Sensex | 34,344.91 | -0.88% | |
| Nifty 50 | 10,430.35 | -1.01% | |
| S&P BSE 200 | 4,528.44 | -0.93% | |
| Nifty 500 | 9,069.80 | -0.83% | |
| S&P BSE Mid-Cap | 15,699.75 | -0.24% | |
| S&P BSE Small-Cap | 16,976.88 | -0.47% | |
8:38 AM
SGX Nifty
The SGX Nifty was at 10,466, up 0.43 per cent from the previous close.
The SGX Nifty was at 10,466, up 0.43 per cent from the previous close.
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First Published: May 24 2018 | 3:30 PM IST
