MARKET WRAP: Sensex dips 333 pts; PMI data, proposed FPI norms spook Street

Among sectoral indices, the Nifty FMCG index settled over 2.5 per cent lower weighed by HUL and Britannia Industries.

1:01 PM

Top gainers in BSE 500:

COMPANY	PRICE()	CHG()	CHG(%)
NETWRK.18 MEDIA	54.20	6.65	13.99
MAHINDRA CIE	295.00	30.35	11.47
H D I L	35.15	2.40	7.33
HIND.CONSTRUCT.	15.12	0.91	6.40
ENGINEERS INDIA	135.90	7.80	6.09

12:58 PM

MARKET COMMENT Gautam Chhaochharia, head of India research, UBS Securities

The markets are worried that GST collections are falling a little short of the monthly run-rate implied by budgeted numbers, based on our investor discussions. However, using just the monthly run-rate is fundamentally wrong, in our view. The festive season ahead in September and October should be bigger months and will give better clarity. There may anyway be a fiscal shortfall of 20-30bp of GDP assuming 12-15% YoY growth from August onwards.

Our discussions in Delhi suggest that the government views direct tax collections as potentially ahead of budget. The number of returns filed under the GST also shows medium-term potential. Formalisation seems to have led to some improvement in tax compliance, as indicated by our survey responses

GAUTAM CHHAOCHHARIA

12:54 PM

HDFC Securities on EIL

We  expect EIL to deliver revenue, EBITDA and PAT CAGR of 23%, 16% and 16%, respectively,  in  FY18-20E. Currently, EIL  trades at ~16x FY20E EPS. We recommend  Engineers  India (EIL) as a Buy at CMP of Rs 128 and add on dips to  Rs 117 with sequential price targets of Rs 144 and Rs 165 over the next

4-6 quarters

12:54 PM

Nomura on PMI numbers

The moderation in headline PMI and price sub-indices support our view that the cyclical recovery likely peaked in Q2 while higher oil prices, tighter financial conditions and external and political uncertainty will constrain demand. The weaker rupee is not yet reflected in higher input costs, although this may become visible with a lag. However, we expect weaker demand to at least partly offset any increase in costs.

Given this trajectory, we expect the Reserve Bank of India to pause in its October policy review meeting (65% probability of no change; 35% chance of a hike), after delivering two consecutive hikes for a cumulative 50bp

12:43 PM

Pharma shares extend rally; Dr Reddy's, Sun Pharma hit 52-week high

Shares of pharmaceutical companies continued their upward journey with Nifty Pharma index quoting higher for 11 out of past 14 trading days on the National Stock Exchange (NSE).
 

Sun Pharmaceutical Industries, Dr Reddys Laboratories, Glenmark Pharmaceuticals, Torrent Pharmaceuticals, Abbott India, Merck, Sanofi India and GlaxoSmithKline Pharmaceuticals were among 11 stock that hit their respective 52-week highs on Monday. READ MORE

12:33 PM

COMMENT Dhananjay Sinha, Head, Institutional Research, Economist and Strategist, Emkay Global

The rebound in GDP growth is aligned with our reflationary recovery thesis, which incorporates the fiscal multiplier impact, favorable base effect, unwinding of GST and demonetization shocks and the revival in external trade. The impact of this reflationary recovery reflects in the strong Q1FY19 GDP print of 8.2% yoy, the results of consumer sector companies and the rapid pace of retail lending. We believe that this multiplier effect will gain pace in the foreseeable future before fading out in 2-3 quarters. Accordingly, we project FY19 GDP growth of 7.2-7.4%

12:31 PM

Kotak Securities on NMDC

NMDC has revised prices of domestic iron ore thrice YTD, adding up to Rs300 and Rs350 per tonne for iron ore fines and lump ore to Rs2,960/tonne and Rs3,350/tonne, respectively. We believe that the recent hike in the iron ore prices is backed by 4% month on month increase in international iron ore

prices, rupee depreciation and the surge in pellet prices (~4 years high / +25% YoY).

Though, we continue to remain cautious on the outlook of iron ore prices for the medium to long term perspective. But, expect it to remain strong in the coming months, as Odisha miners has also hiked prices in the range of Rs250-300/tonne.

12:30 PM

Stock idea from Anand Rathi

We initiate coverage on Khadim India with a Buy rating and a target price of Rs 976 based on 16x FY20e EV/EBITDA. We believe it is best positioned to benefit from the domestic footwear industry shifting towards branded footwear. We anticipate it reporting a 19% revenue CAGR over FY18-20 driven respectively by its dual strategy of expanding its retail network (a 16% revenue CAGR) and its distribution channel (a 25% revenue CAGR). Driven by operating leverage kicking in and lower interest costs, we expect Khadim to deliver a 28% PAT CAGR over FY18-20.

12:28 PM

Nomura on Coal India

On our FY20F adjusted earnings (adding back OB removal provisioning to EPS and EBITDA), the stock trades at 8.2x P/E (EPS: Rs 30.4) and 4.8x EV/EBITDA (9.4x P/E and 5.2x EV/EBITDA on reported earnings); on our FY19F dividend of INR23/share, the stock offers a yield of 8%. We maintain our Buy rating on the stock. 

12:26 PM

Edelweiss on Pidilite

Our recent interaction with Pidilite’s (PIDI) top management reaffirms our confidence in its ability to gain market share and create future growth drivers. The company expects the core portfolio (two-thirds) to grow 1–2x GDP, growth portfolio at 2–4x GDP, and pioneer portfolio to touch INR1bn in three years (implying 13–15% growth). Waterproofing segment has huge opportunity landscape (paint-to-waterproofing ratio at 1:15 vis-à-vis 1:6 globally).

We value other market leaders such as HUL and Britannia at 55x FY20E EPS each. Given strong demand recovery, PIDI’s market leadership and NPDs we are raising the target multiple to 50x (45x earlier) that yields a revised target price of Rs 1,334 (Rs 1200 earlier). We will however closely watch the VAM price trajectory. Maintain ‘BUY’.

12:16 PM

Cracking the MF code in rural India: Mahindra MF looks to expand markets

Somewhere close to Jalandhar, the chief executive of a fund house is trying to explain the patriarch of a wealthy Punjabi joint family the concept of mutual funds (MF). At first, this 50-year old mistakes the CEO for a share dalal or an agent of sorts. READ MORE

12:00 PM

Markets at noon

Index	Current	Pt. Change	% Change
S&P BSE SENSEX	38,736.69	+91.62	+0.24
S&P BSE SENSEX 50	12,264.34	+33.53	+0.27
S&P BSE SENSEX Next 50	35,855.97	+199.23	+0.56
S&P BSE 100	12,055.14	+38.17	+0.32
S&P BSE Bharat 22 Index	3,757.99	+6.90	+0.18

11:50 AM

Real estate stocks trade weak after SC stays construction in some states

 

Shares of real estate companies were trading lower by up to 3% in an otherwise range-bound market after the Supreme Court stayed construction in some states and union territories (UTs) till they frame policy on waste management.

 

Sunteck Realty, DLF, Indiabulls Real State, Mahindra Lifespace Developers, Ajmera Realty, Puravankara and Kolte Patil Developers were trading lower in the range of 1% to 3% on the BSE. Oberoi Realty and Godrej Properties, however, were trading higher by 3% and 1%, respectively. READ MORE

11:40 AM

Indian equities are off to best start to a financial year since Modi win

 

Indian equities are off to the best start to a financial year since 2014-15, when Narendra Modi-led National Democratic Alliance (NDA) government came to power. So far this fiscal year, the benchmark Sensex has gained 16.3 per cent, thanks to sharp gains in key stocks. In comparison, the index for the performance of 30 blue-chip stocks had gone up 19 per cent during the first five months of 2014-15.

 

The benchmark indices are currently hovering around their lifetime highs. Also, India is already among the best-performing markets globally this fiscal year. READ MORE

11:25 AM

ANALYSIS Many reasons why Bajaj Finance stock will remain an outperformer

 

Trading at about Rs 11 apiece and with thin volumes, Bajaj Finance was a neglected, unfavoured stock 10 years back.

 

Today, just a few points shy of the Rs 3,000-mark, the country’s leading consumer goods lender has transformed itself as the most sought-after scrip in the financials space. What’s more, despite the recently gone by June quarter (Q1) being a tough one for the non-banking finance companies (NBFCs) due to some instability in asset quality and adoption of new accounting norms, Bajaj Finance outperformed the pack maintaining its industry-best return on assets. READ MORE