A security guard stands behind a glass facade displaying the CNX Nifty logo at the National Stock Exchange in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
A security guard stands behind a glass facade displaying the CNX Nifty logo at the National Stock Exchange in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Sensex, Nifty Close At Two-Month High As New Infections Slow

Closing Bell

Indian equity benchmarks rose for a second day, tracking most regional peers, to close at a two month high.

The S&P BSE Sensex added 1.24% to 50,193.33 making it a third day of gains and its highest close since March 16. The NSE Nifty 50 Index added 1.24% as well. Seventeen out of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of automakers.

With the earnings season underway, 11 of the 32 Nifty 50 companies that have so far announced quarterly results have beaten or met analysts’ estimates while 20 have missed, according to data compiled by Bloomberg. Tata Motors Ltd. is scheduled to post its results after the market closes today.

India, home to the world’s worst Covid outbreak, is now seeing a slight slowdown, with the daily infection tally dropping to around 300,000 for the last few days from a peak of 410,000 a week ago.

The resurgence of Covid cases in India may have peaked and investors are now looking at how quickly the wave descends along with how quickly vaccinations can be deployed, analysts at Morgan Stanley wrote in a note. The analysts expect the ongoing consolidation in the Indian stock market to improve its return prospects into the second half of the year.

Also Read: India Stock Return Prospects To Improve In Second Half, Says Morgan Stanley

IndiaMart Up Most In 15 Weeks

IndiaMart InterMesh Ltd. rose 9.8%. Trading volume was double the average for this time of day.

  • The stock was the best performer among its peers.
  • Trading volume was 482,568 shares, double the 20-day average of 217,420 shares for this time of day.
  • IndiaMart trades at 67 times its estimated earnings per share for the coming year. It trades at 80 times trailing EPS.
  • Analysts have five buy, three hold, and two sell recommendations on the stock.
  • The price target of Rs 7,776.89 represents a 0.6% increase from the last price

HSBC Expects IndiGo To Post Rs 4,100-Crore Loss In FY22

HSBC expects IndiGo, operated by InterGlobe Aviation Ltd., to report a loss of Rs 4,100 crore in the ongoing fiscal because of low demand, rising costs and cash burn.

That prompted the research firm to cut IndiGo's 12-month price target to Rs 1,200, implying a downside of about 30% from Monday's close. It maintained the 'reduce' rating.

Click here to read the full report

Canara Bank Q4 Net Income Beats Estimates

Canara Bank reported net income for the fourth quarter that beat the average analyst estimate.

  • Net income Rs 1,010 crore vs. loss Rs 3,260 crore YoY, estimate Rs 503 crore
  • Interest income Rs 16,320 crore, +35% YoY
  • Interest expense Rs 10,730 crore, +23% YoY
  • Gross non-performing assets 8.93% vs. 7.46% QoQ
  • Provisions Rs 4,130 crore, -4.4% QoQ
  • Provision for loan losses Rs 4,430 crore, +67% QoQ
  • Other income Rs 5210 crore vs. Rs 2170 crore YoY
  • Approves setting off accumulated Rs 18,495 crore losses.

Hindustan Zinc Surges To Record High

Hindustan Zinc Ltd. rose 11% to a record high of Rs 350.50. Trading volume was eight times the average for this time of day.

  • The stock was the best performer among its peers.
  • Trading volume was 15.6 million shares, eight times the 20-day average of 2.02 million shares for this time of day.
  • The shares are up 8.2% in the past 5 days and rose 18% in the past 30 days.
  • Hindustan Zinc trades at 14 times its estimated earnings per share for the coming year. It trades at 18 times trailing EPS.
  • Analysts have five buy, 10 hold, and six sell recommendations on the stock
  • The price target of Rs 304.06 represents a 12% decrease from the last price

Autos Index Rallies Ahead Of Tata Motors Earnings

Also Read: India’s Panicked Two-Wheeler Dealers Send An SOS

Rupee Gains For A Third Day as Virus Cases Drop

The rupee gains for a third day to its highest in almost seven weeks amid hopes the economy will reopen soon on a fast decline in daily virus cases.

  • USD/INR declines 0.3% to 72.9825 the lowest since March 31; rupee has gained 1.4% in Asia’s best performance in May so far
  • There are a lot of inflows lined up due to IPOs as well as potential flows due to the MSCI rebalancing, that are likely to support the rupee, says Dilip Parmar, research analyst at HDFC Securities  
    • The RBI will try to stabilise rupee at 72.50 odd levels

Birla Corp Up Most in Three Months On Heavy Volumes

Shares of Birla Corp. rose for a seventh straight session.

  • Trading volume was eight times the average for this time of day.
  • The stock was the best performer among its peers.
  • Trading volume was 391,853 shares, eight times the 20-day average of 47,925 shares for this time of day.
  • The relative strength index on the stock was above 70, indicating it may be overbought.
  • Analysts have 19 buy, no hold, and no sell recommendations on the stock.
  • The price target of Rs 1,351.15 represents a 12% increase from the last price

MRPL Soars After Q4 Earnings

Shares of the oil company rose as much as 13.7% to Rs 55.25, the highest since Nov. 1 2019, after turning profitable in the fourth quarter.

According to broking firm Motilal Oswal, MRPL reported Ebitda in line with estimates (at Rs 85 crore), but lower-than-estimated PAT of Rs 330 crore – due to high interest cost. While the refining throughput increased (to a ~107% utilization rate) on the back of increasing demand for petroleum products, it said, current utilisation has declined to ~80% due to the ongoing lockdowns.

We believe that with (a) demand for petroleum products returning to normal worldwide – as Covid lockdowns are phased out completely and (b) the closure of refinery complexes (estimated ~3mnbopd over the next 2–3years), refining margins would recover to the long-term average (of $5-6/bbl).  
Motilal Oswal Note
  • A key concern noted as per the results was the increase in consol. debt by ~35% YoY to Rs 22,750 crore in FY21 (standalone debt up 49% YoY to Rs 15,360 crore) – amid the acquisition of a 100% stake in OMPL and loss during nine months of FY21

Bharti Airtel Slips After Q4 Earnings Miss

Shares of the telecom major dropped as much as 2.3% after it reported a lower-than-expected profit as expenses rose and it lost a part of its revenue due to a new rule that bars operators from charging rivals for incoming calls on their network.

Read the full earnings report here

Here is what analysts are saying:

  • Motilal Oswal Financial Services Ltd. (buy, price target Rs 720):
    • Ebitda up 32% despite tariff increase indicates gains in subscriber addition and average revenue-per-user
    • Home business vertical saw a 10% rise in subscriber additions with increased coverage; subscriber additions likely to rise further in coming quarters
    • Investment of network spectrum, buyback of direct-to-home stake added to total debt; free cash flow generation, deleveraging has been poor in last year despite earnings growth
  • Jefferies India Pvt. (hold, price target Rs 590)
    • A quarter-on-quarter decline in average revenue-per-user is disappointing
    • Expects Bharti to deliver 18% Ebitda CAGR over FY21-23; maintain hold given limited triggers
    • Raises subscriber estimates by 4%
  • Dolat Capital Market Pvt (buy, price target Rs 701)
    • Company best positioned to gain from weak competition and increase in tariffs
    • Outlook for average revenue-per-user and tariff increases will be crucial
    • The addition of 13m subscribers is a key highlight

Read more analysts views here.

Opening Bell: Sensex, Nifty Open Higher In Line With Asian Peers

Indian equity benchmarks climbed, in line with Asian peers, boosted by gains in lenders and metal companies.

The S&P BSE Sensex added 1.1% to 50,122.41 as 29 of its 30 constituents advanced. The gauge is on course for a third day of gains and its highest close since March 16. The NSE Nifty 50 Index added 1.1%. All 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of metal companies. The regional MSCI Asia Pacific Index added 1.4%.

With the earnings season underway, 11 of the 32 Nifty 50 companies that have so far announced quarterly results have beaten or met analysts’ estimates while 20 have missed, according to data compiled by Bloomberg. Tata Motors Ltd. is scheduled to post its results after the market closes today. The shares climbed 1.7%, taking their gain this year to 78%.

The resurgence of Covid cases in India may have peaked and investors are now looking at how quickly the wave descends along with how quickly vaccinations can be deployed, analysts at Morgan Stanley wrote in a note. The analysts expect the ongoing consolidation in the Indian stock market to improve its return prospects into the second half of the year.

Rupee Bond Traders to Await $1.4 Billion State Debt Sale

Indian sovereign bond traders will watch for demand at a Rs 10,500-crore state debt sale after an auction of benchmark 10-year bond was cancelled last week. Bonds may open weaker on a rise in crude prices and U.S. Treasury yields.

  • 10-year yields fell 1bps to 5.97% on Monday
  • USD/INR declined 0.1% to 73.2200 on Monday; rupee has gained 1.2% in Asia’s best performance in May so far
    • Implied opening from forwards suggest spot may start trading around 73.28

Morgan Stanley view:

  • Rupee seems to be supported by a collapse in domestic demand which improves the current account
  • Still, the rupee is likely to underperform given RBI’s dovishness and preference for a weaker currency
  • Holds on to front-end receiver trade as the Covid resurgence should prompt RBI to be on the dovish side
  • Inflation is a concern but the central bank is likely to view it is as a supply-side shock and look through it
  • Continue to expect risk-premium in front-end to be priced out

India Stocks Return Outlook To Improve In Second Half: Morgan Stanley

India stock market’s ongoing consolidation is improving its return prospects going into the second quarter, according to a note from Morgan Stanley.

  • Fundamental and macro indicators including growth, stability, government policy and RBI policy are generally positive for equity returns, strategists led by Ridham Desai writes
  • That said, waning liquidity and valuation support are some of the challenges to the stock market
  • Sees ample alpha opportunity, prefers cyclicals, rate-sensitive stocks, shares exposed to global cyclicals, defensive exporters in the market
  • Sensex target unchanged at 55,000, implying 11% potential upside from Monday close

Also Read: India Stock Return Prospects To Improve In Second Half, Says Morgan Stanley

SGX Nifty Climbs Amid Buoyant Asian Trade

Asian stocks and U.S. futures rose Tuesday as investors weighed the pace of growth as nations vaccinate and economies reopen against a pick-up in virus cases in the region. The dollar dipped.

Taiwan outperformed, jumping as much as 4%, after its biggest rout in more than a year. Japan and South Korea paced gains in a gauge of the region’s stocks. Nasdaq 100 futures outperformed.

India's SGX Nifty 50 Index futures for May delivery rose 1.1% to 15,116, while MSCI Asia Pacific Index gained 1.3%. The NSE Nifty 50 Index added 1.7% Monday to 14,923.15.

Oil was steady near a two-year high as rising optimism around a demand recovery in regions such as the U.S. offset Covid-19 flare-ups in parts of Asia. The dollar edged lower, while Treasuries were stable after retreating.

Bitcoin fluctuated following a volatile weekend that saw comments from Tesla Inc.’s Elon Musk whipsaw prices. Coinbase Global Inc. fell to a record low and below the reference price used in its April direct listing. Gold traded near its highest in almost four months.

Back home, Bharti Airtel, Gland Pharma, MRPL, WABCO India may react as the companies reported quarterly results after the market closed Monday. Tata Motors, Torrent Pharma, Canara Bank, PI Industries are among the companies scheduled to report earnings Tuesday. Foreign investors sold net Rs 2,480 crore of stocks on May 14, according to NSDL website.

Also Read: All You Need To Know Going Into Trade On May 18

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