KEY HIGHLIGHTS
Closing Bell
India stocks rose, with the benchmark index clocking their best two-week gain since February, on investors’ optimism that businesses will reopen in key states and expected stimulus from the government will boost the pandemic-hit economy.
The S&P BSE Sensex climbed 0.6% to 51,422.88, taking its weekly gain to 1.7%. The measure had climbed 3.7% in the week before. The NSE Nifty 50 Index advanced by a similar magnitude to close at a fresh record of 15,435.65, after surpassing its previous high on Thursday.
A steady decline in new coronavirus cases has led state governments to consider gradually lifting localised lockdowns, that hurt sectors including auto, finance, consumer durables, tourism and aviation. The government is said to plan a stimulus package focused on these industries along with small- and medium-sized companies.
Rally In Quality 'Good And Clean' Stocks Just Started: Ambit
Equity markets, unlike investors, are always forward-looking, said Manish Jain.
According to the fund manager at Ambit Asset Management, one of the key reasons why the indices have not corrected despite the second wave is that financial and human impact needs to be differentiated.
“Unlike the first wave, the state governments have been smart about the lockdown and in that respect logistics and production has not completely broken down. Hence, the overall economic impact on the economy and growth is going to be limited. Moreover, with a V-shaped recovery still in the offing and prospects of a double-digit growth still look bright for FY22, We do believe that rally in quality Good and Clean stocks has just started,” Jain wrote in an email.
Given the limited impact on overall economy and growth, we do believe that this rally in quality stocks in equity markets is here to stay. Overall shift will happen from Medium and Small enterprises to market leaders and hence even more of a reason to invest in quality names and market leaders. We do believe that financials, consumer discretionary names and chemicals are some of the sectors that should do well in the short to medium term.Manish Jain, Fund Manager, Ambit Asset Management
IPCA Labs Plunges After Q4 Miss
Shares of the drugmaker plunged as much as 9.4% after it reported net income for the fourth quarter that missed the average analyst estimate.
- Net income Rs 161 crore, +87% YoY, estimate Rs 210 crore
- Revenue Rs 1,110 crore, +3.7% YoY, estimate Rs 1,286 crore
- Company’s revenue from formulations business rose 8% YoY to Rs 770 crore; revenue from India formulations was flat YoY at Rs 430 crore
- API revenue declined 6% YoY to Rs 260 crore
- Total costs Rs 940 crore, -3.4% YoY
- Other income Rs 19.92 crore, +45% YoY
- Ebitda Rs 236 crore, estimate Rs 303 crore
M&M Reports Q4 Net Profit Of Rs 48.44 Crore
Mahindra & Mahindra reported a fourth-quarter profit that met analysts estimates.
- Profit before exceptional item down 43% to Rs 1,002 crore vs profit before the exceptional item of Rs 1,745 crore (Bloomberg estimate: Rs 1,094 crore)
- Profit after exceptional item down 69% to Rs 163 crore vs profit after exceptional item of Rs 531 crore
- Ebitda down 18% to Rs 1,960 crore Vs Rs 2,386 crore (estimate: Rs 1,865 crore)
- Ebitda margin at 14.7% Vs 17% (estimate: 14.6%)
- Revenue Rs 13,338 crore, down 5% QoQ, estimate Rs 12,795 crore
- Total costs Rs 12,377 crore, +43% QoQ
- Other income Rs 130 crore
- Dividend per share Rs 8.75
COMMENTARY AND CONTEXT
- Had exceptional loss of Rs 887 crore in 4Q
- Q4 exceptional loss on asset impairment, provision
- Operating cash generated for FY21 up 119% at Rs 10,020 crore
- Capital allocation actions resulted in a significant decline in exceptional losses
- Says supply constraints limit production and sales
- Approves merger of Mahindra Engineering with itself.
- Shareholders to get 480 Mahindra shares for every 10,000 held.
Canara Bank Approves Up To Rs 9,000 Crore Fund Raising Plan
Canara Bank plans to raise as much as Rs 2,500 crore by selling shares to institutional investors during the year to March 31, according to a statement to stock exchange.
- The Indian state-run lender also plans to raise as much as Rs 4,000 crore via AT1 bonds and up to Rs 2,500 crore selling Tier 2 bonds
- The bank’s board approved the capital raising plan Friday
Rupee Logs Fifth Weekly Advance
The Indian rupee logged a fifth straight week of gains amid a continued rally in stocks and a weaker dollar. Sovereign bonds are steady ahead of a Rs 26,000 crore ($3.6 billion) bond auction.
- USD/INR fell 0.3% to 72.3650; down 0.7% so far this week
- 10-year yields steady at 5.98%; traders also look forward to central bank’s policy review Friday next week
- Finance Minister Sitharaman will chair the GST Council meeting via video conference at 11 a.m.; press briefing scheduled at 7 p.m.
Next week is going to be very eventful for USD-INR, with RBI MPC outcome and the U.S. NFP data. RBI MPC will continue to maintain its accommodative stance but the focus will be on the outlook of the central bank over the spill-over effect of the second wave of COVID-19 on the economic growth. So we can expect some volatility in spot ahead of that. Technically, there has been a sharp fall in USDINR spot and we expect the new trading range to be 72-73.Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services:
Is Vijay Shekhar Sharma’s Paytm IPO-Ready?
Digital payments provider Paytm is mulling a $3-billion initial public offering, the largest ever in India, Bloomberg News reported on Thursday. The Vijay Shekhar Sharma-led startup may tap the Indian capital markets close to the festival season this year, the report said.
Is the 12-year-old Paytm ready to go public?
Catch the must-read story here
Is Gold Set to Tear Even Higher?
Just when the vaccine rollout and economic optimism left gold looking like last year’s metal, it staged a recovery.
Bullion is one of the best-performing commodities this month, erasing almost all of this year’s losses. Investors have been lured back by gold’s appeal as an inflation hedge, while the Federal Reserve maintains its monetary stimulus and says price pressures should prove temporary. Spot gold was little changed at $1,895.41 an ounce on Friday and is up more than 7% in May.
Here’s are four key charts to watch.
Morgan Stanley Focus List Rejig
Morgan Stanley added DMart, Shriram Transport, Havells, Axis Bank and Indigo to its focus list and sector model porftolio.
The changes to our Focus List reflect what we characterise as a stock picker’s market with modest headline index returns but significant churn underneath. They in large part also fit our theme of buying stocks of companies that are sensitive to an economic recovery and interest rates. Our pecking order: domestic cyclicals > rate sensitives > global cyclicals > defensives exporters and large caps> small capsMorgan Stanley Note
The broking firm removed Just Dial, Britannia, Indusind Bank, Bharat Electronics and Mahindra & Mahindra Financial Services to accommodate these additions.
Redington India Jumps To Record After Q4 Profit Beats Estimates
Redington India climbs as much as 20% to its highest level since its debut in Feb. 2007 after fourth-quarter net income and revenue beat analysts’ estimates.
- Best performer on S&P BSE SmallCap, S&P BSE 500, NSE Nifty 500 indexes
- Trading volume >3.3x 3-month full-day average
- Net income Rs 303 crore vs. Rs 119 crore YoY, estimate Rs 162 crore
- Revenue Rs 15,504 crore, +22% YoY, estimate Rs 15,119 crore
- Total costs Rs 15,150 croe, +21% YoY
- Dividend per share Rs 11.60
Reliance Industries Up Most In 10 Weeks
Reliance Industries Ltd. rose 3.4%. Trading volume was triple the average for this time of day.
- The stock was the best performer among its peers.
- Trading volume was 4.78 million shares, triple the 20-day average of 1.73 million shares for this time of day.
- Reliance Industries trades at 24 times its estimated earnings per share for the coming year. It trades at 29 times trailing EPS. The company is priced at 1.9 times book .
- Analysts have 25 buy, eight hold, and four sell recommendations on the stock.
- The price target of Rs 2,201.54 represents a 7.7% increase from the last price
At the current stock price, valuing the Energy business at long-term average multiples, we are left with Rs 1,150/share as imputed of RIL’s stake in Jio and Retail. This is inline with the valuation offered by PE funds that bought stakes in Jio and Retail in Q1FY21. In our view, sustained strong petrochemical performance improves the likelihood of O2C stake sale in FY22. This could lead to a reversal of the 40% Nifty underperformance. Our price target (Rs 2,580) represents 30% upside.Jefferies Note
Sun Pharma Worst On Sensex Post Q4 Earnings
Shares of the drugmaker fell as much as XX% after it reported a lower-than-expected quarterly profit as it took a one-time charge amid sluggish growth in the U.S., its biggest overseas market.
India’s largest drugmaker posted a net income of Rs 894 crore ($123 million) for the quarter ended March 31 compared to an average profit estimate of Rs 1,371 crore based on a Bloomberg survey of brokerages. Revenue also missed expectations, rising 4.2% to Rs 8,520 crore, according to an exchange filing Thursday.
Sun said in an earnings statement that it took a one-time charge of Rs 673 crore. The drugmaker has accounted for regulatory and legal expenses due to antitrust probes on its units in the U.S. and Europe, according to a footnote in its exchange filing. [To read the full earnings report, click here]
Macquarie’s Take
- Sun Pharma expects to grow in all segments — speciality, biosimilars and U.S. generics — in FY22.
- With increasing face-to-face interactions and participation in conferences, Sun remains confident of growing its share in dry eye medicine Cequa (currently in low-single digits).
- Sun has been more active in the second Covid-19 wave with launches like Remdesivir, Itolizumab, Favipiravir along with Molnupiravir and Baricitinib in the offing, which poses upside risk to our FY22 India growth forecast of 16% YoY.
- We expect field force expansion and efforts to fortify brands to lead outperformance even post COVID-19.
- After years of hesitancy, Sun will be developing biosimilars with an eye on the third wave. While it is too early to judge Sun's ability to be successful in biosimilars, being a late entrant, the going will not be easy.
- Sun is also looking at products that have patent expiries beyond 2027, where it could be among the first companies to launch.
- We increase our FY22/23 earnings per share target by 5-7% on higher domestic and specialty sales and raise the target price by 12% to Rs 782.
Opening Bell: Nifty Opens At Record High; Sensex Jumps 300 Points
Indian equity benchmarks opened higher, in line with Asian peers, as investors remained optimistic about a pickup in business recovery as the nation emerges from the world’s worst coronavirus outbreak.
The NSE Nifty 50 rose as much as 0.8% to 15,455.55, an all-time high for the index. The gauge's previous record high was 15,431.75 on Feb. 16. It is nearly 10% so far in 2021, outperforming the MSCI Asia Pacific Index by about six percentage points.
The S&P BSE Sensex advanced as much as 0.7% to 51,477.05, as investors take positions on the derivative contracts for June. Eighteen of the 19 sector indices compiled by BSE Ltd. gained, led by a gauge of metal companies.
Investors are counting on a resumption of business activities as a steady decline in new coronavirus cases prompts key states to gradually lift strict curbs on movements. The daily caseload for the nation has more than halved compared with counts in excess of 400,000 at the start of the month.
Rupee Bond Traders to Await Debt Sale, FM’s Presser
Bond traders in India will look forward to a Rs 26,000 crore ($3.6 billion) bond auction and comments by Finance Minister Nirmala Sitharamanafter a meeting of the goods-services-tax panel as concerns grow that the government may need to borrow more than planned to compensate states for the lost revenue.
- 10-year yields rose 2bps to 5.99% on Thursday
- Finance Minister Sitharaman will chair the GST Council meeting via video conference at 11 a.m.
- USD/INR fell 0.3% to 72.5850 on Thursday
SGX Nifty Climbs Amid Buoyant Asian Trade
Asian stocks rose along with U.S. equity futures after solid economic data and President Joe Biden’s federal spending plans spurred a Wall Street rally in cyclical shares.
Japanese shares led gains, Hong Kong pushed higher aided by JD Logistics Inc.’s debut and China fluctuated. India’s SGX Nifty 50 Index futures for June delivery rose 0.4% to 15,476.00, while MSCI Asia Pacific Index +0.9%. The NSE Nifty 50 Index added 0.2% Thursday to 15,337.85, a record high close.
The dollar inched up and the yen fell as Japan recommended extending a state of emergency that spans Tokyo to curb infections. China signalled the yuan’s recent appreciation is too rapid with a weaker-than-expected reference rate.
Elsewhere, oil climbed to a more than two-year peak and the Bloomberg Commodity Spot Index rose the most in about two weeks. Bitcoin continued to trade below the $40,000 level.
Back home, Sun Pharma, Eicher Motors, Redington India, Metropolis, IRB Infra, HEG, Goodyear may react as the companies reported quarterly results after the market closed Thursday. Mahindra, Glenmark Pharma, Karur Vysya, IPCA Lab, City Union Bank, HeidelbergCement are among the companies scheduled to report earnings Friday. Foreign investors bought net Rs 1,495 crore of stocks on May 25 and May 26, according to NSDL website.
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