Employees work at computers at a brokerage firm in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Nifty Halts 4-Day Gains As Oil Stocks Selloff

Market Wrap

Closing Bell

Most Indian equity benchmarks declined as shares of oil marketers sold off on reports the government may ask these companies to absorb fuel price increase.

The S&P BSE Sensex was little changed at 32,186 while the NSE Nifty 50 Index fell 0.14 percent to 10,079. Bharat Petroleum Corporation Ltd., led the declines on the Nifty, falling 6.45 percent — the most in two years.

Sentiment was also soured after data released late Tuesday showed inflation accelerated to the fastest since March and exceeded expectations, diminishing hopes of an RBI interest rate cut.

The Nifty’s in a phase of consolidation and is likely to remain in it for the short-term, said Pushkar Kanetkar, assistant vice president (technical research) at GEPL Capital. “We are seeing profit booking at the 10,0130 levels, the record high of the index, which is also the big resistance right now,” he told BloombergQuint by phone.

Kanetkar advised against making any fresh investment at current levels. “One can buy if the Nifty drops to 9850 or thereabouts. But remain stock specific.” He recommended buying two auto stocks – Ashok Leyland and Motherson Sumi.

Oil Stocks Drag Nifty Lower

Oil stocks slide after media report suggests government may ask state oil PSUs to absorb fuel price increase.

  • BPCL -6%
  • HPCL -4.9%
  • Indian Oil Corp. -4.2%

Credit Suisse India Outlook

European Shares Little Changed

Market Check

The NSE Nifty 50 Index was trading close to its all-time high of 10,137 led by gains in index heavyweight Reliance Industries and Sun Pharma.

Markets At Lunch

8K Miles Software Slumps After Promoter Pledges Shares

Shares of the Chennai-based software developer fell as much as 14.4 percent to R381, its lowest in over two years.

The promoter of the company, Suresh Venkatachari pledged 0.49 percent stake in the company with IFCI and Indian Bank.

The Mutual Fund Show

Nifty Faces Resistance Near 10,137: Amar Singh

Trend for the markets remain positive in the near term, Amar Singh, head of advisory at Angel Broking said. “Fresh long positions should be created if Nifty closes above 10,140,” Singh told BloombergQuint by phone.

On the downside, he said, support for Nifty was around 9,970-10,000 levels, while on the upside, the index faces resistance near all-time high of 10,137.

IPO Market Update

  • Capacit'e Infraprojects day 1: IPO subscribed 20 percent till 12 noon
  • Matrimony.com day 3: IPO subscribed 2.1 times till 12 noon

Source: NSE website

Dr Reddy's Labs Rises Nearly 3%

Shares of the drugmaker rose as much as 2.74 percent, the most since September 1, to Rs 2,225.

Its subsidiary Aurigene Discovery Technologies launched second phase of clinical trial for drugs used in treatment of cancer and inflammatory diseases, the company said in a stock exchange filing.

Power Stocks Jump Ahead of Coal Supply Auctions

Shares of power generators including Tata Power, JSW Energy and Lanco Infratech rose ahead of auctions on Wednesday to secure coal supply from Coal India.

Tata Power gained as much as 7 percent in Mumbai, the biggest intra-day increase since July 10; JSW Energy rose as much as 5.8 percent, while Lanco jumped as much as 4.8 percent.

Block Deal Alert

  • Idea Cellular has 42.3 lakh shares (0.11 percent equity) change hands in three block deals at Rs 80.25-Rs 80.70 each. (stock up 5 percent at Rs 82.90)

Buyers and sellers were not immediately known.

Source: Bloomberg

Reliance Industries Surges To Record High

Shares of the Mukesh Ambani-led company surged as much as 3.25 percent to fresh record high of Rs 850.50.

Trading volume was 3.8 times its 20-day average.

V2 Retail Surges On June Quarter Earnings

Shares of the Delhi-based retailer jumped as much as 6.2 percent, the most since September 11, to Rs 474.65 after it reported June quarter earnings.

Key Q1 highlights

  • Net profit rose 85 percent to Rs 8.68 crore
  • Rvenue jumped 31 percent to Rs 142.25 crore

Capital First At 9-Year High After RBI Hikes Foreign Investment Limit

Shares of the non-banking finance company jumped as much as 3.75 percent to Rs 839, its highest level in over nine years after the Reserve Bank of India hiked foreign investment limit in the company to 50 percent from 24 percent of its paid-up capital.

Shemaroo Entertainment Surges Post Q1 Earnings

Shares of the Mumbai-based entertainment company jumped as much as 11 percent, the most since August 29, to Rs 385 post June quarter earnings.

Key Q1 Highlights

  • Revenue up 8 percent to Rs 104 crore versus Rs 96 crore
  • EBITDA up 10 percent to Rs 33 crore versus Rs 30 crore
  • Margins at 31.7 percent versus 31.3 percent
  • Profit up 14 percent to Rs 16 crore versus Rs 14 crore

Tata Power Surges Most In Two Months

Shares of the Mumbai-based company jumped as 7 percent, the most since July 10, to Rs 86.70 after its promoters Tata Sons indicated at increasing stake in the company.

Meanwhile, credit rating agency CARE Ratings reaffirmed its 'CARE AA STABLE' rating on company's long-term debt instruments, Tata Power said in a stock exchange filing.

Bond Yields Jump

The yield on 6.79 percent government bonds due May 2027 rose 3 basis points to 6.59 percent in early trade. The rupee slid 0.1 percent to 63.9950 against the dollar, halting a two-day gain.

Retail inflation quickened to 3.36 percent in August, according to an official report released after close of markets Tuesday; that was faster than the 3.24 percent median estimate in a Bloomberg survey and July’s 2.36 percent pace.

It expects headline CPI inflation to inch higher toward 4.7 percent by March, as adverse base effect, mean reversion of food prices and impact of pay hike for federal employees begin to seep in.

The RBI will pause on rates for the rest of FY18, Kotak Mahindra Bank reiterated its call in a note.

Opening Bell

Indian equity benchmarks rose for a fifth session, reflecting gains in global markets, while bond yields jumped as hopes of a RBI interest rate cut diminished on rising inflation.

The S&P BSE Sensex was little changed at 32,171 and the NSE Nifty 50 Index was at 10,090.

Sixteen out of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Power Index's 0.7 percent gain. On the other hand, the S&P BSE Capital Goods Index snapped its four-day winning streak, declining 0.3 percent.

Money Market Heads-Up

Pressure is seen on bonds as August inflation rate accelerated to the fastest since March, exceeding expectations ahead of the central bank’s policy review in October. CPI quickened to 3.36 percent in August, as against Bloomberg estimate of 3.24 percent.

A point to be noted here is that this is the second consecutive month of price surge, which is close to the RBI's inflation expectation at between 2 to 3.5 percent till September this year. After declining 0.4 percent so far this week, the rupee could halt two days losses today due to broad dollar weakness.

F&O Cues

  • Nifty Sep Futures closed with a premium of 15 points Vs 20 points
  • Sep Nifty Futures open interest up 1 percent, Bank Nifty open interest up 7 percent
  • India VIX closed lower by 4.8 percent at 11.7
  • Sep series highest Call base shifts to 10,200 (open interest at 38.3 lakh, up 5 percent)
  • Sep series highest Put base at 9900 (open interest at 63 lakh, open interest up 13 percent)
  • Call strikes 9,900,10,000 see open interest unwinding, 10,200 sees open interest addition
  • Put strikes 10,000, 10,100, 10,200 see open interest addition

Stocks To Watch

  • Overseas investment limit in Capital First raised to 50 percent from 24 percent
  • Tata Chemicals to sell 4.31 crore shares of Tata Global Beverages to Tata Sons
  • Tata Global Beverages to sell 1.05 crore shares of Tata Chemicals to Tata Sons
  • Dr Reddy’s unit Aurigene and Curis announce the start of Phase II trials of its CA-170 program
  • S H Kelkar board approves acquisition of VN Creative Chemicals
  • Rane Holding acquired 10.96 lakh shares in Rane Madras at Rs 547 each. Holding increased to 60.44 percent post the acquisition
  • Wipro Lighting concludes agreement with pureLiFi
  • NBCC signs pact with Belarus' BZS for infra, energy projects
  • Shree Pushkar board meet on October 3 to consider preference shares to promoters
  • Indian Bank to appoint merchant banker for stake dilution

For complete list of stocks to watch, click here

Brokerage Radar

UBS on TCS

  • Maintains Buy with target price of Rs 2,800
  • Lack of internal challenges could help TCS gain market share over peers
  • TCS as best placed to address the transformation to digital services
  • TCS benefitting from high employee satisfaction

Credit Suisse on Oil & Gas

  • Maintains rating and target price of Petronet, GAIL, Indian Oil and BPCL
  • Exxon-Gorgon deal suggest a $380 million present gain to Indian buyers
  • GAIL swapping 60 percent U.S. LNG does not mean zero loss

BoFAML on GAIL India

  • Maintains Underperform with target price of Rs 302
  • GAIL swapped 3.5MT using mix of time and destination swaps
  • Meaningful capacity expansion in fertiliser unlikely before FY21
  • Time swaps avert pricing risk; destination swaps lower freight cost

IPO Market Update

  • Matrimony IPO Day 3. Issue subscribed 1.36 times
  • Capacit'e Infraprojects IPO opens. Issue price Rs 245 - Rs 250
  • SBI Life IPO to open on September 20, closes on September 22. Price band set at Rs 685 - Rs 700 per share
  • Bandhan Bank appoints five merchant bankers for proposed IPO

Earnings Reaction To Watch

Jet Airways (Q1FY18 YoY)

  • Revenue up 9.9 percent at Rs 5,649 crore versus Rs 5,139 crore
  • EBITDA down 50.3 percent at Rs 144 crore versus Rs 289.5 crore
  • Margin at 2.5 percent versus 5.6 percent
  • Profit up 106 percent at Rs 53.5 crore versus Rs 26 crore

Future Lifestyle Fashions (Q1FY18 YoY)

  • Revenue up 28.8 percent to Rs 1,032 crore versus Rs 801 crore
  • EBITDA up 15.5 percent to Rs 85.5 crore versus Rs 74 crore
  • Margin narrowed to 8.3 percent versus 9.2 percent
  • Profit up 30.6 percent Rs 23.5 crore versus Rs 18 crore

Shemaroo (Q1FY18 YoY)

  • Revenue up 8 percent to Rs 104 crore versus Rs 96 crore
  • EBITDA up 10 percent to Rs 33 crore versus Rs 30 crore
  • Margins at 31.7 percent versus 31.3 percent
  • Profit up 14 percent to Rs 16 crore versus Rs 14 crore

Asahi Songwon Colours (Q1FY18 YoY)

  • Revenue down 5.8 percent at Rs 65 crore versus Rs 69 crore
  • EBITDA down 50 percent at Rs 6 crore versus Rs 12 crore
  • Margin at 9.4 percent versus 17.6 percent
  • Profit down 25 percent at Rs 3 crore versus Rs 4 crore

Kesar Terminals (Q1FY18 YoY)

  • Revenue down 4.5 percent at Rs 10.7 crore versus Rs 11.2 crore
  • EBITDA down 20.6 percent at Rs 5.4 crore versus Rs 6.8 crore
  • Margin at 50.5 percent versus 60.7 percent
  • Profit down 38 percent at Rs 3.7 crore versus Rs 6 crore

Mandhana Retail (Q1FY18 YoY)

  • Revenue up 46.8 percent at Rs 71 crore versus Rs 48 crore
  • EBITDA down 11.5 percent at Rs 4.6 crore versus Rs 5.2 crore
  • Margin at 6.5 percent versus 10.8 percent
  • Net profit down 14.3 percent at Rs 2.4 crore versus Rs 2.8 crore

Earnings To Watch

  • AXISCADES Engineering
  • Cheviot
  • CMI
  • Hindustan Motors
  • ISMT
  • ITI
  • Kopran
  • Lovable Lingerie
  • Minda Corp
  • Sandur Manganese
  • State Trading Corporation of India
  • Suprajit Engg
  • Transformers & Rectifiers
  • WPIL
  • Walchandnagar Industries

BQ Heads-Up!

Economic Data Check

  • The Index of Industrial Production (IIP) recovered in July after dealers and wholesalers began re-stocking after implementation of the Goods and Services Tax
  • IIP rose to 1.2 percent in July compared with contraction of 0.2 percent in June
  • Retail inflation rose for the second straight month on rising vegetable prices
  • Consumer price index in August rose 3.36 percent versus 2.4 percent rise seen in July
  • Economists polled by Bloomberg had expected inflation to rise to 3.24 percent

Talking Points

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, declined 0.15 percent to 10,092.

Asian stocks extended gains and Treasuries held on to declines on bets that economic growth is strong enough to withstand heightened geopolitical tensions.

The dollar held onto gains ahead of U.S. inflation data later this week that could impact the timing of the next Federal Reserve interest-rate hike. Oil rose as OPEC and its allies are discussing an extension of output curbs.

Commodity Cues

  • West Texas Intermediate crude rose 0.1 percent to $48.29 a barrel, up for a third day. The Organization of Petroleum Exporting Countries OPEC and its allies are discussing extending by more than three months the oil production cuts that expire in March 2018.
  • Gold was at $1,331.13 an ounce.
  • ICE Sugar ended lower at 14.54 cents a pound; down 2.02 percent
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