Employee monitoring securities at the BSE (Photographer: Dhiraj Sing/Bloomberg)

Sensex, Nifty Snap Three-Day Winning Streak As Banks Drag

Closing Bell

Indian equity benchmarks snapped their three-day winning streak led by losses in banking shares.

The S&P BSE Sensex fell 0.28 percent to 31,834 and the NSE Nifty 50 Index declined 0.32 percent to 9,985. The broader markets also came under selling pressure with the S&P BSE MidCap index declining 0.8 percent and the S&P BSE SmallCap Index falling 1 percent.

Fourteen out of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Realty Index's 2 percent drop. On the other hand, the S&P BSE Telecom Index was the top sectoral gainer, up 2.8 percent.

Countdown

Indian Energy Exchange IPO Hits Regulatory Glitch

Indian Energy Exchange Ltd.’s fund raise from anchor investors declined by more than half to Rs 130 crore after India’s largest power trading platform revised the pre-IPO allotment amid confusion over foreign investment norms.

Some of the custodians of foreign investors objected to the interpretation of regulatory norms regarding their investment, Satyanarayan Goel, managing director and chief executive officer at IEX, told BloombergQuint over the phone. IEX is awaiting clarification from the Securities and Exchange Board of India, Goel said.

Lakshmi Vilas Bank Falls As Asset Quality Worsens In Q2

Shares of the private sector lender fell as much as 6 percent, the most since September 25, to Rs 137.5 after it reported weak set of September quarter earnings.

Key Q2 Highlights:

  • Net profit falls 84 percent to Rs 10.5 crore from Rs 64.84 crore during the same period last year
  • Goss non-performing assets as a percentage of total advances rise to 5.5 percent compared with 3.78 percent in previous quarter

Jai Bala To BloombergQuint

  • Bullish on markets and do not see Nifty going below 9,867
  • Nifty can go up to 10,500-10,700 and the current dip is a welcome opportunity in the market
  • Bullish on Tata Elxsi, the stock can go above Rs 1,100 and it is unlikely to go below Rs 790
  • Bullish on Petron Engineering and as long as it holds Rs 110 on the downside it can go up to Rs 244
  • DHFL can stage a correction in the near term and investors can look to book profits

Stocks Gaining On Heavy Volumes

  • Bajaj Corp: The Rajasthan-based hair care product maker jumped as much as 3.35 percent, the most since September 29, to Rs 413. Trading volume was 31.6 times its 20-day average.
  • Finolex Cables: The Pune-based electrical components maker rose as much as 9.14 percent, the most in over four months, to Rs 612. Trading volume was 22.2 times its 20-day average.
  • Century Plyboard: The Kolkata-based plyboard and veneer maker gained as much as 11 percent, the most in two months, to Rs 2273. Trading volume was 16.6 times its 20-day average.
  • Ingersoll Rand: The Bangalore-based industrial equipment maker jumped as much as 11 percent, the most in nearly five months, to Rs 858. Trading volume was 11.3 times its 20-day average.

Banking Shares Fall

Banking shares came under selling pressure in afternoon deals. The NSE Nifty Bank Index declined nearly 1 percent led by losses in Punjab National Bank, IDFC Bank, Yes Bank and Canara Bank.

Fab Four Stocks Of The Day

  • Bharti Airtel: The stock gained close to 5 percent, the most in over two months, to Rs 403 after a KKR-led consortium was in talks to acquire the company’s subsidiary Bharti Infratel and Indus Towers for around $11 billion, The Times of India newspaper reported citing people familiar with the matter.
  • DCW Ltd: The stock gained the most in over a year to hit a lifetime high of Rs 46.20 after the company started commercial production of Clhlorinated Poly Vinyl Chlride (CPVC) at its Tamil Nadu unit.
  • Sreeleathers: The stock gained as much as 10 percent to Rs 207.6 after company announced that it will consider the proposal of share buyback.
  • Sical Logistic: The stock gained the most in over five months to Rs 222 after the company said that it will acquire the 26 percent stake in its subsidiary Sical Iron Ore Terminals from MMTC.

Market Check

  • Indian equity benchmarks came off intraday highs as banking heavyweights came under selling pressure.
  • S&P BSE Sensex erased gains to trade unchanged at 31,923 and NSE Nifty 50 Index also erased gains to 10,017.
  • NSE Nifty PSU Bank Index was the top sectoral loser, down 1.6 percent
  • Nifty Bank also erased gains to trade 0.5 percent lower
  • From the Nifty 50 basket of shares 31 were trading lower while 19 were among gainers
  • State Bank of India, Yes Bank, Indiabulls Housing Finance, Kotak Mahindra Bank and Tata Steel were among the losers

Power Lunch

IPO Update

Indian Energy Exchange Ltd.’s Rs 1,000 crore IPO was subscribed 64 percent as of 1 p.m. on final day of subscription.

  • Portion reserved for qualified institutional buyers subscribed 2 percent
  • Retail portion subscribed 1.53 times
  • Source: Company PR

Oil Marketing Companies Rise

Shares of the state-run oil marketing companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum were trading higher.

#Ask BQ

European Shares Trade Mixed

IPO Watch

General Insurance Corporation Of India's Rs 11,000 crore IPO was subscribed 0.71 times as of 12:00 p.m. on first day of the issue.

  • Retail portion subscribed 0.02 times
  • Portion reserved for qualified institutional buyers subscribed 1.41 times
  • Portion reserved for employees subscribed 0.04 times
  • Source: Company PR

Goa Carbon Profit More Than Doubles In September Quarter

Shares of the Goa based diversified chemical maker jumped as much as 4.6 percent, the most since October 10, to Rs 652.40.

Key Q2 highlights:

  • Net sales jumps 90.6 percent to Rs 150.64 crore
  • Total expenses up 78 percent to 130.66 crore
  • EBITDA jumps 291 percent to Rs 25 crore
  • EBITDA margin at 16.6 percent versus 8 percent during the same period last year
  • Net profit up 191 percent at Rs 13.76 crore versus Rs 4.72 crore YOY

Hot Money

Prakash Industries Gains After Rakesh Jhunjhunwala Raises Stake

Shares of the Delhi-based steel maker jumped as much as 5.8 percent to Rs 137 after well-known investor Rakesh Jhunjhunwala increased his stake in the company.

Rakesh Jhunjhunwala increased his stake in the company to 1.64 percent from 1.01 percent in June quarter.

Cochin Shipyard Extends Gains As ICICIDirect Calls It A ‘Quality Play’

ICICI Direct initiated coverage on Cochin Shipyard Ltd. with a ‘Buy’ rating, calling it a ‘quality play’ on improving business mix, healthy order book, a strong balance sheet, and superior return profile.

Shares of the South India-based shipbuilder rose as much as 3.5 percent following a 10.9 percent jump on Tuesday after the company won an order worth Rs 5,400 crore.

Gujarat Borosil Gains On Opening First 2MM Tempered Solar Glass Facility

Shares of the Mumbai-based sheet glass maker jumped as much as 11.14 percent, the most since June 5, to Rs 99.80 after the company opened first glass melting and production facility for fully tempered 2 mm glass.

Block Deal Alert

  • Oberoi Realty has 20 lakh shares (0.44 percent equity) change hands at Rs 422 per share in two blocks,

Buyers and sellers were not immediately known

Source: Bloomberg

DCW Surges On Starting Production Of Chlorinated Poly Vinyl Chloride

Shares of the Mumbai-based chemical maker jumped as much as 13.37 percent, the most in over a year, to Rs 46.20.

The company commenced commercial production of Chlorinated Poly Vinyl Chloride (CPVC) at its units in Tamil Nadu, DCW said in a stock exchange filing post mosrket hours on Tuesday.

L&T Gains After Arm Wins Order Worth Rs 1,150 Crore

Shares of infrastructure construction company jumped as much as 1.16 percent, the most since October 9, to Rs 1,156 after its subsidiary L&T Hydrocarbon Engineering won an order worth Rs 1,150 crore from ONGC.

Key order highlights:

  • Contract won against international competitive bidding
  • Encompasses total EPCIC – engineering, procurement, construction, installation and commissioning for the project
  • The project is part of ONGC’s strategy to extract gas from Daman field

Lupin Flat After Acquiring Symbiomix Therapeutics

Shares of the Mumbai-based drugmaker were trading 0.12 percent higher at Rs 1,062 after completing acquisition of Symbiomix Therapeutics for $150 million in cash.

Lupin says:

  • Acquisition funded internally
  • Symbiomix deal includes $50 million of upfront payment

The F&O Show

GM Breweries Soars 20% On Q2 Earnings

Shares of the Mumbai-based liquor maker jumped as much as 20 percent, the most in over two years, to Rs 675.95 after the company reported strong earnings in September quarter.

Key Q2 highlights:

  • Profit rose 45.5 percent to Rs 16 crore
  • Revenue rose 23.4 percent to Rs 385 crore
  • EBITDA up 56 percent to Rs 25 crore
  • Margin expanded to 24.8 percent from 18.4 percent
  • Recorded growth in profits after three quarters of decline
  • Good sales growth, cost optimization and lower depreciation helped in reporting profit

Bharti Infratel Gains On Buzz Of Tower Deal

Shares of the Gurgaon-based telecom infrastructure company jumped as much as 3.2 percent, the most since September 29, to Rs 412.70.

A consortium of investors led by private equity firm KKR and Canadian Pension Plan Investment Board (CPP) are sewing up the biggest consolidation deal in telecom infrastructure by helping Bharti Infratel acquire Indus Towers, The Times of India newspaper reported citing people aware of the matter.

Block Deal Alert

  • Bajaj Corp has 15.6 lakh shares change hands in a block deal

Buyers and sellers were not immediately known

Source: Bloomberg

Indian Open

Gautam Chhaochharia Of UBS To BloombergQuint

  • Mortgage finance may see moderation
  • Auto sales have been reasonably good
  • Expect earnings growth of 6-7 percent
  • Metals, mining and two-wheeler stocks can stage positive surprise
  • Expect muted results for IT sector
  • Corporates are positive on second half of current financial year
  • Advising caution to clients on entering small mid-caps at current levels
  • Selectively looking at ideas in pharma space
  • This quarter will be tricky due to GST
  • Seeing some positive impact from re-stocking
  • Earnings growth of 19 percent looks stretched
  • Expect earnings growth cuts going ahead

Opening Bell

Indian equity benchmarks edged higher led by gains in Axis Bank, Bharti Airtel and Tata Steel.

The S&P BSE Sensex rose 0.3 percent to 32,024 and the NSE Nifty 50 Index advanced 0.28 percent to 10,045. The gains were broad-based as the S&P BSE MidCap and S&P BSE SmallCap Indices rose 0.6 percent each.

All the 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Telecom Index's 1.4 percent gain.

G Chokkalingam Of Equinomics Research To BloombergQuint

  • Within few weeks and months there can be a correction in zinc prices
  • Whirlpool has much bigger business than Dixon Technologies and is trading at a discount to Dixon Technologies
  • Axis Bank is cheapest banking stock when compared on price to book value basis
  • We have strong subscribe rating on GIC as it is available at cheap valuations compared to global peers

Money Market Heads-Up

Sovereign bond markets advanced on Tuesday, snapping four sessions of decline as higher yields attracted buyers. Yield on the 10-year note fell 4 basis points to 6.74 percent. On the horizon is the September consumer price data which will help gauge the inflation trajectory. However, the market is positioned for a long pause as the central bank stated it expects inflation to climb up into a higher band. For the day, yield on the benchmark bond is seen moving in a range of 6.72-6.78 percent.

Currencies in Asia are trading slightly lower as an index of dollar strength rose after last three sessions of decline. The rupee too could face some pressure in the opening hour. Importantly, Mizuho Bank, the third most accurate rupee forecaster in Bloomberg's quarterly ranking sees the risk of rupee sliding below 66 per dollar as the chances of higher U.S. interest rates is supporting the greenback. For the day, a range of 65.25-65.45 a dollar is likely.

F&O Cues

  • Nifty October Futures closed with a premium of 19.7 points from 27.5 points at 10,035.7
  • October Futures: Nifty open interest up 2 percent; Bank Nifty open interest up 1 percent.
  • India VIX lower by 2.4 percent at 11.11
  • October series highest Call base at 10,000 (open interest at 45.5 lakh, up 4 percent).
  • October series highest Put base at 9800 (open interest at 58.3 lakh, up 1 percent).
  • October Call strikes 10,000 10,100, 10,200 see open interest addition.
  • October Put strikes 9900, 10,000 see open interest addition.

Earnings Reaction To Watch: GM Breweries

  • Profit rose 45.5 percent to Rs 16 crore
  • Revenue rose 23.4 percent to Rs 385 crore
  • EBITDA up 56 percent to Rs 25 crore
  • Margin expanded to 24.8 percent from 18.4 percent

Earnings To Watch

  • Goa Carbon
  • Kirloskar Pneumatic
  • Lakshmi Vilas Bank
  • Network 18
  • TV18 Broadcast

BQ Heads-Up

Bulk Deals

Lumax Industries

  • Ashish Kacholia bought 62,837 shares or 0.7 percent stake at Rs 1395.36 each

Strides Shasun

  • Steadview Capital Mauritius sold 6.37 lakh shares or 0.7 percent stake at Rs 861.19 each

SORIL Holdings and Ventures Ltd

  • Anil Bansilal Lodha sold 6.95 lakh shares or 1.4 percent stake at Rs 71.6 each (average). He’d sold 7 lakh shares on Monday.

GHCL Limited

  • Ocean Dial Gateway sold 5.81 lakh shares or 0.6 percent stake at Rs 230.58 each. They’d sold 7.49 lakh shares (0.8 percent) on Monday.

Tyche Industries

  • Garnet International bought 63,000 shares or 0.6 percent stake at Rs 116.2 each. Stock locked in 20 percent upper circuit.

IPO Watch

  • MAS Financial Services IPO subscribed 128 times on final day. NII category subscribed 378 times.
  • Indian Energy Exchange IPO continues on day 3. The issue has been subscribed 0.43 times.
  • General Insurance Corporation of India: IPO opens. Issue Price of Rs 855 - Rs 912

Ex-Date/Splits/Circuit Revisions

  • Tata Tele and TVS Electronics: Circuit filter revised to 10 percent
  • Kwality Pharma: Ex-date for 1:1 bonus
  • Alexander Stamps: Ex-date for 1:5 bonus
  • Can Fin Homes: Last trading day before stock split from Rs 10 to Rs 2 per share
  • Kallam Spinning Mills: Last trading day before 1:4 bonus
  • Karur Vysya Bank: Last trading day before going ex-rights
  • Talbros Engineering: Last trading day before 1:1 bonus

Brokerage Radar

ICICI Direct on Cochin Shipyard

  • Initiates Buy Rating with a price target of Rs 725
  • Strong order book, bidding pipeline of orders worth Rs 11,900 crore a natural beneficiary of large & critical government projects places company in a sweet spot
  • Expect Revenue, EBITDA and Net Profit to grow at CAGR of 18 percent, 14 percent and 8 percent respectively over FY17-20
  • Shifting focus on ship-repair orders which is two-times profitable than shipbuilding business
  • Company to deliver negative cash flow over FY18-20 due to heavy capex, but dividend payout to remain healthy
  • Positives:- core competency in both shipbuilding & ship repair, debt-free status, best-in-class working capital cycle and reliability in execution

CLSA on Jubilant Food

  • Maintains Buy with price target of Rs 1,900
  • 12 percent GST without input credit can hike Jubilant menu prices by 5 percent
  • GST panel is likely to finalise this in two weeks; Important event for Jubilant
  • Await clarity on GST which could have meaningful negative impact on earnings in near term

JPMorgan on Coal India

  • Maintains Neutral Rating with price target of Rs 290
  • Final wage agreement to have an annual impact of Rs 5,700 crore which is higher than expected
  • Coal India would require large price hike to pass on the cost
  • With sales volumes of 600 MT, implied price hike comes to Rs 95/tonne
  • There is still additional gratuity burden yet to hit the financials
  • Stock to trade higher with wage cost behind and large annual dividend likely to be announced over the next 3-4 months

Morgan Stanley on Coal India

  • Maintains Underweight with price target of Rs 221
  • Wage hike settled at two-times provisions
  • Expect cash outflow of Rs 8,000 crore, 26 percent of FY17 cash balance, implying downside on FY18 dividend payout
  • Management to lower the impact in medium term by various cost optimisation methods

Motilal Oswal on Coal India

  • Maintains Buy; hiked price target to Rs 335 from Rs 305
  • Wage hike to impact earnings by 6 percent in FY19 estimates; Average hike is 22 percent versus estimates of 18 percent
  • Expect EBITDA and EPS to grow at CAGR of 15 percent and 18 percent respectively over FY17-19
  • Volume growth of 6.7 percent and operating leverage to drive EBITDA growth
  • Triggers:- shutting down loss making mines, cost optimisation and price hikes

CLSA on Axis Bank

  • Upgrade to Buy from Outperform; hiked price target to Rs 620 from Rs 600
  • Valuations are attractive and can rerate as asset quality normalises
  • Retail business continues to grow well; Operating efficiencies to aid earnings
  • Expect normalisation of asset quality to lift return on equity to mid-teens over FY19-20
  • Expect stabilisation and easing out of new stress loan formation from FY19 onwards
  • Normalisation of credit costs and bottoming of margins to aid earnings from H2FY18
  • Cost growth and cost/income ratio higher than large private banks; 100 basis points reduction in FY19 can lift estimates by 3 percent.

Credit Suisse on Pharma

  • Prefer stocks with low price erosion risk and firms transitioning beyond generics
  • Sun and Cipla have lower price erosion risk Vs Dr Reddy’s
  • Dr Reddy’s has highest price erosion risk at 12 percent each over the next 2-3 years
  • Outperform on Sun Pharma: Transition to specialty should result in 20 percent CAGR from FY19-22
  • Outperform on Cipla: Beneficiary of faster approvals in the U.S.
  • Underperform on Dr Reddy’s: High product concentration; Nearing overvalued
  • Underperform on Lupin: High concentration; No near-term material launches

Citi on Indraprastha Gas

  • Maintains Buy; hiked price target to Rs 1,720 from Rs 1390; Potential Upside 15 percent
  • Expect earnings to grow at CAGR of 18 percent over three years
  • Value of contribution from new cities doubled to Rs 344 per share to factor three new cities
  • Valuations are expensive, but not overvalued
  • Triggers:- Higher payouts, new licences, gas inclusion in GST and environment-led policy initiatives

Deutsche Bank on Tata Steel

  • Maintains Buy; hiked price target to Rs 870 from Rs 848
  • India's EBITDA to rise by 27 percent over FY17-19 driven by volume and margin improvement
  • India capacity could double in five years; To increase capacity to 26 MMTPA by 2022
  • Expect India volume growth of 14 percent over FY17-19
  • Expect India’s EBITDA/tonne to grow at 14 percent over FY17-19 driven by improved product mix and operational cost savings

Stocks To Watch

  • Bodal Chemicals: Rs 225 crore QIP opens, price range of Rs 172-174 per share as per term sheet
  • Coal India signs pact for National Coal Wage. The wage agreement may have average Rs 5,667 crore per year impact
  • Dena Bank QIP opened at a floor price of Rs 30.73 per share.
  • Karur Vysya Bank rights issue to open from October 25 to November 10
  • CRISIL has withdrawn its application to enter peer-to-peer lending business
  • Sical Logistics approves buying MMTC's 26 percent stake in unit Sical Iron Ore
  • DCW Commences commercial production of Chlorinated Poly Vinyl Chloride (CPVC) at its units in Tamil Nadu
  • Repro India issued 5.92 lakh shares at Rs 675 each on preferential basis to Malabar India Fund, Malabar Value Fund and Kedia Securities
  • Dixon Technologies entered into design, manufacturing and supply agreement with Flipkart India
  • PSP Projects bags order worth Rs 1575 crore from Surat Diamond bourses
  • SBI-led consortium of lenders orders forensic audit of Punj Lloyd accounts (Economic Times)

For a complete list of stocks to watch, click here

Taking Points

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.3 percent to 10,073.

Stocks in Asia traded near decade highs, while the euro held gains spurred by Catalonia’s president stepping back from an immediate declaration of independence from Spain.

What’s coming up this week:

  • Consumer confidence data is due in Australia Wednesday after machine orders data from Japan.
  • Minutes from the most recent Federal Reserve meeting are due Wednesday.
  • API and EIA crude data are delayed to Wednesday and Thursday, respectively, because of Monday’s U.S. holiday.
  • Earnings season begins for major U.S. banks, led by JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. Also reporting will be BlackRock Inc., Domino’s Pizza Inc., Samsung Electronics Co., German container company Gerresheimer AG, U.K. grocery wholesaler Booker Group Plc, and Sky Plc.
  • The active Atlantic hurricane season will probably figure prominently in U.S. data on retail sales and consumer prices.

Commodities

  • West Texas Intermediate crude was steady at $50.88 a barrel after rising 2.7 percent to $50.92 a barrel.
  • Gold futures were little changed. They added 0.3 percent to $1,288.02 an ounce in the previous session.
  • Copper climbed 1 percent to $3.06 a pound.
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