A man uses a mobile phone in front of electronic screens displaying stock prices in the trading hall at the Karachi Stock Exchange (KSE) in Karachi, Pakistan. (Photographer: Asim Hafeez/Bloomberg)

Sensex, Nifty Clock Sixth Weekly Gains; Infosys Q3 Profit Beats Estimates

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Closing Bell

Indian equity benchmarks rose to record highs in today's volatile session led by gains in ICICI Bank, Reliance Industries and HDFC.

The S&P BSE Sensex rose 0.26 percent or 89 points to 34,592.39 and the NSE Nifty 50 Index advanced 0.28 percent or 30 points to 10,681. On weekly basis, benchmarks clocked gains for sixth week in a row with the Sensex rising 1.28 percent and Nifty advancing 1.16 percent.

The mid-cap and small-cap indices underperformed their large cap counterparts as the S&P BSE MidCap Index fell 0.17 percent while the S&P BSE SmallCap Index was little changed.

Eleven out of 19 sector gauges compiled by BSE ended higher led by the S&P BSE Energy Index's 0.7 percent gain. On the flipside, the S&P BSE Realty Index was the top sectoral loser, down 1.46 percent.

Infosys Beats Profit Estimates, Maintains Sales Guidance

Infosys Ltd. surpassed profit estimates for the December ended quarter on a one-time tax benefit, and maintained its sales guidance for the financial year 2017-18.

The software developer’s net profit rose 37.7 percent to Rs 5,130 crore in the October-December quarter on a sequential basis, the company said in an exchange filing. The bottom line beat estimates after the company reversed income tax provisions of Rs 1,432 crore made in previous years after signing an advance pricing agreement with U.S. Internal Revenue Service. While Infosys has accounted for it in the third quarter, the actual amount is expected to be staggered over the next few quarter, it said in the notes to the financial statement.

Revenue rose 1.3 percent on a sequential basis to Rs 17,794 crore over the previous quarter. Analysts projected a figure of Rs 17,849 crore. Dollar revenue rose 0.98 percent to $2,755 million sequentially. BloombergQuint’s estimate stood at $2,753 million.

Earnings before interest and tax rose 1.7 percent to Rs 4,319 crore. The figure missed Bloomberg consensus estimate of Rs 4,278 crore. EBIT margins expanded 10 basis points to 24.3 percent and surpassed/was behind consensus estimate of 24 percent.

Countdown

Fab Four Stocks Of The Day

  • KEI Industries: Shares of the Delhi-based stainless-steel wire maker rose as much as 13 percent, the most in nearly four months, to Rs 421 after Motilal Oswal initiated coverage on the stock with a buy for target price of Rs 537 indicating potential upside of 44 percent from yesterday's closing price.
  • Amtek Auto: Shares of the Gurugram-based auto component maker was locked in a 5 percent upper circuit at Rs 29.40 after the UK-based metals group Liberty House and American hedge fund Deccan Value Investors submitted bids to acquire the company, The Economic Times newspaper reported citing two officials.
  • Tata Global Beverages: The Kolkata-based coffee and tea producer rose as much as 4.8 percent, the most in nearly two months, to Rs 328.35 as it may sell stake in Amalgamated Plantations, The Mint newspaper reported.
  • HT Media: Shares of the Delhi-based news publisher rose as much as 5.36 percent, the most since Jan. 5, to Rs 117 after its announced its December quarter earnings.

Karnataka Bank Rises As Asset Quality Improves In Q3

Shares of the Mangalore-based private sector lender rose as much as 3.26 percent, the most in over two months, to Rs 167.95 after it reported December quarter earnings.

  • Net Profit at Rs 87.38 crore versus Rs 68.52 crore (YoY)
  • Gross NPA at 3.97 percent versus 4.13 percent (QoQ)
  • Net NPA at 2.85 percent versus 3.04 percent (QoQ)
  • Net interest income up 20 percent at Rs 451.5 crore versus Rs 376.5 crore (YoY)
  • Provisions at Rs 196.4 crore versus Rs 225.9 (QoQ); Rs 100.6 crore (YoY)

Idea Cellular Rises As NCLT Approves Vodafone Merger Proposal

Shares of the Aditya Birla Group telecom company rose as much as 2.7 percent to Rs 110 after the National Companies Law Tribunal approved its merger with Vodafone. Now, Idea-Vodafone merger awaits telecom department's approval and merger process is expected to complete by June 30.

European Shares Little Changed

Top Court Asks Unitech To Deposit Rs 18 Crore; Shares Decline

Shares of the Gurugram-based real estate developer fell 1 percent to Rs 9.70 after the Supreme Court ordered company to deposit Rs 18 crore. Meanwhile, the court will hear Unitech homebuyers case on Jan. 29.

3I Infotech Rises After Q3 Earnings

Shares of the Mumbai-based IT services company rose as much as 4.8 percent to Rs 9.17 after it reported third quarter earnings.

Key earnings highlights:

  • Net profit at Rs 23 crore versus Rs 19.95 crore (YoY)
  • Revenue at Rs 238 crore versus Rs 227 crore (YoY)
  • Total costs at Rs 212 crore versus Rs 227 crore (YoY)

HT Media Gains As Profit More Than Doubles In Q3

Shares of the Delhi-based news publisher rose as much as 5.36 percent, the most since Jan. 5, to Rs 117 after its announced its December quarter earnings.

Key earnings highlights:

  • Revenues down 1.6 percent at Rs 375 crore versus Rs 381 crore (YoY)
  • Net profit up 165 percent at Rs 106 crore versus Rs 40 crore (YoY)
  • EBITDA up 66 percent at Rs 73 crore versus Rs 44 crore (YoY)
  • Margins at 19.5 percent versus 11.5 percent (YoY)

Infosys Flat Ahead Of Q3 Earnings

Shares of the country's second largest IT outsourcer were trading flat ahead of December quarter earnings. Analysts polled by Bloomberg expect:

  • Total income rising 1.6 percent to Rs 17,849 crore
  • EBIT is seen rising 0.8 percent to Rs 4,278 crore
  • EBIT margin is expected at 24 percent
  • Profit may fall to Rs 3,591 crore from Rs 3,726 crore

Power Lunch

Stocks Moving On Heavy Volumes

  • Emami: Shares of the Kolkata-based household products maker fell 0.54 percent to Rs 1,396. Trading volume was 18.3 times its 20-day average.
  • Hathway Cable: The Mumbai-based cable TVV service provider rose as much as 5 percent to Rs 42.35. trading volume was 14.4 times its 20-day average.
  • Firstsource Solutions: Shares of the Mumbai-based IT company rose as much as 10.41 percent to Rs 48.25. Trading volume was 14.4 times its 20-day average.
  • Cera Sanitaryware: Shares of the bathroom accessories maker rose 0.96 percent to Rs 3,828. trading volume was 10.5 times its 20-day average.

Nifty Tests 10,600

Market Check

  • Indian equity benchmarks erased gains led by losses in Bharti Airtel, TCS and Sun Pharma.
  • The NSE Nifty 50 Index fell 0.28 percent or 29 points to 10,623 and the S&P BSE Sensex declined 0.22 percent or 79 points to 34,421.
  • The mid-cap and small-cap shares also came under the selling pressure. The S&P BSE MidCap Index declined 0.5 percent and the S&P BSE SmallCap Index fell 0.3 percent.

Hot Money

Gujarat Pipavav Port Surges After Axis MF Buys Stake

Shares of the Mumbai-based operator of marine shipping port rose as much as 11.27 percent to Rs 162.40 after Axis Mutual Fund bought 69.80 lakh shares (1.44 percent equity) as per December shareholding pattern of the company.

Amtek Auto Surges On Acquisition Buzz

Shares of the Gurugram-based auto component maker was locked in a 5 percent upper circuit at Rs 29.40 after the UK-based metals group Liberty House and American hedge fund Deccan Value Investors submitted bids to acquire the company, The Economic Times newspaper reported citing two officials.

Trend Spotting

Shoppers Stop Fluctuates After Share Allotment To Amazon

Shares of the Mumbai-based department store chain operator rose as much as 3.47 percent soon after it announced allotment of 43,95,925 shares to Amazon.com NV Investment Holdings LLC. However, the gains were short-lived, and the stock fell as much as 2.8 percent to Rs 531.05.

Shoppers Stop has allotted over 43.95 lakh shares of face value of Rs 5 each at Rs 407.78 per equity share for total consideration of Rs 179.25 crore to Amazon.com on private placement basis, the company said in a stock exchange filing.

KEI Industries Surges As Brokerage Initiates Buy With Upside Of 44%

Shares of the Delhi-based stainless-steel wire maker rose as much as 13 percent, the most in nearly four months, to Rs 421 after Motilal Oswal initiated coverage on the stock with a buy for target price of Rs 537 indicating potential upside of 44 percent from yesterday's closing price.

Motilal Oswal says:

  • KEI to be major beneficiary of key government initiatives.
  • KEI looking to enter newer markets in South and East India.
  • Expanding retail segment to be a key growth driver.
  • EHV cables and EPC to drive institutional segment growth.
  • Exports to report decent growth due to strong geographical presence.
  • Expanding margins due to improving business mix.
  • Working capital cycle to improve along with positive FCF in future.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 18.7 percent, 21.6 percent and 33 percent over the financial years through March 2020.
  • Given high growth expectation along with healthy financials, KEI deserves higher valuations.

MAS Financial Services Gains As Motilal Oswal Initiates Buy

Shares of the Ahmedabad-based non-banking finance company rose as much as 4.23 percent to Rs 652.95 after domestic brokerage Motilal Oswal initiated coverage on the stock with a 'buy' for target price of Rs 740.

Motilal Oswal in a note said:

  • An efficient player in high growth product segment.
  • Present in high growth segments with differentiated offering.
  • Strong risk management to lead to superior asset quality.
  • AUM growth to be aided by MEL, SME loans and housing loans.
  • Expect AUM and Net Profit to grow at a compounded rate of 25 percent and 36 percent over the financial years through March 2020.
  • Higher share of direct lending coupled with stable asset quality to support return on assets.
  • Expect return on assets to improve to 2.7 percent by March 2020.
  • NIM to improve aided by asset and liability diversification.
  • Consistent performance warrants premium valuations.
  • Bull Case price target of Rs 907: Expect AUM and Net Profit to grow at a compounded rate of 30 percent and 44 percent over the financial years through March 2020.

TVS Motor Company Falls After Citi Initiates Sell

Shares of the Chennai-based two wheeler maker fell as much as 1.76 percent to Rs 742 after Citi initiated sell on the stock for target price of Rs 700.

Citi in a note said:

  • Competitive intensity to escalate in scooters.
  • Weaker presence in motorcycles to impede growth.
  • Valuations price-in margin improvement, not headwinds.
  • Expect significant uptick in premium bikes market share to 15.5 percent by March 2020, compared to 11.7 percent, clocked in the financial year-ended March 2017.
  • Premium bike segment could see pricing pressures.
  • There is very little room for error for TVS Motor.
  • 3-Wheeler growth depends on exports.
  • Cash flow generation to aid deleveraging of balance sheet.
  • Expect domestic volumes, export volumes and earnings per share to grow at a compounded rate of 20 percent, 15.6 percent and 30 percent respectively over the financial years through March 2020.

The F&O Show

Dredging Corporation Gains On Order Win

The government-owned dredging service provider rose as much as 3.96 percent to Rs 857.50 after it secured order worth Rs 88.5 crore for dredging of channels and basins at Cochin port.

Indiabulls Real Estate Gains As Unit Acquires Commercial Building In Gurugram

Shares of the Delhi-based real estate developer rose as much as 3.13 percent to Rs 263 after the company said its wholly-owned subsidiary Yashita Buildcon entered into a binding and definitive agreement to acquire a prime and newly constructed commercial building, having leasable area of approx 2.5 lakh sq ft in Gurugram, Indiabulls Real Estate said in a stock exchange filing.

TCS Falls Post Q3 Earnings

Shares of the country's biggest IT outsourcing firm fell as much as 1.79 percent to Rs 2,740 a day after announcing third quarter numbers the company said its sales from the key banking and finance sector, which contributes the most to TCS’ turnover, fell 2.1 percent sequentially.

Block Deal Alert

  • Gayatri Projects has 70 lakh shares (4 percent equity) change hands at Rs 212 per share.

Buyers and sellers were not immediately known

Source: Bloomberg

Opening Bell

Indian equity benchmarks extended their record run led by gains in ICICI Bank, Axis Bank and Reliance Industries.

The S&P BSE Sensex rose 0.32 percent or 108 points to 34,612and the NSE Nifty 50 Index advanced 0.28 percent or 30 points to 10,681.

The mid-cap and small-cap shares were broadly outperforming the benchmarks as the S&P BSE MidCap Index rose 0.37 percent and the S&P BSE SmallCap Index advanced 0.6 percent.

All sector gauges compiled by BSE were trading higher led by the S&P BSE Metal Index's 0.7 percent gain.

IndianOpen: Trade Setup

Money Market Heads Up!

Sovereign bonds are set to trade in a range ahead of Friday’s auction of sovereign notes and release of consumer-price inflation data in the evening.

A surge in oil prices is not good news for investors as it could stoke inflationary pressures even more. A Bloomberg Survey showed that CPI probably quickened to 5.10 percent in December (YoY) versus 4.88 percent in November and that should make it harder for the RBI to provide any accommodation in case growth flounders

The 10-year bond ended Thursday at 7.44 percent, having risen 15 basis points this week.

Worries about rising prices of oil -- India's biggest import item -- should keep the rupee under pressure. The rupee ended weaker at 63.66 per dollar on Thursday, its third day of losses.

BQ Heads Up!

Nifty Earnings To Watch

Infosys

  • Total income seen 1.6 percent higher at Rs 17,849 crore
  • EBIT seen rising 0.8 percent to Rs 4,278 crore
  • EBIT margin seen at 24 percent
  • Profit may fall to Rs 3,591 crore from Rs 3,726 crore

Bloomberg estimates

Others Earnings To Watch

  • 3i Infotech
  • HT Media
  • Karnataka Bank
  • Reliance Industrial Infrastructure
  • Sintex Industries
  • TGV Sraac

Earnings Reaction To Watch

TCS Q3 (QoQ)

  • Dollar revenue up 1 percent at $4,787 million.
  • Revenue up 1.2 percent at Rs 30,904 crore.
  • Profit up 1.3 percent at Rs 6,531 crore.
  • EBIT up 1.6 percent at Rs 7,781 crore.
  • EBIT margin at 25.2 percent.

Shree Cement Q3 (YoY)

  • Revenues up 23 percent at Rs 2,296 crore.
  • Net profit up 41.7 percent at Rs 333 crore.
  • EBITDA up 16.3 percent at Rs 570 crore.
  • Margins at 24.8 percent from 26.3 percent.

Sintex Plastics Q3 (QoQ)

  • Revenues down 7 percent at Rs 1,333 crore.
  • Net profit doubled to Rs 52 crore.
  • EBITDA down 3 percent at Rs 185.5 crore.
  • Margins at 13.9 percent from 13.4 percent.

5Paisa Capital Q3 (YoY)

  • Revenue up 170 percent at Rs 5.4 crore.
  • Net loss of Rs 6.7 crore from a loss of Rs 4.7 crore.

F&O Cues

  • Nifty January futures trading at 10,654, premium of 3 points versus 5 points.
  • January Series: Nifty open interest unchanged; Bank Nifty open interest down 2 percent.
  • India VIX ended at 14.01, down 0.16 percent.
  • Max open interest for January series at 11,000 Call (open interest unchanged at 44.9 lakh).
  • Max open interest for January series at 10,500 Put (open interest at 82 lakh, up 9 percent).

IPO Market Update

  • Apollo Micro Systems IPO continues on day 3. The issue is subscribed 8.99 times till now.

Corporate Action

  • Astron Paper & Board Mill shifted to B group and circuit filter revised to 20 percent.
  • Southern Online Bio Technologies circuit filter revised to 10 percent.

Bulk Deals

  • Apl Apollo Tubes: Emblem FII sold 2.50 lakh share or 1.1 percent equity at Rs 2198.2 each.
  • Menon Bearings: Astute Investments sold 13.80 lakh shares or 2.5 percent equity at an average of Rs 110.1 each.
  • Snowman Logistics: Norwest Venture Partners VII-A-Mauritius sold 10 lakh shares or 0.6 percent equity at Rs 64.35 each.
  • Hi-Tech Pipes: Transatlantic Arbitrage Fund bought 1 lakh shares at Rs 365 each.
  • Euro Ceramics: Aspire Emerging Fund sold 2.2 lakh shares at Rs 8.11 each.

Stocks To Watch

  • SBI to raise Rs 20,000 crore through long term bonds for financing infrastructure and affordable housing.
  • Motilal Oswal to transfer its lending business to Motilal Oswal Capital Markets.
  • MEP Infra unit achieved first milestone for road project.
  • Indiabulls Real Estate unit to acquire a commercial building in Gurugram having leasable area of 2.5 lac square feet.
  • Shree Cements to acquire majority stake in Union Cement Co., UAE for $305.24 million.
  • Dredging Corp. secures Rs 88.5 crore contract for dredging of channels and basins at Cochin port.
  • Dish TV is evaluating the impact of Videocon D2H insolvency proceedings.
  • Texmaco Rail incorporated a subsidiary Texmaco Defence Systems Pvt. Ltd.
  • GEI Industrial Systems said NCLT granted 90 day extension for insolvency process.
  • KDDL closed one of its stores in New Delhi, tally down to 40 stores.
  • Liberty House, Deccan Value Investors top bidders for Amtek Auto (ET).
  • Reliance Infra lowest bidder for NTPC’s Rs 567 Cr turnkey contract (ET).

Brokerage Radar

Motilal Oswal on KEI Industries

  • Initiated ‘Buy’ with price target of Rs 537; implying a porential upside of 44 percent from yesterdday’s close.
  • KEI to be major beneficiary of key government initiatives.
  • KEI looking to enter newer markets in South and East India.
  • Expanding retail segment to be a key growth driver.
  • EHV cables and EPC to drive institutional segment growth.
  • Exports to report decent growth due to strong geographical presence.
  • Expanding margins due to improving business mix.
  • Working capital cycle to improve along with positive FCF in future.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 18.7 percent, 21.6 percent and 33 percent over the financial years through March 2020.
  • Expect return on equity and return on capital employed to expand 26.5 percent and 20.5 percent respectively by March 2020, compared to 23.5 percent and 18.5 percent respectively, clocked during the financial year-ended March 2017.
  • Given high growth expectation along with healthy financials, KEI deserves higher valuations

Motilal Oswal on MAS Financial

  • Initiated ‘Buy’ with price target of Rs 740.
  • An efficient player in high growth product segment.
  • Present in high growth segments with differentiated offering.
  • Strong risk management to lead to superior asset quality.
  • AUM growth to be aided by MEL, SME loans and housing loans.
  • Expect AUM and Net Profit to grow at a compounded rate of 25 percent and 36 percent over the financial years through March 2020.
  • Higher share of direct lending coupled with stable asset quality to support return on assets.
  • Expect return on assets to improve to 2.7 percent by March 2020.
  • NIM to improve aided by asset and liability diversification.
  • Consistent performance warrants premium valuations.
  • Bull Case price target of Rs 907; expect AUM and net profit to grow at a compounded rate of 30 percent and 44 percent over the financial years through March 2020.

Citi on TVS

  • Initiated ‘Sell’ with price target of Rs 700.
  • Competitive intensity to escalate in scooters.
  • Weaker presence in motorcycles to impede growth.
  • Valuations price-in margin improvement, not headwinds.
  • Expect significant uptick in premium bikes market share to 15.5 percent by March 2020, compared to 11.7 percent, clocked in the financial year-ended March 2017.
  • Premium bike segment could see pricing pressures.
  • There is very little room for error for TVS Motor.
  • 3-Wheeler growth depends on exports.
  • Cash flow generation to aid deleveraging of balance sheet.
  • Expect domestic volumes, export volumes and earnings per share to grow at a compounded rate of 20 percent, 15.6 percent and 30 percent respectively over the financial years through March 2020.

UBS on Jubilant Foodworks

  • Maintained ‘Sell’; raised price target to Rs 1,450 from Rs 800.
  • Operational turnaround and GST drove sharp improvement in operating margins.
  • Jubilant now consumer stocks but with compounded growth rate in earnings per share of only 20 percent over the financial years through March 2020.
  • Double digit same-store sales growth over medium to long term to be difficult given intense competition.
  • Operating Margin reverting to earlier level seems difficult; Dominos runs on high fixed cost model.
  • Jubilant's shares are pricing in high long-term growth.

UBS on Banks

  • India Financials—a revenue opportunity of $175 billion by March 2022.
  • Dis-intermediation—banks losing ground in savings and corporate loans.
  • Expect banks to raise deposit rates by 50-100 basis points in 2018.
  • Banks/Fincos with strong presence in SME and retail likely to gain market share in lending.
  • Banks with greater customer engagement to gain market share in liability business.
  • Banks/Fincos with own MF/Insurance business likely to capture entire savings value chain.
  • Most preferred stocks — HDFC Bank, ICICI Bank and Kotak Mahindra.
  • HDFC Bank: Maintained ‘Buy’; raised price target to Rs 2,400 from Rs 2,250.
  • Bank of Baroda: Maintained ‘Buy’; cut price target to Rs 220 from Rs 230.
  • SBI: Maintained ‘Neutral’; cut price target to Rs 340 from Rs 350.

Brokerages On TCS

UBS

  • Maintained ‘Buy’ with price target of Rs 3,000.
  • Previous quarter was in-line with estimates.
  • Retail picks up, but banking declines.
  • Management expects retail to return to double digit growth.
  • Management confident of achieving 26-28 percent constant currency margins.
  • Expect muted reaction given in line previous quarter numbers.
  • Pickup in retail is positive, but concerned about decline in banking.

Credit Suisse

  • Maintained ‘Neutral’ with price target of Rs 2,350.
  • December-ended quarter results and dividend payout in-line with expectations.
  • Strong growth in retail offset by softness in BFSI.
  • Growth momentum continues to be soft in the U.S.
  • Management sounds comfortable on outlook, barring financial services.

Deutsche Bank

  • Maintained ‘Buy’ with price target of Rs 3,000.
  • Ex-BFSI company reported a strong revenue growth in a seasonally weak quarter.
  • Robust recovery in retail; Strong digital tech revenue growth.
  • Large deal signings were healthy.
  • Company reported turnaround in underperforming retail and CPG vertical.
  • Management expects BFSI to improve in 2018.

Brokerages On Shree Cement

Citi

  • Maintained ‘Neutral’; cut price target to Rs 20,450 from Rs 20,800.
  • Operating income remained in Line in the previous quarter; flattish EBITDA/tonne.
  • Volumes could have been higher but for sand mining ban in North and East.
  • Cost pressures apparent; As petcoke has have come off, expect ease going forward.

Goldman Sachs

  • Maintained ‘Neutral’ with price target of Rs 18,800.
  • Previous quarter was in line.
  • Given capacity addition pipeline, remain positive on growth trajectory.
  • Current valuations adequately reflect capacity addition positives.
  • New clinker unit to lead to lower freight costs.

Talking Points

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.39 percent to 10,699.

Asian stocks are set to end the week on diverging paths as Japanese shares declined, while those in Hong Kong extended a record winning streak. Volatility in the Treasuries market subsided and the euro extended its advance.

Equities rose in most Asia-Pacific markets with above-average volumes in Hong Kong and South Korea, while a stronger yen weighed on Japanese stocks. The euro was boosted by signals from the European Central Bank the economy may be strong enough to warrant scaling back crisis-era guidance on stimulus.

Here are some key events and data releases scheduled for the remainder of this week:

  • U.S. inflation data are forecast to show price pressures remain muted for now, giving hawks little reason to argue for faster tightening.
  • JPMorgan and BlackRock Inc. are among four financial firms reporting results Friday.
  • China’s export growth probably slowed somewhat, to 10.8 percent in December from November’s 12.3 percent, forecasts ahead of data on Friday show. Imports are expected to climb 15.1 percent, with the trade surplus narrowing to $37 billion.

Commodities

  • West Texas Intermediate crude slid 0.3 percent to $63.64 a barrel, while Brent was flat at $69.28 after briefly topping $70.
  • Gold futures advanced 0.3 percent to $1,326 an ounce, on course for a fifth weekly gain.
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