Sensex, Nifty Snap Three-Day Winning Streak; IT Stocks Outperform

Indian equity benchmarks snapped their three-day winning streak led by selling pressure in Reliance Industries, ITC, HDFC and State Bank of India. However, the losses were capped as IT heavyweights such as Infosys, TCS and Wipro gained after international brokerage Morgan Stanley released a report which said Indian IT is expected to turnaround in 2018.

The S&P BSE Sensex declined 0.21 percent or 72 points to 24,771 and the NSE Nifty 50 Index fell 0.38 percent or 41 points to 10,700.

The broader markets also faced the heat of selling pressure as the S&P BSE MidCap Index slumped 1.7 percent and the S&P BSE SmallCap Index plunged 2.2 percent.

Seventeen out of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Realty Index's 3.5 percent fall. On the other hand, the S&P BSE Information Technology Index was the top sectoral gainer, up 3.3 percent.

Shares of the Mumbai-based stock exchange fell as much as 5.27 percent to Rs 881 after it reported December quarter earnings.

Key earnings highlights:

• Consolidated net profit down 44.8 percent At Rs 18.77 crore versus Rs 34 crore
• Consolidated revenue down 11 percent At Rs 60.97 crore versus Rs 68.60 crore crore

Indian rupee extended losses and broke below crucial psychological level of 64 per dollar. The local unit fell as much as 0.82 percent, the most in nearly a month to 64.01, its lowest level since, Dec. 29.

• HCL Technologies: The Noida-based IT outsourcing firm rose over 5 percent to Rs 955 after Morgan Stanley in a report said Indian IT industry is expected to turnaround in 2018. It also upgraded the stock to ‘Overweight’ from ‘equal-weight’ and raised its target price to Rs 1,060.
• ICICI Lombard: The Mumbai-based general insurance company rose more than 7 percent to Rs 844.80 on the back of strong December quarter earnings. Its gross domestic premium income (GDPI) rose 17.8 percent to Rs 2937 crore versus Rs 2,494 crore and combined ratio improved to 96 percent versus 106.6 percent.
• Trigyn Technologies: The Mumbai-based IT services company rose as much as 12.4 percent, the most in over a month, to Rs 159.50 after it secured contract from ARIPO, Zimbabwe to provide technical support.
• EIH Ltd: Hotel stocks were buzzing in trade today. The stock gained for fifth day in a row and it has so far in the month of January soared 49.5 percent.

Shares of the Delhi-based cable TV operator fell as much as 4 percent to Rs 133.80 after it reported loss in December quarter.

Key earnings highlights:

• Consolidated loss at Rs 3.17 crore versus loss of Rs 44.96 crore (YoY)
• Revenue up 9.8 percent at Rs 328.2 crore versus Rs 298.8 crore loss (YoY)
• Consolidated EBITDA up 56.5 percent At Rs 78.7 crore versus Rs 50.3 crore (YoY)
• Consolidated margin at 24.0 percent versus 16.8 percent (YoY)

Shares of the Delhi-based broadcasting company fell 4.5 percent to Rs 62.50 after it reported December quarter earnings.

Key earnings highlights:

• Consolidated profit down 18.3 percent at Rs 16.06 crore versus Rs 19.65 crore (YoY)
• Consolidated revenue up 8.5 percent at Rs 271 crore versus Rs 250 crore (YoY)
• EBITDA down 6.7 percent at Rs 32.42 crore versus Rs 34.75 crore (YoY)
• Margin at 12 percent versus 13.9 percent (YoY)

• Indian equity benchmarks held on to losses and rupee fell to its lowest level in nearly three weeks after trade deficit widened to its highest level in more than three years as higher imports of gold and crude weighed on exports, according to trade data released by the government.
• Losses were capped as IT heavyweights like Infosys, TCS and Wipro were trading higher on account rupee depreciation and Morgan Stanley expecting turnaround in the IT sector.
• The S&P BSE Sensex fell 0.14 percent to 34,794 and the NSE Nifty 50 Index declined 0.3 percent or 32 points to 10,709.
• Barring the S&P BSE IT Index all sector gauges compiled by BSE were trading lower led by the S&P BSE Realty Index's 2.6 percent drop. At the same time the S&P BSE IT Index was the top sectoral gainer, up 3.5 percent.

Indian rupee fell to its lowest level in nearly three weeks against the U.S. dollar. Rupee declined as much as 0.69 percent to 63.93.

International brokerage house expects Indian IT industry to turnaround in 2018.

Morgan Stanley in a report said:

• A cyclical rally could be in the offing
• Expect large deal wins in traditional outsourcing, infra management and BPO segments
• Expect rebound in BFSI and retail segment
• Expect significant scale up in digital deals

Shares of the hotel operators were trading higher in an otherwise subdues session.

• EIH Ltd jumps 16.7 percent
• Indian Hotels up 3.58 percent
• EIH Associated Hotels up 10.2 percent
• Hotel Leela Venture up 1.77 percent
• Taj GVK Hotels up 5.2 percent
• Oriental Hotels up 12.6 percent
• Royal Orchid Hotels up 6.7 percent
• Asian Hotels North up 5 percent
• Advani Hotels & Resorts up 4.86 percent

Shares of the country's largest IT outsourcing firm were trading 3.7 percent higher at Rs 2,848. The company has introduced digital subscription platform on Microsoft Azure.

Shares of the Mumbai-based investment management company rose 1.9 percent to Rd 332 after it reported December quarter earnings.

Key earnings highlights

• Consolidated net profit at Rs 130 crore versus Rs 104 crore (YoY)
• Consolidated revenue at Rs 409 crore versus Rs 328 crore (YoY)
• To Pay Rs 5 per share interim dividend
• AUM up 17 percent at Rs 3.88 lakh crore (YoY)

• Power grid Corporation has 27 lakh shares change hands in a block.
• Federal Bank has 46 lakh shares change hands at Rs 106.90 per share on the BSE.

Buyers and sellers were not immediately known

Source: Bloomberg

Shares of the Mumbai-based transformer maker were locked in a 5 percent upper circuit at Rs 128 after it won an order for manufacturing turbines for Germany’s Smart Hydro Power GmbH for a period of 20 years.

Shares of the mid-cap cement makers surged in an otherwise subdued session after a report suggested that Rakesh Jhunjhunwala and Radhakishan Damani have teamed up for the race to acquire Binani Cement.

• Prism Cement jumps 10.18 percent
• Heidelberg Cement jumps 9.2 percent
• Orient Cement up 3.3 percent

Shares of the Mumbai-based electrical motors and transformers maker rose as much as 4.19 percent to Rs 1,435 as company is set to receive Rs 46.79 crore from MIDC towards acquisition of land situated at Navi Mumbai.

Shares of the Pune-based IT company rose as much as 3.26 percent to Rs 561.50 after it announced partnership with Israel's ContextSpace for cybersecurity.

Tel Aviv, Israel's financial and technological hub, will be the nerve centre for the programme and will focus on creating collaborative solutions across cyber security, fintech, mobility, artificial intelligence and data analytics.

Shares of the Gujarat-based agricultural chemicals maker fell as much as 7 percent to Rs 502.45 after it indefinitely closed its TDI-II plant at Dahej following leakage, the company said in a stock exchange filing.

Shares of the Kerala-based private sector lender fell as much as 6.87 percent to Rs 105.80 after its non-performing assets slightly rose in the December quarter.

key earnings highlights:

• Net interest income up 20.1 percent at Rs 950 crore.
• Net profit up 26.2 percent at Rs 260 crore.
• Gross NPA at 2.52 percent versus 2.39 percent (QoQ).
• Net NPA at 1.36 percent versus 1.32 percent (QoQ).

Shares of IT companies were witnessing good buying interest in trade today. The NSE Nifty IT Index rose as much as 2.2 percent to 28-month high of 12,261. Gains in today's session were led by frontline IT companies like HCL Technologies, Infosys and Wipro.

Shares of the Pune-based casino operator rose as much as 6.62 percent to record high of Rs 338.90 after it reported strong earnings in December quarter.

key earnings highlights:

• Revenue up 56 percent at Rs 162 crore.
• Net profit up 347 percent at Rs 44.7 crore.
• EBITDA up 113 percent at Rs 68.7 crore.
• Margin at 42.4 percent versus 31 percent.

Shares of the Mumbai-based cement maker were locked in a five percent upper circuit at Rs 146.25 as billionaires Rakesh Jhunjhunwala and Radhakishan Damani teamed to bid for its debt-laden Binani Cement which is facing bankruptcy proceedings from its lenders, The Economic Times newspaper reported citing two senior executives in the know of matter.

Shares of the West Bengal-based wagon maker rose as much as 3.14 percent to Rs 182.15 after it won order for 2,338 wagons, DNA newspaper reported.

Indian equity benchmarks were little changed as gains in Wirpro, TCS and Infosys were offset by losses in HDFC, Tata Steel and Reliance Industries.

The S&P BSE Sensex rose 0.16 percent or 57 points to 34,899 and the NSE Nifty 50 Index was little changed at 10,750.

The broader markets were in-line with the large cap peers as the S&P BSE MidCap Index was little changed at 18,129 while the S&P BSE SmallCap Index rose 0.2 percent to 20,046.

Twelve out of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Telecom Index's 0.7 percent gain. On the flipside, the S&P BSE Energy Index was the top sectoral loser, down 0.46 percent.

The rupee will likely weaken after data showed the country's trade deficit widening to its highest in over three years and the dollar strengthened. The gap widened to $14.88 billion in December, data showed late Monday, much wider than the estimate of $13 billion.

The implied opening from forwards suggests rupee will start trading around 63.61 on Tuesday, down from 63.49 on Monday. Economists, are of course, worried about the spike in oil prices which could see upward pressure on imports.

Bonds, meanwhile, are likely to consolidate with more debt supplies expected this week. The federal government will auction Rs 15,000 crore of bonds while states will sell Rs 9,000 crore. On Monday, deputy governor Viral Acharya told banks they shouldn't be repeatedly surprised by higher yields.

• Nifty January futures trading at 10,743, premium of 1.8 points from 5 points.
• January series: Nifty open interest up 4 percent; Bank Nifty open interest up 18 percent.
• India VIX ended at 14.3, up 4.2 percent.
• Maximum open interest for January series at 11,000 Call (open interest at 47.9 lakh, up 1 percent).
• Maximum open interest for January series at 10,500 Put (open interest at 82.2 lakh, up 1 percent).

F&O Ban

• In ban: Capital First, Dish TV, Fortis, GMR Infrastructure, HDIL, IFCI, Jet Airways, Jindal Steel & Power, Jain Irrigation, JP Associates, Kaveri Seed, Reliance Communications, Reliance Capital, Reliance Power and Wockhardt.
• New in ban: Capital First and IFCI.

Only intraday positions can be taken in stocks which are in F&O ban. In case of a rollover of these intraday positions, there is a penalty.

Put-Call Ratio

• Nifty PCR at 1.78 from 1.74.
• Nifty Bank PCR at 1.31 from 1.06.

JM Financial on Cochin Shipyard

• Initiated ‘Buy’ with price target of Rs 700.
• Indomitable player in the Indian shipyard industry.
• Large dock size and strategic location place Cochin Shipyard in sweet spot.
• Investing in both capacity and capability to the pave way for the next leg of growth.
• Government policies to enable sustained flow of orders.
• Outpaced peers in a shrinking industry.
• Defence, inland waterways and O&G to offer next leg of growth.
• Robust order book provides revenue visibility over next eight years.
• Expect order inflow momentum to sustain as Navy orders jump three times over the next decade.
• Healthy cash flows and a negative working capital cycle to keep company debt free.
• Expect revenue and operating income to grow at a compounded rate of 18 percent over the financial years through March 2020.
• Expect dividend payout to be 25 percent in coming years.

UBS on Reliance Industries

• Initiated ‘Sell’ with price target of Rs 870.
• Reliance Industries’ capex to expand operating income, but deleveraging to be delayed.
• Refinery-petchem integration to boost returns and reduce cyclicality, but stabilisation to take time.
• GRMs on upward trajectory, boosted by petcoke gasification benefits.
• Expect petchem Ebitda to almost double over the financial years through March 2020, and a compounded growth rate in volume of 8 percent over the financial years through March 2022.
• Expect retail business revenue and operating income to grow at a compounded rate of 22 percent and 24 percent respectively over the financial years through March 2022.
• Jio's market share to expand, but ARPU could be low.
• Expect subscriber and ARPU to grow at a compounded rate of 13 percent and 6.5 percent respectively over the financial years through March 2022 and that will support Jio’s growth in revenue and operating income.
• Expect upstream capex to pick-up and steady telecom capex to continue.
• Expect operating income and earnings per share to grow at a compounded growth rate of 19.3 percent and 14.1 percent respectively over the financial years through March 2022.
• Share price factors in all benefits from the refining and petchem projects.

IIFL on Persistent Systems

• Initiated ‘Add’ with price target of Rs 835.
• Persistent is in middle of an investment phase.
• Continuous investments to keep margin expansion under check.
• Digital to drive growth, Alliance and Accelerite pose upside risks.
• Expect $ Revenue and earnings per share to grow at a compounded rate of 10.5 percent and 11 percent respectively over the financial years through March 2020.
• Remain positive on long-term story
• Believe that investments made are in the right direction.
• Market is already pricing in significant margin expansion.
• Valuations fair but rerating may take time.
• Earnings upgrade cycle may take time to kick in.

JPMorgan on Metals

• Steel, Zinc and Aluminum are preferred commodities.
• Positives: Chinese supply rationalisation, improving India demand and strong global demand.
• Vedanta most attractively positioned in terms of growth.
• TATA and JSW for domestic steel exposure and Hindalco for aluminum.
• Remain Underweight on NMDC and NALCO.
• SAIL offers an interesting option play on India demand recovery.
• Coal India remains a yield play with limited upside..
• Vedanta: Raised price target to Rs 415 from Rs 350; Stressed asset acquisition in steel would be positive given attractive economics.
• Tata Steel: Raised price target to Rs 1,015 from Rs 880.
• JSW Steel: Raised price target to Rs 325 from Rs 285.
• Hindaco: Raised price target to Rs 335 from Rs 300; Little volume growth, re-rating to continue.

Credit Suisse on Sadbhav Engineering

• Maintained ‘Outperform’; raised price target to Rs 480 from Rs 360.
• Positives: Improving execution, ordering pipeline and traffic.
• Execution will continue to keep up the momentum in the next financial year.
• Stronger execution to drive earnings on leverage.
• NHAI bidding pipeline is much stronger now.
• Sadbhav still trades at a relatively attractive.

UBS on Info Edge

• Downgraded to ‘Neutral’ from ‘Buy’; cut price target to Rs 1,370 from Rs 1,500.
• Believe positive market expectations have already driven the stock higher.
• Current valuation appears full.
• Believe market is pricing in an accelerated earnings trajectory for Naukri and undermining risk.
• Expect 15-16 percent/18-20 Revenue CAGR over near to medium term.
• Expect increase in advertisement to limit margin expansion.
• Expect strong delivery and subscription revenue growth at a compounded rate of 50 percent over the financial years through March 2020 for Zomato.
• Expect a $50-100 million fund-raising by Zomato at a valuation of about $1.5 billion.

Macquarie on ITC

• Maintained ‘Neutral’ with price target of Rs 304.
• Cess decision for the next financial year critical for re-rating.
• No cess increase in fixed cess rate for the next financial year will be best.
• Cigarette business continue to be under pressure.
• Expect 1 percent compounded growth rate in cigarette volume for the next two years.
• Profitability focus important for re-rating of FMCG business.

Centrum on Aarti Drugs

• Initiated ‘Buy’ with price target of Rs 940.
• Aarti Drugs is a leading domestic player of APIs.
• Positives: good growth of existing products, new product launches and over 75 percent utilisation.
• Aarti Drugs is profit-making, dividend paying company poised for good growth.
• See strong scope for re-rating.
• Expect to perform well due growth across geographies and economies of scale.
• Expect revenue, operating income and net profit to grow at a compounded rate of 14 percent, 15 percent and 19 percent respectively over the financial years through March 2020.
• To benefit from its presence over the entire pharma value chain.
• Expect company to generate healthy return ratios in future.
• Outperform peers’ due to its efficacious presence in the domestic and emerging markets.

Morgan Stanley on Indian IT

• Indian IT services stocks could be set for a turnaround in 2018.
• Valuations are at or below long-term averages.
• Improving global macro could spur tech spending; Could re-rate stocks.
• Infosys: Upgraded to ‘Overweight’ from ‘Equal-weight’; raised price target to Rs 1,300 from Rs 1,028.
• Tech Mahindra: Upgraded to ‘Overweight’ from ‘Equal-weight’; raised price target to Rs 635 from Rs 500.
• HCL: Upgraded to ‘Overweight’ from ‘Equal-weight’; raised price target to Rs 1,060 from Rs 939.
• TCS: Upgraded to ‘Equal-weight’ from ‘Underweight’; raised price target to Rs 2,900 from Rs 2,500.
• Wipro: Maintained ‘Underweight’; raised price target to Rs 290 from Rs 275.
• Persistent: Maintained ‘Overweight’; raised price target to Rs 915 from Rs 840.
• Mphasis: Upgraded to ‘Overweight’ from ‘Equal-weight’; raised price target to Rs 830 from Rs 688.
• Cyient: Maintained ‘Overweight’; raised price target to Rs 650 from Rs 620.
• Mindtree: Maintained ‘Underweight’; raised price target to Rs 560 from Rs 440.
• Hexaware: Downgraded to ‘Underweight’ from ‘Equal-weight’; raised price target to Rs 290 from Rs 221.

Morgan Stanley on Federal Bank

• Maintained ‘Equal-weight’ with price target of Rs 95.
• Slippages increased driven by higher NPLs in corporate and retail.
• NII was broadly in-line.
• Fee income growth moderated; Cost to core income stayed elevated.
• Lower treasury gains were partially offset by lower opex.
• Expect return on equity to remain below cost of equity over the next few years.

Edelweiss on Federal Bank

• Maintained ‘Buy’; raised price target to Rs 152 from Rs 146.
• Slippages rise; Better recovery restricts rise in GNPLs.
• Core profitability sustains momentum.
• Well placed given upfronting of stress recognition and ample growth levers.
• Limited scope for NIMs improvement and higher cost are key monitorables.
• Expect Earnings to grow at a compounded rate of 27 percent over the financial years through March 2020.

Newgen Software Technologies issue opens today at Rs 240-245 per share (Here’s all you need to know about the IPO).

• JVL Agro Industries circuit filter revised to 10 percent.
• Fiberweb India’s last trading day before ex-bonus.
• SJVN last trading day to determine buyback eligibility.
• Singer India last trading day before stock split.

• Astra Microwave: Dilipkumar Lakhi bought 8.7 lakh shares or 1 percent equity at Rs 123.45 each.
• Apollo Pipes: Canara HSBC OBC Life Insurance bought 1 lakh shares or 2 percent equity at Rs 680 each.
• HDIL: Alliance Capital Management sold 26.85 lakh shares or 0.6 percent equity at Rs 66.62 each.

Poddar Housing

• Securities Investment Management Pvt. bought 39,058 shares or 0.6 percent equity at Rs 1,349.25 each.
• Value Quest India Moat Fund sold 86,549 shares or 1.4 percent equity at Rs 1,350.03 each.

Federal Bank Q3 (YoY)

• Net interest income up 20.1 percent at Rs 950 crore.
• Net profit up 26.2 percent at Rs 260 crore.
• Gross NPA at 2.52 percent versus 2.39 percent (QoQ).
• Net NPA at 1.36 percent versus 1.32 percent (QoQ).

ABC Bearings Q3 (YoY)

• Revenues up 9 percent at Rs 50 crore.
• Net profit up 38.5 percent at Rs 3.6 crore.
• EBITDA up 8 percent at Rs 9.1 crore.
• Margin at 18.2 percent versus 18.3 percent.

India Grid Trust Q3 (QoQ)

• Revenue down 4 percent at Rs 126.7 crore.
• Net profit up 13 percent at Rs 68.8 crore.
• EBITDA down 4 percent at Rs 117.3 crore.

Delta Corp Q3 (YoY)

• Revenue up 56 percent at Rs 162 crore.
• Net profit up 347 percent at Rs 44.7 crore.
• EBITDA up 113 percent at Rs 68.7 crore.
• Margin at 42.4 percent versus 31 percent.

Zee Learn Q3 (YoY)

• Revenue up 73 percent at Rs 52 crore.
• Net profit up 250 percent at Rs 7.7 crore.
• EBITDA up 89 percent at Rs 18 crore.
• Margin at 34.6 percent versus 31.7 percent.

• ICICI Lombard General Insurance
• MCX
• Reliance Nippon Life Asset Management
• Agro Tech Foods
• Den Networks
• Hatsun Agro Products
• Jay Bharat Maruti
• Network 18
• SH Kelkar
• TV18

• Jubilant Life gets environmental clearance for pesticide plant in Gujarat.
• BSE board approved a buyback of up to 15 lakh shares at Rs 1,100 per share; will spend Rs 166 crore on buyback.
• Vascon Engineers sold 85 percent of the units of its new residential project Forest Edge on Day 1.
• Max Ventures approved raising up to Rs 450 crore via rights issue.
• Kotak Mahindra is mulling divesting its stake in MCX (Moneycontrol).
• Bharat Bijlee to receive Rs 46.79 crore from MIDC towards acquisition of land situated at Navi Mumbai.
• RattanIndia Power says joint lenders forum has submitted the S4A Scheme to the overseeing committee.
• BL Kashyap & Sons: Standard Chartered Bank approved one-time settlement scheme.
• Bajaj Finance to hold 12.6 percent stake in Mobikwik on a fully diluted basis post conversion of Compulsorily Convertible Preference Shares for a total investment of Rs 225 crore.
• Seamec bags contract worth $1.26 million from L&T Hydrocarbon for deployment of its vessel.
• IMP Powers receives order for manufacturing turbines from Germany’s Smart Hydro Power GmbH for a period of 20 years.
• Zee Music in pact with Amazon Prime to provide music content.

• Sensex hits multiple records yet BNP still sees value.
• Oil trades near 3-year high as hedge funds increase bullish bets.
• Metals power higher as sickly dollar spurs copper-to-gold rally.
• Chief Justice sets up Five-Judge Constitution Bench to hear major issues.
• India’s trade gap at its widest in three years as crude, gold imports surge.
• UIDAI to allow face recognition for Aadhaar authentication.
• Israeli Prime Minister Benjamin Netanyahu backs U.S. President Donald Trump on Iran ultimatum to European leaders.

• West Texas Intermediate crude increased 0.7 percent to $64.72 a barrel, reaching the highest since 2015.
• Brent crude ended higher for sixth day at $70.26 per barrel, up 0.6 percent.
• Gold rose 0.1 percent to $1,340.72 an ounce, the highest in more than four months.

Shanghai Exchange

• Steel snaps two-day losing streak; up 0.6 percent.
• Aluminium trades lower; down 0.8 percent.
• Zinc trades higher for fourth day; up 0.02 percent.
• Copper snaps two-day losing streak; up 0.2 percent.
• Rubber trades higher for sixth straight session; up 0.3 percent.

Good Morning!

Asian equities’ best start to a year since 2006 took a breather Tuesday in the absence of fresh catalysts to spur the rally on. The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, was a little changed at 10,756.50 as of 8:00 a.m.

Here are some of the key events scheduled for this week:

• Earnings season ramps up: Taiwan Semiconductor Manufacturing Co., ASML Holdings NV, Bank of America Corp. and Goldman Sachs Group Inc. are among some notable releases.
• Industrial production in the U.S. probably increased in December, a report may show Wednesday, completing a solid year for manufacturing.
• U.S. housing starts probably slipped in December for the first time in three months as frigid winter weather impeded work, forecasts show ahead of Thursday’s release.
• The Bank of Canada’s interest-rate decision comes Wednesday. Monetary policy announcements are also this week due in South Korea, South Africa and Turkey.
• China releases fourth quarter GDP, December industrial production and retail sales Thursday.