Banks Power Sensex, Nifty To Record As Earnings Pick Up Steam

Indian equity benchmarks rose to fresh record highs for second day in a row led by rally in heavyweight private sector lenders which rose after reports surfaced which suggested that the government is mulling to raise foreign direct investment (FDI) limit in private sector banks to 100 percent from 74 percent.

The S&P BSE Sensex rose 0.51 percent or 178 points to fresh record close of 35,260 and the NSE Nifty 50 Index advanced 0.26 percent or 28 points to fresh lifetime high close of 10,817.

In the intraday deals, the Sensex rose over 1 percent to 35,507 and Nifty surged as much as 0.9 percent to 10,887. However, due to selling pressure in metals and telecom shares, the benchmarks came off highs but managed to close at new record highs.

The broader markets faced selling pressure as the S&P BSE MidCap Index fell 1.7 percent and the S&P BSE SmallCap Index plunged 2 percent.

Fifteen out of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Realty Index's 4 percent drop. On the other hand, the S&P BSE FMCG Index was the top sectoral gainer, up 0.7 percent.

Shares of the India's sixth largest private sector lender were trading 0.77 percent lower at Rs 339.75 after it reported December quarter earnings.

Key earnings highlights:

• Standalone net profit at Rs 1,076.8 crore versus Bloomberg estimate of Rs 1,062 crore
• Standalone net profit up 22 percent At Rs 1,076.8 crore versus Rs 882.6 crore (YoY)
• Gross NPA at 1.72 percent versus 1.82 percent (QoQ)
• Net NPA at 0.93 percent versus 1.04 percent (QoQ)
• Standalone net interest income (NII) at Rs 1,888.8 crore versus Bloomberg estimate of Rs 1,935 crore
• Standalone NII up 26.8 percent at Rs 1,888.8 crore versus Rs 1,489.3 crore (YoY)
• Gross NPA at Rs 2,974.3 crore versus Rs 2,720 (QoQ)
• Net NPA at Rs 1,595 crore versus Rs 1,543 (QoQ)
• Standalone provision at Rs 421.3 crore versus Rs 447 crore (QoQ); Rs 115 crore (YoY)

Shares of the Gujarat-based coal mining and cargo handling company fell as much as 6.36 percent to Rs 191.55 after it reported December quarter earnings.

Key earnings highlights:

• Net profit up 3.3 percent at Rs 351 crore versus Rs 339.9 crore (YoY)
• Revenue up 15.5 percent at Rs 9,938.4 crore versus Rs 8,605.8 crore (YoY)
• EBITDA up 60.6 percent at Rs 999.7 crore versus Rs 622.3 crore (YoY)
• Margin at 10.1 percent versus 7.2 percent (YoY)

Shares of the Udaipur-based zinc miner fell as much as 6.16 percent, the most in nearly 10 months, to Rs 303.25.

Key earnings highlights:

• Net profit down 3.9 percent at Rs 2,230 crore versus Rs 2,320 crore (YoY)
• Revenue up 18.7 percent at Rs 5,922 crore versus Rs 4,987 crore (YoY)
• EBITDA up 16.4 percent at Rs 3,244 crore versus Rs 2,788 crore (YoY)
• Margin at 54.8 percent versus 55.9 percent (YoY)

Shares of real estate companies were trading lower on the BSE. Gauge of real estate shares- S&P BSE Realty Index declined 3.4 percent led by losses in Unitech, DLF and Godrej Properties.

Shares of the Ahmedabad-based transport support services fell 4.2 percent to Rs 415 after it reported October-December quarter earnings.

Key earnings highlights:

• Consolidated net profit at Rs 994 crore versus Bloomberg estimate of Rs 946 crore
• Consolidated net profit up 18 percent At Rs 994 crore versus Rs 842 crore (YoY)
• Consolidated revenue at Rs 2,688.9 crore versus Bloomberg estimate of Rs 2521 crore
• Consolidated revenue up 21.7 percent at Rs 2,688.9 crore versus Rs 2,208.7 crore (YoY)
• Consolidated EBITDA at Rs 1,785 crore versus Rs 1,415 crore (YoY)
• Consolidated margin at 66.4 percent versus 64.1 percent (YoY)

Shares of the Aditya Birla Group cement maker declined 1.41 percent to Rs 4,480 after its standalone net profit declined 25 percent to Rs 421 crore compared with Rs 563 crore during the same period last year.

Higher coal prices and pet coke ban in some states impacted companies performance in December quarter, the company said in an exchange filing.

Key earnings highlights:

• Revenue up 35 percent at Rs 7,589 crore versus Rs 5,609 crore (YoY)
• EBITDA up 13 percent at Rs 1,268 crore versus Rs 1,113 crore (YoY)
• Margins at 16.7 percent versus 19.8 percent

Newgen Software Technologies Rs 425 crore IPO subscribed was 1.59 times as on 11:00 am.

• QIB portion subscribed 1.77 times
• HNI portion subscribed 0.04 times
• Retail portion subscribed 2.14 times

Source: Company's PR

Shares of the Vadodara-based fabricated metal and hardware company rose as much as 8.38 percent to Rs 44.60 after it won an order worth Rs 11 crore from oil & gas sector, the company said in a stock exchange filing.

Shares of the West bengal-based paper maker rose as much as 5 percent to Rs 221.80 after L&T MF bought stake in the company.

L&T MF bought 38.40 lakh shares or 6.3 percent equity at an average of Rs 224.9 each. While, Ganpati Industrial Pvt Ltd sold 22.42 lakh shares or 3.7 percent equity at Rs 225 each and Parwati Devi Jalan sold 5.71 lakh shares or 0.9 percent equity at Rs 225 each.

• Star Cement has 1.4 crore shares change hands in five blocks
• Fortis Healthcare has 19 lakh shares change hands in two blocks on the BSE.

Buyers and sellers were not immediately known

Source: Bloomberg

Shares of the Kolkata-based non-banking finance company rose as much as 4.56 percent to Rs 181.30 after Edelweiss initiated coverage on the stock with a buy for target price of Rs 238.

Edelweiss in a note said:

• Magma is a turnaround story.
• Revamping business to build a scalable and profitable model.
• Regional diversification, balanced distribution mitigate event risk.
• AUM CAGR of 15 percent and GNPLs to dip to 5.2 percent by March 2020.
• Improving operating efficiencies to drive productivity surge.
• Acceleration in return ratios inevitable.
• Expect return on assets and return on equity to expand to 2.2 percent and 13 percent respectively by March 2020.
• Street values the stock at steep discount to peers, owing to weak RoE profile.

Shares of the Mumbai-based LPG bottling company were locked in a 10 percent upper circuit at Rs 36.35 for second day in a row after EQ India Fund bought 30 lakh shares (1.2 percent equity) at Rs 29.56 per share.

Shares of the Bangalore-based IT company rose as much as 10 percent to Rs 687 after it reported strong earnings in December quarter.

Key earnings highlights (Q3, QoQ):

• Revenue up 3 percent at Rs 1377.8 crore.
• Net profit up 13 percent at Rs 141.5 crore.
• EBIT up 52 percent at Rs 165.5 crore.
• Margins at 12 percent versus 8.2 percent.

Shares of the Bhopal-based road construction company rose as much as 3.76 percent to Rs 995 after it won an EPC project valued at Rs 730 crore by National Highways Authority of India in Madhya Pradesh, the company said in an exchange notification.

Shares of the telecom infrastructure company fell nearly 5 percent, the most in over two months, to Rs 348.20 after its profit declined in the December ended quarter, falling short of analyst estimates.

Net profit declined 6 percent on to Rs 585 crore on a year-on-year basis, the company said in an exchange filing. That’s lower than the Bloomberg consensus estimate of Rs 707 crore. The telecom tower company’s revenue rose 7 percent to Rs 3,655 crore over the same quarter last year, in line with the consensus of analyst estimates tracked by Bloomberg.

• Indian equity benchmarks extended record run in early noon deals led by strong gains in HDFC Bank, HDFC, ITC and Larsen & Toubro.
• The S&P BSE Sensex rose as much as 1.46 percent or 407.71 points to fresh record high of Rs 35,489.53 and the NSE Nifty 50 Index surged 0.92 percent or 98.95 points to 10,887.50.
• Seven out of 11 sector gauges compiled by the National Stock Exchange were trading higher led by the Nifty Bank Index's 1.86 percent surge. On the flipside, the Nifty Metal Index was the top sectoral loser, down 1.5 percent.

Top Nifty Gainers

• Yes Bank
• UPL
• IndusInd Bank
• HDFC Bank
• ITC

Top Nifty Losers

• Bharti Infratel
• Hindalco
• Vedanta
• Tata Steel
• Indian Oil

Market capitalisation of India's largest private sector lender crossed Rs 5 lakh crore after its shares rose as much as 3.36 percent to record high of Rs 1,954.

The gauge of banking shares on the National Stock Exchange rose to fresh record high for the second day in a row led by gains in HDFC Bank after reports surfaced which suggested that the government may raise FDI in banking sector to 100 percent from 74 percent.

Shares of the Punjab-based drug maker rose as much as 8.56 percent to Rs 279 after it signed two long term agreements with Serum Institute of India (SII) and SII's subsidiary Bilthovan Biologicals (BBIO), Panaces said in an exchange notification.

Under the collaboration, Serum Institute will ensure supply of injectable polio vaccine bulk to Panacea, which is an important constituent of the Hexavalent vaccine from its Netherlands-based subsidiary BBIO.

Shares of the Gurugram-based beverage maker rose as much as 4.35 percent to Rs 688 after its board approved plant to acquire franchisee rights for PepsiCo India's previously franchised sub-territory in Bihar, the company said in a stock exchange notification post market hour yesterday.

Shares of the Mumbai-based chemical maker rose as much as 12 percent to Rs 2,390 after it reported strong earnings in October-December quarter.

Key earnings highlights:

• Revenue up 39.5 percent at Rs 346 crore.
• Net profit up 243 percent at Rs 51.5 crore.
• EBITDA up doubled to Rs 80 crore.
• Margin at 23.1 percent from 16.1 percent.

Indian equity benchmarks surged led by gains in banking heavyweights like ICICI Bank, State Bank of India and HDFC Bank.

The S&P BSE Sensex rose as much as 1.13 percent or 395 points to fresh record high of 35,476.70 and the NSE Nifty 50 Index advanced as much as 0.91 percent or 98 points to new record high of 10,887.

The gains were broad-based as the mid-cap and small-cap shares were also trading higher. The S&P BSE MidCap Index rose 0.4 percent and the S&P BSE SmallCap Index gained 0.65 percent

Thirteen out of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Bankex Index's 1.7 percent gain. On the flipside, the S&P BSE Telecom Index was the top sectoral loser, down 0.6 percent.

Shares of the Mumbai-based fast-moving consumer goods maker rose as much as 2.6 percent to record high of Rs 1,406 after its third quarter net profit surpassed estimates on healthy volume growth due to a low base in the previous year on account of demonetisation.

Net profit of HUL jumped 27.7 percent to Rs 1,326 crore on a year-on-year basis driven by higher volumes, according to the company's exchange filing. This bottom line exceeded the Bloomberg consensus estimate of Rs 1,167 crore. Sales volumes grew 11 percent as compared to a 4 percent contraction in the comparable quarter last year.

In a surprising turn yesterday, the government reduced it planned additional borrowing for this year by 60 percent to Rs 20,000 crore.

The move came less than a month after the government had said that it need to sell an extra Rs 50,000 crore in bonds. Unsurprisingly, yields on the benchmark 10-year bond dropped by 16 basis points.

Investors will now be watching to see if sovereign bonds are able to sustain Wednesday’s rally. Naveen Singh, head of fixed-income trading at ICICI Securities, doesn't think they will. He told Bloomberg that “As the dust settles, bond-market players will come to realize that all other negatives are stacked against them.”

“There’s not a single positive metric, domestically and globally, that can ensure a broad-based buying in the bond market,” Singh added.

• Adani Ports SEZ
• Bharti Airtel
• UltraTech Cement
• Yes Bank

Other earnings to watch

• Adani Enterprises
• Cyient
• DB Corp
• Deepak Nitrite
• Hindustan Zinc
• Mastek
• Zensar Technologies

Hindustan Unilever Q3 (YoY)

• Net sales up 11.5 percent at Rs 8,590 crore.
• EBITDA up 24 percent at Rs 1,680 crore.
• Margin at 19.6 percent from 17.6 percent.
• Net profit up 27.7 percent at Rs 1,326 crore.
• Volumes growth at 11 percent.

Bharti Infratel Q3 (YoY)

• Revenue up 7 percent at Rs 3,655 crore.
• EBITDA up 8 percent at Rs 1,613 crore.
• Margin flat at 44.1 percent.
• Net profit down 6 percent at Rs 585 crore.

Mindtree Q3 (QoQ)

• Revenue up 3 percent at Rs 1,377.8 crore.
• Net profit up 13 percent at Rs 141.5 crore.
• EBIT up 52 percent at Rs 165.5 crore.
• Margin at 12 percent from 8.2 percent.

Thirumalai Chemicals Q3 (YoY)

• Revenue up 39.5 percent at Rs 346 crore.
• Net profit up 243 percent at Rs 51.5 crore.
• EBITDA up doubled to Rs 80 crore.
• Margin at 23.1 percent from 16.1 percent.

Adani Transmission Q3 (YoY)

• Revenue up 144.5 percent at Rs 1,782.5 crore.
• Net profit at Rs 842 crore from Rs 99 crore.
• EBITDA up 205 percent at Rs 1,437 crore.
• Margins at 80.6 percent from 64.7 percent.

Srei Infra Q3 (YoY)

• Revenue up 24 percent at Rs 1,405 crore.
• Net profit up 57 percent at Rs 105 crore.
• Consolidated AUM up 20 percent at Rs 44,971 crore.
• Disbursements up 19 percent at Rs 5,731 crore.

DCB Bank Q3 (YoY)

• Net interest income up 20 percent at Rs 251 crore.
• Net profit up 12 percent at Rs 57 crore.
• Provisions up 13 percent at Rs 34.25 crore (QoQ).
• Gross NPAs at 1.89 percent from 1.80 percent (QoQ).
• Net NPAs at 0.87 percent from 0.9 percent (QoQ).

• Banks: Government mulls allowing 100 percent FDI in banking. (CNBC TV-18)
• Varun Beverages to acquire franchisee rights for Pepsico India in the state of Bihar.
• PNB Housing Finance gets RBI nod for $500 million masala bonds.
• Adani Power gets 49 percent stake in 600 MW Korba West Power.
• TCS expands partnership with Shure Inc to establish global development center.
• Ashoka Buildcon receives completion certificate for its Mudhol Nipani road project.
• Pitti Lamination starts commercial operations at its Aurangabad plant.
• Premier Explosives announces successful test firing of PSOM-XL strap-on motor.
• Piramal Enterprises explores re-entry into Indian formulations business as Abott non compete expires this year (Economic Times).

For a complete list of stocks to watch, click here

• Newgen Software Technologies continues on day 3. The issue was subscribed 0.7 times until day 2.
• Amber Enterprises India IPO continues on day 2. The issue has been fully subscribed.

• Circuit filter revised to 10 percent: Asian Hotels (North) and Pudumjee Industries.
• Circuit filter revised to 5 percent: Hindustan Motors.
• Zenith Birla shifted out of GSM framework.
• Orbit Exports and James Warren Tea ex-date for buyback eligibility.

• Confidence Petroleum India: EQ India Fund bought 30 lakh shares or 1.2 percent equity at Rs 29.56 each.
• Uttam Galva Steel: Albula Investment Fund sold 42.25 lakh shares or 3 percent equity at Rs 22.48 each.
• Shah Alloys: United India Insurance Co sold 1 lakh shares or 0.5 percent equity at Rs 18 each.

Emami Paper Mills:

• L&T MF bought 38.40 lakh shares or 6.3 percent equity at an average of Rs 224.9 each.
• Ganpati Industrial Pvt Ltd sold 22.42 lakh shares or 3.7 percent equity at Rs 225 each.
• Parwati Devi Jalan sold 5.71 lakh shares or 0.9 percent equity at Rs 225 each.

IRB InvIT Fund:

• BNP Paribas arbitrage sold 1.31 crore units at Rs 88.1 each.
• Prusik Asia Fund bought 1.66 crore units at Rs 88.1 each.

• Nifty Jan. futures trading at 10,791.8, premium of 3.3 points versus 9.5 points.
• Jan. Series: Nifty open interest up 3 percent; Bank Nifty open interest up 5 percent

• India VIX ended at 13.8, down 1.6 percent.
• Max open interest for Jan. series at 11,000 Call (open interest at 50.3 lakh, down 3.6 percent).
• Max open interest for Jan. series at 10,500 Put (open interest at 79.7 lakh, up 6 percent).

UBS on Small Finance Banks

• Expect small finance banks to report highest loan and revenue growth in next five year.
• Initiate coverage on AU Small Finance Bank, Equitas Holdings and Ujjivan Financial Services.
• Loan book for three listed SFBs to grow four-fold over the financial years through March 2022.
• We believe valuations are now attractive for Equitas and Ujjivan.
• Though AU Small Finance has best metrics valuations are expensive.
• AU Bank, Equitas better placed for loan growth on diversified product portfolio.
• MSMEs present large opportunity due to low penetration.
• Scale-up in low cost deposit base to drive reduction in cost of funds by March 2022.
• Equitas: Initiate ‘Buy’ with price target of Rs 250.
• Ujjivan: Initiate ‘Buy’ with price target of Rs 575.
• AU Bank: Initiate ‘Neutral’ with price target of Rs 800.

Edelweiss on Magma Fincorp

• Initiated ‘Buy’ with price target of Rs 238.
• Magma is a turnaround story.
• Revamping business to build a scalable and profitable model.
• Regional diversification, balanced distribution mitigate event risk.
• AUM CAGR of 15 percent and GNPLs to dip to 5.2 percent by March 2020.
• Improving operating efficiencies to drive productivity surge.
• Acceleration in return ratios inevitable.
• Expect return on assets and return on equity to expand to 2.2 percent and 13 percent respectively by March 2020.
• Street values the stock at steep discount to peers, owing to weak RoE profile.

Deutsche Bank on Reliance Industries

• Maintained ‘Buy’; raised price target to Rs 1,150 from Rs 1,040.
• With end of capex cycle, FCF to improve to 5.3 percent over the financial years through March 2020.
• Jio’s massive investment signals an optimistic view of Indian telecom sector.
• Jio: Raising equity value to Rs 206 per share; Fixed broadband is next catalyst.
• Jio to reach 23 percent wireless revenue market-share by March 2021.
• New capacities, higher margins to drive strong EBITDA growth.
• RIL remains one of the most under-owned stocks by MF/FII in the Nifty.
• Valuations leave scope for upside.

Axis Capital on Sterlite Technologies

• Initiated ‘Buy’ with price target of Rs 430.
• Sterlite will benefit from a multi-year global data wave.
• Positives: exponential increase in data consumption, replacement of copper wires with optic fiber, transition to 5G and government initiatives.
• Shift towards optic fiber cables is inevitable due to its speedier data transmission.
• Expect domestic demand to accelerate as India has low fiber penetration.
• Expect revenue and Ebitda to grow at a compounded rate of 20 percent and 25 percent respectively over the financial years through March 2020.
• Sterlite should command scarcity premium in market that has potential for exponential growth.
• Government capex towards Bharat Net and Smart city projects to drive software business.

CLSA on Zee Entertainment

• Maintained ‘Buy’ with price target of Rs 707.
• Previous quarter results were ahead of estimates.
• Performance fuelled by revival in ad spends and improvements in viewership.
• Strong revival in ad growth.
• Domestic subscription revenues were hit by delays in content deals.
• Expect domestic ad revenue, domestic subscription revenue and earnings to grow at a compounded rate of 14 percent, 16 percent and 20 percent respectively over the financial years through March 2020.

CLSA on Bharti Infratel

• Downgraded to ‘Outperform’ from ‘Buy’; cut price target to Rs 400 from Rs 440.
• Core performance below estimates.
• Operator exits led net tenancy loss.
• Full impact of tenancy loss will be realised in current quarter.
• Likely merger of Infratel and Indus will be a catalyst for its valuation.

Morgan Stanley on Bharti Infratel

• Maintained ‘Equal-weight’ with price target of Rs 478.
• Previous quarter’s revenue and Ebitda were in line with estimate.
• Net tenancies declined sequentially owing to churn from smaller operators.
• Estimate tenancy exposure to smaller operators to be more than 5 percent.
• Ebitda impact from tenancy loss could be reflected next quarter.
• Energy margins remained strong.

CLSA on HUL

• Maintained ‘Outperform’; raised price target to Rs 1,575 from Rs 1,515.
• Low demonetisation base helped its strong results in the previous quarter.
• Volume growth was ahead of estimate and so was earnings growth.
• Homecare continued to be star; Personal care growth was modest.
• Punchy valuation to be maintained.

Macquarie on HUL

• Maintained ‘Outperform’ with price target of Rs 1,609.
• Previous quarter results were ahead of estimates.
• Gradual improvement in demand to sustain.
• Ebitda margin expanded despite step-up in advertising cost.
• Segmental performance- All rounded growth.
• HUL is top pick in the consumer space.

BoFAML on Zee Entertainment

• Maintained ‘Underperform’ with price target of Rs 530.
• Results in the previous quarter above estimates.
• Domestic Ad bounce back; International struggle continues.
• Expect subscription growth to pick up in current quarter.
• Expect Ebitda to grow at a compounded rate of 11 percent over the financial years through March 2020.

Axis Capital on Bajaj Auto

• Upgraded to ‘Buy’ from ‘Hold’; raised price target to Rs 3,905 from Rs 3,503.
• Three wheelers – Strong growth to continue.
• Motorcycles – Banking on new launches.
• Premium bikes – Triumph could be a game changer.
• Exports – Recovering from low base.
• Foray into electric vehicles – Starting with three wheelers.
• Expect volumes and earnings to grow at a compounded rate of 13 percent and 20 percent respectively over the financial years through March 2020 given the better mix.

• HUL offers to pay Rs 119 crore after GST profiteering notice
• China poised for first full-year growth acceleration since 2010
• Net direct tax collections rise most in four years
• Facing margin pressure, Axis Bank ups loan rates by 5 basis points
• HUL profit exceeds estimates on strong volume growth
• Indian missile deal with Rafael back on table, Netanyahu says
• GST council may revise rates, streamline returns filing
• Bitcoin storms back from dip below $10,000
• Apple expects $38 billion tax bill on overseas repatriated cash

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.42 percent to 10,850 as of 8:19 a.m.

Asian stocks extended this year’s stellar run, following their U.S. counterparts higher amid optimism for global growth. Treasuries held losses on speculation Congress will avert a government shutdown.

Japanese and South Korean benchmarks gained, while Australia was largely flat. Technology shares were the best performers in the MSCI Asia Pacific Index. A global rise in yields has pushed those on 10-year Japanese government bonds to their highest since July, stretching toward a test of the Bank of Japan’s target around zero percent.

Here’s what to watch out for this week:

• 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.
• Central banks in Indonesia, Turkey and South Africa are all expected to stay on hold over the next day.
• China releases fourth quarter GDP, December industrial production and retail sales Thursday.

Commodities

• West Texas Intermediate crude rose 0.3 percent to $64.13 a barrel.
• Gold was flat at $1,326.13 an ounce.