A Broker looks a graph depicting the change in sterling on the trading floor at ETX Capital, a broker of contracts-for-difference. (Photographer: Jason Alden/Bloomberg)

Sensex, Nifty Drop As Deficit, Bank Fraud Weigh On Sentiment

Closing Bell

Indian equity benchmarks fell dragged down by banking shares as Punjab National Bank's Rs 11,000 crore fraud weighed on the investor sentiment.

The S&P BSE Sensex fell 286.71 points or 0.8 percent to 34,010.76 and the NSE Nifty 50 Index declined 0.88 percent or 93 points to 10,452.

Selling pressure in today's session was broad-based as the mid-cap and small-cap shares underperformed their larger counterparts. The S&P BSE MidCap and S&P BSE SmallCap Indices fell 1.2 percent each.

All sector gauges compiled by the National Stock Exchange ended lower dragged down by the Nifty PSU Bank Index's 2.5 percent fall.

Countdown

Fab Four Stocks Of The Day

Vakrangee: The Mumbai-based e-governance service provider was locked in a five percent upper circuit for fifth day in a row after facing a sharp selloff.

8K Miles Software: Shares of the software developer rose as much as 10 percent to Rs 86.65 after it announced blockchain platform 8K Health Edge.

PC Jeweller: The Delhi-based jeweller rose 7 percent to Rs 381 after company clarified that the company does not use a letter of credit/letter of undertaking in business transactions and buys all diamonds from local markets on a cash basis only.

Indoco Remedies: Shares of the Mumbai-based drug maker rose as much as 6.4 percent to Rs 277.25 after the company received European GMP certification from Regulatory Authority of Hungary for its Goa plant.

Block Deal Alert

  • ICICI Bank has 20 lakh shares change hands in a block.
  • State Bank of India has 13 lakh shares change hands in a block,

Buyers and sellers were not immediately known

Source: Bloomberg

Stocks Moving On Heavy Volumes

  • Torrent Pharma: The Ahmedabad-based drug maker was trading 0.3 percent higher at Rs 1,422. As many as 5 lakh shares changed hands on the BSE compared with an average of 8,700 shares traded daily in the past two weeks.
  • Motherson Sumi: The Noida-based auto parts maker fell 4.5 percent to Rs 326. As many as 31 lakh shares changed hands on the BSE compared with an average of 1.35 lakh shares traded daily in the past two weeks.
  • Federal Bank: The Kerala-based private sector lender rose 1.8 percent to Rs 96.15. As many as 1.08 crore shares changed hands on the BSE compared with an average of 5.8 lakh shares traded daily in the past two weeks.
  • NTPC: The Delhi-based power producer were trading 0.06 percent lower at Rs 162.8. As many as 34 lakh shares changed hands on the BSE compared with an average of 6.35 lakh shares.

PSU Bank Index Extends Selloff Dragged Down By PNB

Shares of the government-owned banks were trading lower dragged down by Punjab National Bank's 5 percent fall. Gauge of state-run lenders was the top sectoral loser on the National Stock Exchange, down 2.4 percent.

Fortis Healthcare Falls After SC Dismisses Singh Brothers Appeals

Shares of the Delhi-based hospital chain operator fell as much 8.6 percent from day's high to Rs 138 after the Supreme Court dismissed Singh brothers' appeal against Daiichi's Rs 3,500 crore arbitration award.

Power Lunch

Praxis Home Retail Gains As Aadi Financial Advisors Acquire Shares

Shares of Praxis Home Retail rose as much as 10 percent to Rs 202.45 after Aadi Financial Advisors LLP (Akash Bhansali) acquired 6.26 lakh shares at Rs 161.81 each.

Prakash Industries Gains ON Fund Raising Plan

Shares of the Delhi-based steel maker rose as much as 7 percent to Rs 234.60 after the company announced raising Rs 234 crore by issuing convertible equity warrants.

#Ask BQ

Vakrangee Gains For Fifth Day

Shares of the Mumbai-based e-governance services provider were locked in 5 percent upper circuit at Rs 245.45.

PNB Hits Fresh 52-Week On Fallout Of Rs 11,000 Crore Fraud

Shares of the Delhi-based state-run lender fell for third day in a row to hit fresh 52-week low of Rs 121 on fallout of Rs 11,000 crore fraud which was detected at one of its branches in Mumbai.

Hot Money

Market Check

  • Indian equity benchmarks extended losses dragged down by weakness in auto and state-owned banking stocks.
  • The S&P BSE Sensex fell 112 points to 34,185 and the NSE Nifty 50 Index declined 34 points to 10,510.
  • Selling pressure was broad-based as the S&P BSE MidCap and S&P BSE SmallCap Indices fell 0.8 percent each.
  • Seventeen out of 19 sector gauges compiled by BSE were trading lower led by the S&P BSE BSE Auto Index's 1.3 percent drop. On the other hand, the S&P BSE IT index was the top sectoral gainer, up 0.7 percent.

Trend Spotting

8K Miles Software Surges On Launching Blockchain Platform

Shares of the software developer rose as much as 10 percent to Rs 86.65 after it announced blockchain platform 8K Health Edge.

Indoco Remedies Gains On EU GMP Certification Of Goa Plant

Shares of the Mumbai-based drug maker rose as much as 6.4 percent to Rs 277.25 after the company received European GMP certification from Regulatory Authority of Hungary for its Goa plant.

The EU GMP certification will enable Indoco to continue to export medicinal products to all European countries, Indoco said in an exchange filing.

The F&O Show

MSCI Slams Indian Exchanges’ Move To Sever Overseas Ties

A move by Indian exchanges to stop all licensing deals with their foreign counterparts is anti-competitive and could jeopardize the country’s standing in indexes tracked by global funds worth trillions of dollars. (click here to read the full story)

India’s Second-Largest Firm May Disappoint Investors This Year

Tata Consultancy Services Ltd.’s valuations have run so far ahead of its earnings that analysts, for the first time in more than a decade, expect investors betting on the stock will be left poorer. (Click here to read more)

Amit Jatia, Vice Chairman At Westlife Development Speaks To BQ

  • To invest Rs 750 crore in expansion and hire 10,000 more people till 2020.
  • Margin growth will come with positive SSS growth going forward.
  • Across the spectrum seeing consumers spending if they find value.
  • As the economy grows, QSR sector is going to grow better.
  • India is still very nascent in QSR, sector is poised for growth.
  • We saw 8.1 percent growth again after the launch of Happy Price menu.
  • Seeing a good trend in consumer spending.
  • Mentioning calorie-count very specifically on products.
  • Introduced a number of new products that are doing quite well.
  • Never resorted to discounting rather re-invested into business.
  • Tailwinds in consumer spending continue; very excited about the current fiscal.
  • Have clocked 10 quarters of positive same-store-sales growth.

Fortis Healthcare Rises After Court Lets Lenders Sell Singhs' Pledged Shares

Shares of the healthcare provider rose as much as 5.3 percent to Rs 151. The Supreme Court, yesterday said that the status quo should not apply to the shares of Fortis healthcare held by Fortis Healthcare holdings that were encumbered before Aug. 11, Bloomberg reported.

Trading volume was 8.8 times its 30-day average. Fortis Healthcare trades at 15.8 times trailing 12-month earnings per share and 61 times its estimates for the coming year.

Gitanjali Gems Locked In Lower Circuit For The Second Day

Shares of the Mumbai-based jewellery maker was locked in the lower circuit for the second day at Rs 37, after its promoter, Mehul Choksi’s name surfaced in the PNB fraud case. The stock has declined for the third straight day.

Gitanjali Gems had said in a statement that Choksi did not have any current dealings with the firms enlisted in the FIR that PNB had lodged against Nirav Modi and other jewellers.

The stock’s trading volume was 11 times the 30-day average, and its the Relative Strength Index was 24, indicating that the stock may be oversold.

Mahesh Nandurkar, India Strategist At CLSA Speaks To BQ

  • Continue to remain optimistic on financial sector; prefer private banks and top PSU banks.
  • Focusing on cement, auto, pipes on the back of housing and consumption story.
  • Selectively underweight on staples as a sector.
  • Rural consumption growth will recover going forward.
  • Expect 15-20 percent Nifty EPS growth going forward.
  • Improvement in corporate earnings growth in general is another positive for markets.
  • Housing affordability at the best levels in last decade, need trigger for recovery.
  • Tax changes a small irritation for fund managers, calculation will become difficult.
  • Still remain optimistic on Asia-Pacific portfolio.
  • Macro story is not looking good for India now.
  • Weightage on India has been cut down.
  • Fund managers are not too perturbed right now.
  • Past few weeks there has been volatility in global markets.

IndianOpen

Opening Bell

Indian equity benchmarks gained for the third time this week following the gains in its Asian peers.

The S&P BSE Sensex Index rose as much as 0.6 percent to 34,508, while the NSE Nifty also rose as much as 0.6 percent to 10,613.

The market breadth was tilted in favour of buyers. All the 19 sectoral gauges advanced, led by S&P BSE Realty Index's 1.2 percent gain.

BQ Heads-Up!

Money Market Heads Up

Sovereign bonds fell the most in two weeks in the last session on account of shrinking liquidity in the system. Yield on the 10-year note jumped as high as 7.61 percent, easing only after the RBI said its stands ready to meet the cash requirements of the system.

It is important to note here that liquidity in the system tends to be tight in March on account of advance tax payment by companies. For today, the yields may stay in a tight range of 7.55-7.60 percent in the day.

In the currency market, the rupee is likely to gain for a fourth session supported by a strong risk appetite in the region. However, volumes could be impacted due to most South Asia market shut for lunar new year holiday. A rangebound trade of 63.70-64.10 a dollar is expected in the session.

F&O Setup

  • Nifty February futures traded at 10,551, a premium of 5.7 points.
  • February series: Nifty open interest down 2 percent, Bank Nifty OI unchanged.
  • India VIX ended at 16.3, down 5 percent.
  • Maximum open interest for February series at 11,100 call strike (open interest at 52.7 lakh, down 2.2 percent).
  • Maximum OI for February series at 10,500 Put (open interest at 64 lakh, up 1 percent).

F&O Ban

  • In ban: Balrampur Chini, Dish TV, GMR Infra, HDIL, Jain Irrigation, JP Associates, Oriental Bank.
  • New in ban: Jain Irrigation.

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

Put-Call Ratio

  • Nifty PCR at 1.13 versus 1.08.
  • Nifty Bank PCR at 0.99 versus 0.78.

Brokerage Radar

Macquarie on Punjab National Bank

  • Maintained ‘Underperform’ with price target of Rs 128.
  • Yet another example of poor risk management practices at PSU banks.
  • Funded exposure of Rs 1,700 crore and non-funded exposure of Rs 11,000 crore.
  • If held liable, this would translate to 27 percent of net worth and 43 percent of market cap.
  • If held liable, would wipe out profits made between April 2012 and March 2017.
  • Frauds a periodic occurrence because of poor systems, checks & balances.

JPMorgan on Punjab National Bank

  • Maintained ‘Neutral’ with price target of Rs 195.
  • Fraud detected; Large potential writedown.
  • Expect this event to remain an overhang on stock price in the near term.
  • May be too late to sell but recommend avoiding entering the stock.
  • If liability of Rs 11,300 crore booked, then 15 percent hit to the next fiscal’s estimated book value per share.
  • May also lead to slower revenue growth along with higher funding costs.
  • Total liability nearly represents entire deposit accretion of December quarter.
  • Possible incremental recap from the government.
  • PNB could divest its 33 percent stake in PNB Housing Finance.

Morgan Stanley on Zee Entertainment

  • Maintained ‘Overweight’ with price target of Rs 610.
  • Zee launched its new OTT platform - Zee5.
  • Some content available for free.
  • For premium content there will be monthly subscription.
  • Expect aggressive advertising of this platform over the next several months.

HSBC on SKF India

  • Maintained ‘Buy’; raised price target to Rs 2,300 from Rs 2,000.
  • December quarter’s earnings strong.
  • Automotive business continues to do well.
  • Slower industrial sales negatively impacted earnings.
  • New initiatives and new product lines to support market share driven growth.
  • New distribution centre to allow the company to gain market share for industrial products.

Deutsche Bank on India Equity Strategy

  • Following the sell-off we see attractive risk reward for rural reflation beneficiaries and high growth, high CASA banks.
  • Rural Reflation thrust to gain momentum.
  • RBI’s latest guidelines turn risk-reward firmly in favor of retail-oriented lenders.
  • Strong liabilities franchise emerge as a key differentiator in tightening liquidity scenario.
  • Preferred stocks: HUL, Dabur, M&M, Dalmia Bharat and Shree Cement.
  • Preferred banks: HDFC Bank, IndusInd Bank and Kotak Mahindra Bank.
  • Preferred NBFCs: Shriram Transport Finance, HDFC and M&M Financial Services.

Motilal Oswal on Zee Entertainment

  • Maintained ‘Buy’ with price target of Rs 705.
  • Zee launches digital app – Zee5.
  • Focusing on original content to benefit from shift toward OTT.
  • Offering original content at initial price of Rs 99 per month.
  • Incremental operating cost toward Zee5 could be Rs 50-70 crore.
  • Expect 80 – 100 basis point impact on the operating margin.
  • Expect 24 percent compounded growth rate in earnings per share over the financial years through March 2020, with RoIC of over 30 percent.

Credit Suisse on Apollo Hospitals

  • Upgraded to ‘Outperform’ from ‘Neutral’; raised price target to Rs 1,450 from Rs 1,075.
  • Margins bottoming out; strong growth ahead.
  • Margins for mature hospitals stabilising now.
  • Strong 20 percent compounded growth rate in operating income over the financial years through March 2020.
  • New hospitals show improvement in utilisation and operating income.
  • Pharmacy margins better than expected.
  • Apollo Hospital turnaround pushed out to the financial years ending March 2020.

Earnings To Watch

  • Varun Beverages

Offerings

  • Aster DM Healthcare IPO closes. The issue was subscribed 1.3 times.
  • Flemingo Travel Retail filed for DRHP for IPO with SEBI.

Trading Tweaks

  • Sundaram Finance circuit filter revised to 20 percent and shifted to B group.
  • MOIL ex-date for determining buyback eligibility.

Bulk Deals

  • City Union Bank: Lavender Investments sold 60 lakh shares or 0.9 percent equity at Rs 166 each.

Praxis Home Retail

  • Aadi Financial Advisors LLP acquired 6.26 lakh shares at Rs 161.81 each.
  • Pensionskasse Des Bundes Publica sold 1.63 lakh shares at Rs 167.82 each.

Stocks To Watch

  • UCAS appointed Infosys as its core technology partner up to 2021.
  • HDFC allots 2.49 crore shares to investors at Rs 1,726.05/share on a preferential basis.
  • SBI and Union Bank are said to be exposed to $1.8 billion PNB fraud case: Bloomberg.
  • Allahabad Bank’s exposure at about Rs 4,000 crore in PNB fraud case: Bloomberg.
  • Union Bank’s exposure at about Rs 1,000-2,000 crore in PNB fraud case: Bloomberg.
  • Axis Bank’s exposure at about Rs 2,000-3,000 crore in the PNB fraud case: Bloomberg.
  • IDBI Bank sells entire 30 percent stake in NSDL e-Governance infrastructure.
  • Indoco Remedies gets European GMP certification for manufacturing facility in Goa.
  • Prakash Industries to raise Rs 208 crore from promoters by issuing 1 crore convertible warrants.
  • India Grid Trust acquired three power transmission assets for Rs 1,410 crore.
  • 8K miles launched proprietary Blockchain platform 8K Health Edge.
  • Mahindra and Mahindra to invest Rs 176 crore in Zoomcar India for approx. Eyes 16 percent stake in the company.
  • Idea Cellular board meeting on Feb. 21, 2018 to approve QIP issue price.

Talking Points

  • India says no electric vehicle policy needed, will frame action plan.
  • India’s trade deficit at its widest since May 2013.
  • PNB fraud casts shadow on credibility of Indian banks, says HR Khan.
  • Fed seen stepping up pace of rate hikes, Bloomberg survey shows.
  • Lenders now free to sell Singhs’ pledged Fortis Healthcare shares.
  • Nirav Modi left India with family in first week of January.
  • Paytm calls WhatsApp’s closed payments service unfair as cashless war intensifies.
  • Who is liable to pay for Rs 11,000-crore fraud at PNB?

Commodity Cues

  • West Texas Intermediate crude rose 0.3 percent to $61.50 a barrel.
  • Gold was flat at $1,353.76 an ounce.
  • Brent snaps two-day winning streak; ends marginally lower at 64.33 per barrel; down 0.1 percent.
  • Sugar snaps two-day losing streak; ends 1.5 percent higher at 13.51 cents per pound.

Good Morning!

The Singapore traded SGX Nifty, an early indicator of Nifty’s performance in India, edged higher by 0.3 percent to 10,588.50 as of 8:30 a.m.

Japanese stocks extended a rally in global equities and the yen traded around a 15-month high, with trading muted due to holiday closures across Asia.

Australian shares were also higher, but with most major markets across Asia Pacific shut for Lunar New Year holidays, volumes may be light.

The S&P 500 topped 2,700 and the Dow Jones Industrial Average climbed above 25,000 on Thursday as U.S. equities capped their best five-day run since 2011 and rebounded from the worst of this month’s correction.

The yield on 10-year Treasuries hovered near 2.9 percent and the dollar edged lower. Investors seem convinced that even though borrowing costs are on the rise, they are not yet at levels that would hinder equities, especially with the economy gathering pace.

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