Sensex, Nifty Report Biggest Monthly Decline In Two Years

Indian equity benchmarks ended lower for the second day, posting its biggest monthly decline in two years, weighed by banking shares.

The S&P BSE Sensex Index closed 0.6 percent lower at 34,150.12. The benchmark fell nearly 5 percent this month, the biggest monthly decline since February 2016. The NSE Nifty 50 Index ended at 10,488.35, down 0.6 percent. The 50-stock index fell 4.9 percent during the month of February, the biggest monthly decline in two years.

The market breadth was tilted in favour of sellers. Fourteen out 19 sectoral gauges compiled by BSE slipped, led by S&P BSE Metal Index’s 1.2 percent decline. On the flipside, S&P BSE Information Technology Index was the top sectoral gainer, up 0.9 percent.

• Apr-Jan Fiscal deficit at Rs 6.77 lakh crore versus Rs 5.95 lakh crore revised estimates for FY18.
• Apr-Jan revenue deficit at Rs 4.80 lakh crore versus Rs 4.44 lakh crore revised estimates for FY18.

• Punjab National Bank: About 12 lakh shares changed hands in a block deal.
• Bharat Petroleum: About 22.8 lakh shares changed hands in a single block deal.
• Jindal Steel: About 17.9 lakh shares changed hands in a block deal.

Buyers and sellers were not known immediately.

Source: Bloomberg

Zydus-Cadila received a green signal from the U.S. drug regulator for its Dexmedetomidine Hydrochloride Injection used for sedation of non-intubated patients prior surgical procedures, according to its stock exchange notification.

Power of business families, weak legal system and few protections to whistle-blowers contribute to India’s scenario. (More details here.)

Source: Bloomberg

• Bigger issue with the Fed is inflation.
• There are no indications that inflation will accelerate.
• Flows in emerging markets via ETFs have been encouraging.
• Trump Administration tax cuts encouraging for businesses in U.S.

Shares of the wheel rim maker rose as much as rose as much as 2.2 percent to Rs 1,039.90. The company won a new export order close to 2,000 wheels, according to its stock exchange notification.

The stock has declined 9 percent so far this year, compared to 0.5 percent gain in Sensex.

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Shares of the real-estate developer gained as much as 2.3 percent to Rs 227.50 after its subsidiary emerged as the highest bidder for an 11.76-acre plot of land in Gurugram.

The subsidiary, Aadarshini Real Estate Developers Pvt. Ltd. had bid Rs 1,496 crore for the plot.

The stock was trading at an unusually high 99 percent premium versus peers. That compares with an average 59 percent premium that it enjoyed over the last two years, Bloomberg data showed. The Bloomberg consensus price target of DLF is 1.6 percent lower than the current stock price.

India’s market regulator approved the initial public offering of a Gitanjali Gems Ltd.’s subsidiary despite an ongoing probe into alleged trading violations by promoter Mehul Choksi, now named in the Rs 13,000-crore Punjab National Bank fraud. (more details here!)

• Commercial production will begin by June-July 2018.
• Nine months of production could give us close to 6,000 barrels.
• The well is profitable and will be an exciting addition to our bottomline in FY19.
• Demerger will increase focus on dredging.
• Demerger should take 6-8 months.
• Listing of demerged business should take 6-8 months.

Symphony

• Stock rose as much as 4.9 percent to Rs 1,870.
• Trading volume was 11.5 times its 20-day average.

Lakshmi Vilas Bank

• Stock fell as much as 6.5 percent to Rs 104.90.
• Trading volume was 8.7 times its 20-day average.

Avenue Supermarts

• Stock rose as much as 2.4 percent to Rs 1,387.
• Trading volume was 4.1 times its 20-day average.

Network 18 Media & Investments

• Stock rose as much as 5.2 percent to Rs 52.50.
• Trading volume was 2.1 times its 20-day average.

TeamLease Services

• Stock rose as much as 2.5 percent to Rs 2,134.
• Trading volume was 29.8 times its 20-day average.

• The Nikkei Manufacturing PMI in February was 52.1 from 52.4 in January.

Key highlights from the conversation:

• Have been playing an important role in transformation from fintech perspective.
• Focusing on ecosystems rather than individual enterprises.
• Approaching towards managing risk at scale.
• Should be more worried if there is any disruption in delivery model.
• Leading in technology-led transformation rather than location-led transformation.
• E-Commerce competed on a value proposition of price.
• Helping Rolls-Royce in digital transformation.
• Focused on differential capabilities but acquisitions not part of our core strategy.
• Very excited on cloud transformation space via agile.
• Getting more embedded and closer on IT design of clients.
• Technology is becoming so integral that it poses both challenge as well as opportunity.

Shares of the drug-maker climbed as much as 1.77 percent to Rs 597 after it partnered with Roche Products (India) Pvt. Ltd. to create greater access to key medicines, according to its stock exchange notification.

The pharmaceutical company said that the deal is part of the company’s efforts to improve the state of healthcare in India. The stock snapped a two-day losing streak to gain in today’s opening trade. The traded volume was 3.1 times the 30-day average.

Cipla was trading at an unusual 16 percent discount versus peers, compared to an average 2 percent premium over the last two years, Bloomberg data revealed.

Key highlights from the conversation:

• Indications suggest a downward movement for crude prices.
• Crude prices cannot go beyond a point because of shale oil impact.
• Rise in crude prices had no real impact on car sales.
• Will end the year with 6-6.5 percent sales growth.
• Expect 2018-2019 to be better for auto industry.
• No impact on demand due to price hike.
• No serious impact due to introduction of e-way bill.
• Gujarat Plant to produce about 1.70 lakh cars this year.
• Royalty plan based on Indian rupee and Indian selling price.
• Reduction in royalty to be based on certain volume, production and sales for each mode.
• Awaiting numbers and approvals from Suzuki.
• R&D costs with margin added will be reimbursed.
• New roylaty plan depends on newer models becoming larger in terms of sales.
• Capacity limitation also a concern.
• Priority being given to better selling, bigger models.
• Emphasis on pushing entry level cars has lessened.
• Position neutral as Maruti doesn't sell to U.S.
• Do not expect a tariff war over cars with U.S.

Key highlights from the conversation:

• Indian markets are facing global pressure.
• Do not think worst is over for PSU banks.
• Weak dollar impacting IT companies.
• Markets may see major correction led by U.S.

Shares of the cement, zinc manufacturer jumped nearly 5 percent to Rs 117 after Bloomberg reported that a Bain Capital-backed investor group is poised to win the bidding for Binani Cement Ltd. Binani Cement is currently under the Insolvency and Bankruptcy Code.

The stock’s traded volume was 4.4 times the 30-day average, and the stock has declined 15.2 percent since the year beginning, compared to the benchmark S&P BSE Sensex Index’s gain of 0.2 percent.

The NSE Nifty PSU Bank Index extended declines for the third straight day and fell as much as 2.7 percent to 2,975, the lowest in over four months.

The Finance Ministry, on Tuesday, asked public sector banks to examine all bad loans above Rs 50 crore for possible fraud. (more details here)

Indian equity benchmarks extended declines for the second day, following a sell-off in Asian peers. The S&P BSE Sensex Index fell as much as 0.7 percent to 34,088, while the NSE Nifty 50 Index fell as much as 0.9 percent to 10,465.05.

The market breadth was tilted in favour of sellers. All the sectoral gauges compiled by BSE ended lower led by S&P BSE Metal Index's 1.5 percent decline.

The Indian economy is expected to have picked up pace in the October-December quarter due to stronger growth across services and industry. (click here to read more..)

Indian sovereign bonds are likely to extend losses as investors await the latest GDP numbers. According to a Bloomberg survey India's GDP probably grew at 7 percent in three months to December compared to 6.3 percent in the previous quarter.

The benchmark note is already under pressure on expectations that RBI may start raising rates looking at rising inflation. Yield may stay in a range of 7.64-7.70 percent in the session. The government will also be selling Rs 140 billion treasury bills today.

In the currency market, implied opening from forwards suggests rupee will start trading around 65.24 a dollar. With equities around Asia deep in the red and hawkish comments from new U.S. Fed chairman Jerome Powell, the rupee may stay under pressure in the session and may trade between 65-65.35 a dollar.

Motilal Oswal on UPL

• Initiated ‘Buy’ with price target of Rs 945; implying a potential upside of 31 percent form the last regular trade.
• UPL in sweet spot to grab impending opportunity in generics market.
• Products worth $3 billion going off-patent – Opportunity for UPL.
• Generic pesticides, backward integration to drive profitability.
• New launches and branded products to drive growth.
• Strong dealers & distribution network enables superior reach.
• Robust growth across geographies to continue.
• Ebitda margin to expand on better product mix and operating efficiency.
• Expect revenue and net profit to compound at 12 percent and 14 percent over the fiscal 2018-2020.
• Strong free cash flow generation to improve balance sheet.
• Return ratios to remain healthy.
• Re-rating to continue on back of multiple drivers.
• Bull case price target of Rs 1,213, implying a potential upside of 68 percent from the last regular trade.

JPMorgan on Crompton Consumer

• Initiated ‘Overweight’ with price target of Rs 300; implying a potential upside of 29 percent form the last regular trade.
• Company is in a sweet spot.
• Favorable policy environment and renewed & focused growth strategy benefitting.
• Progress on new related segments can enhance growth prospects.
• Expect mid-teen revenue to compound over four years.
• Expect earnings per share to compound at 25 percent over fiscal 2018-2021.
• Margin expansion has more legs.
• Crompton is a quality stock with a solid earnings growth outlook.
• Expect high RoCEs, increasing FCF generation and steady dividend payout.
• Believe risk-reward is favorable post recent correction.
• Stock trading at discount to peers, despite superior earnings growth.

ICICI Direct on Music Broadcast

• Initiated ‘Buy’ with price target of Rs 450.
• Radio industry to thrive on expanding presence.
• Wide reach, balanced approach to aid growth.
• Growth driven by prudent investments as major capex is behind.
• Margins to expand since cost increase would be inflationary.
• Healthy topline, margins expansion to drive earnings growth.
• Expect revenue and operating income to compound at 14 percent and 17 percent over fiscal 2017-2020.
• Strong cash flow generation over next three years.
• Return ratios to improve; Expect company to start paying dividend.
• Expect strong return on capital employed and return on equity of 21.5 percent and 13.8 percent by March 2020.

HSBC on Motherson Sumi

• Maintained ‘Buy’; cut price target to Rs 400 from Rs 425.
• Stock correction triggered by weak December quarter is overdone.
• Expect businesses to return to strong growth trajectory.
• Remain convinced on long-term potential.
• TP cut to factor in delays in plant commissioning.
• Motherson well placed to benefit from increasing role of auto component suppliers.
• Motherson prepared to make multiple acquisitions which should help achieve its 2020 goals.

Kotak on Infosys

• Maintained ‘Add’ with price target of Rs 1,250.
• Infosys expects strong macro to translate into better FY19.
• Ramp-up of deal wins will propel growth in banking vertical.
• Challenges remain in retail and telecom; Other verticals strong.
• Infosys has strong capabilites in digital.
• Does not expect any meaningful changes to strategy or organisation structure.

Macquarie on Strides Shasun

• Maintained ‘Outperform’ with price target of Rs 996.
• Strong foothold in Australia – a key differentiator for Strides.
• Strides has a robust and vertically integrated business in Australia.
• With growth, margin levers and strategy in place, execution remains key.
• Sustained revenue uptick in Australia and US will be key margin driver.
• Expect Strides to generate 100 percent return over three years.

Credit Suisse on Nestle India

• Maintained ‘Outperform’ with price target of Rs 9,000.
• Nestle dividing India into 15 clusters for focused targeting.
• New ‘cluster approach’ a welcome change.
• In food category, cluster approach is needed even more.
• Focus on new launches to continue.
• Nestle is in a turnaround phase.

Macquarie on Indian Real Estate

• Office market – strength in Bangalore market remains highest.
• Residential – recovery in selective places, launches picking up ex-NCR.
• CLSS scheme attracting some developers.
• Implementation of RERA and GST will help in market share gains.
• Preferred picks are Prestige Estates and Phoenix Mills.

Nomura on Indian Auto

• Two wheeler industry to show a compounded growth rate of 8 percent CAGR over the fiscal 2018-2021.
• Motorcycle growth to be lower at a compounded growth rate of 6 percent, while scooters at 12 percent CAGR.
• Expect 11-15 percent cost increases over the fiscal 2018-2021 due to braking norms and BS-VI emission norms.
• Capacity constraints for Honda provides a window of opportunity for Hero and TVS.
• Continue to prefer four wheeler space over two wheeler due to lower penetration.
• TVS: Initiated ‘Reduce’ with price target of Rs 631; Valuations at 80 percent premium to Hero and Bajaj.
• Hero: Upgraded to ‘Buy’ from ‘Neutral’; raised price target to Rs 4,149 from Rs 3,876.
• Eicher: Maintained ‘Neutral’; cut price target to Rs 29,971 from Rs 33,049.
• Bajaj Auto: Maintained ‘Neutral’; cut price target to Rs 3,252 from Rs 3,340.

Deutsche Bank on India Life Insurance

• Multiple tailwinds and a benign base provide solid foundation.
• Expect 18 percent industry total APE compounded growth rate over the fiscal 2018-2023.
• Large private players with banca alliances will be key beneficiaries.
• Rising persistency, higher growth, cost efficiencies to drive better profitability.
• Multiple tailwinds converging for structural growth.
• Shift of market share from LICI to private players to accelerate.
• SBI Life and ICICI Pru are top sector picks.
• HDFC Standard Life: Initiated ‘Hold’ with price target of Rs 460; Valuations full and risk reward balanced.
• ICICI Prudential: Maintained ‘Buy’ with price target of Rs 540.
• SBI Life: Maintained ‘Buy’ with price target of Rs 900.

• Narayana Hrudayalaya: First State Investments bought 11.14 lakh shares, or 0.5 percent equity, at Rs 300 each.
• Punjab Alkalies and Chemicals: IDBI Bank sold 1.50 lakh shares, or 0.6 percent equity, at Rs 23.98 each.
• Supreme Infra: Discord Exim sold 1.42 lakh shares, or 0.6 percent equity, at Rs 69.3 each.

Harrisons Malayalam

• Promoter Instant Holdings sold 14.20 lakh shares, or 7.7 percent equity, at Rs 84.2 each.
• Vayu Udaan Aircraft bought 14.20 lakh shares, or 7.7 percent equity, at Rs 84.2 each.

• HDFC QIP floor price set at Rs 1,824.63 apiece. Panel will consider QIP issue price on March 5.
• Cipla partnered with Roche Pharma India to create greater access to key medicines.
• DLF’s subsidiary emerged as the highest bidder for 11.76-acre Gurugram land at Rs 1,500 crore.
• ICICI Bank said that it has no exposure to the Nirav Modi Group.
• Religare Enterprises said that it sees no direct impact from proceedings in the Delhi High Court.
• Kridhan Infra acquired 31.5 percent stake in Vijay Nirman.
• Moody’s changed its outlook on IDBI Bank to positive from stable.
• Sadbhav Infrastructure Projects declared lowest bidder for Rs 1,047 crore NHAI order.
• Larsen & Toubro to sell up to 34.38 lakh shares, or 2 percent stake in L&T Infotech to achieve the minimum public shareholding.
• Bharat Forge completed stake sale in power equipment joint venture with GE.
• Sona Koyo got approval to change name to JTEKT India.
• Dalmia Bharat: Bain-backed consortium is said to win bid to buy Binani Cement, reported Bloomberg.
• CHD Developers: Ashish Kacholia, M/s. Bengal Finance & Investment along with other promoter and non-promoter investors buy warrants and equity shares. Ashish Kacholia buys 7.25 million warrants and equity shares at Rs 14.25. M/s. Bengal Finance & Investment buys 7.25 million warrants and equity shares at Rs 14.25.

• West Texas Intermediate crude extended a 1.7 percent slump, falling 0.3 percent to $62.80 a barrel.
• Brent snaps four-day winning streak trades lower at $66.63 per barrel; down 1.3 percent.
• Gold was steady at $1,318.72 an ounce after falling 1.2 percent.
• LME copper rose 0.1 percent to $7,027.50 per metric tonne.
• Sugar slipped for a third day. The commodity fell 4.2 percent, the most since Aug., to 12.9 cents per pound, almost 29-month low.

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.6 percent to 10,499.50 as of 8:30 a.m.

Stocks in Asia followed their U.S. counterparts lower after hawkish comments from Federal Reserve Chair Jerome Powell and weaker than expected economic data from China and Japan.