Pedestrians walk past the Bombay Stock Exchange (BSE) in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Sensex, Nifty Fall For Third Day Ahead Of RBI Policy Decision

Closing Bell

Indian equity benchmarks fell for third day in a row ahead of Reserve Bank of India's monetary policy decision which is due tomorrow.

The S&P BSE Sensex fell 0.31 percent or 109 points to 34,903 and the NSE Nifty 50 index declined 0.33 percent or 35 points to 10,593.

The market has been falling on expectation of a 25-basis points rate hike by the Reserve Bank of India in the backdrop of rising crude to keep inflation under check, AK Prabhakar, head of research at IDBI Capital told BloombergQuint over phone.

Seventeen out of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Telecom index's over 3 percent drop. On the flipside, the S&P BSE Energy index was top gainer, up 0.25 percent.

The mid- and small-cap shares underperformed their larger peers as the S&P BSE MidCap index fell 1.2 percent and the S&P BSE SmallCap index plunged 2.4 percent.

Rising interest rates, currency headwinds and rising commodity prices don’t augur well for mid- and small-cap companies.
AK Prabhakar, head of research, IDBI Capital

Many mid- and small-cap stocks have given four to fivefold returns in the last five years and their valuations are not sustainable, he said. The kind of growth required to justify these valuations won’t come through and a correction had to happen as they were trading at a premium to large caps, he said.

Find Out All That You Missed During The Day In Countdown

Idea Cellular Slumps Over 10%; Trading Volume Doubles

Shares of the country's third largest wireless carrier slumped as much as 12 percent on the back of heavy volumes.

Trading volume was double its 20-day average at this time of the day.

Stocks Moving On Heavy Volumes

  • Whirlpool of India: The Haryana-based washing machine and air conditioner maker fell 1.2 percent to Rs 1,536. Trading volume was 13.9 times its 20-day average.
  • Brigade Enterprises: The Bengaluru-based real estate developer fell 2.5 percent to Rs 229. Trading volume was 9.4 times its 20-day average.
  • Star Cement: The Kolkata-based cement maker fell 4.2 percent to Rs 124.50. Trading volume was 9.7 times its 20-day average.
  • Unichem Labs: The Mumbai-based drugmaker fell 2.6 percent to Rs 231. Trading volume was 7.4 times its 20 -day average.

IndusInd Bank, Bharat Financial Inclusion Get Exchange Nod For Merger; Shares Rise

IndusInd Bank and Bharat Financial Inclusion rose after NSE and BSE approves the proposed merger between the two companies.

  • IndusInd erased losses; rose as much as 0.8 percent
  • Bharat Financial extended gains to as much as 1.4 percent

Market Check: Sensex, Nifty Struggle Ahead Of RBI Policy Decision

  • Indian equity benchmarks were on track to end lower for third day in a row dragged by Larsen & Toubro, Infosys, TCS and ICICI Bank.
  • The S&P BSE Sensex fell 0.26 percent or 92 points to 34,919 and the NSE Nifty 50 index declined 0.36 percent or 39 points to 10,590.
  • All but one sector gauge compiled by the National Stock Exchange were trading lower led by the Nifty Realty index's 2.2 percent drop.
  • The mid- and small-cap shares were underperforming their larger peers as the Nifty Midcap 100 index tumbled over a percent while the Nifty Smallcap 100 index plunged over 2 percent.
  • Overall market breadth was extremely bearish as 1,998 shares were declining while 465 were advancing.

Click here for more stock market statistics

Lakshmi Vilas Bank Falls After Block Deal

  • Lakshmi Vilas Bank has 5,00,000 shares change hands in a block. Shares fell as much as 5.4 percent to Rs 100.10.

Buyers and sellers were not immediately known

Source: Bloomberg

Federal Bank Holds Gains Amid Block Deal

  • Federal Bank has 15.1 lakh shares change hands in a block on BSE. Stock up 1.35 percent at Rs 82.35.

Buyers and sellers were not immediately known

Source: Bloomberg

Sterlite Technologies Extends Decline, Falls Most In 6 Months

Shares of the electrical component maker extended its decline for the third straight session and fell as much as 7.2 percent to Rs 286 in early trade, the most in nearly six months.

The trading volume was 1.6 times the 20-day average. Sterlite Technologies

KEI Industries Slumps On Heavy Volumes

Shares of the Delhi-based steel cable maker slumped as much as 18.33 percent, the most in nearly two years, to Rs 371.15 on the back of heavy volumes.

Trading volume was 12.8 times its 20-day average.

Will Removal Of FII Window Affect Demand For HDFC Bank? Find Out On Hot Money

Nikkei India Services PMI Contracts For First Time In 3 Months

Activity in India’s dominant services sector contracted for the first time in three months in May due to broad stagnation in new business orders. Employment growth also slowed to its weakest pace since December.

The Nikkei India Services Business Activity Index fell to 49.6 last month from 51.4 in April, according to a statement by research firm IHS Markit, which compiles the index. A reading below 50 indicates contraction in activity, while a number above it signals expansion. Services activity in the country fell below the 50-point-mark for the first time since February, when the Index reading stood at 47.8.

F&O Check: Nifty 10,700 Call Most Active On NSE

Nifty 10,700 strike price call option was among the most active Nifty option contracts on the National Stock Exchange.

Premium on the contract fell 14.4 percent to Rs 77.65. As many as 4.67 lakh shares were added to the open interest which stood at 36.45 lakh shares.

Find Out About Latest Trends In Derivative Segment On The F&O Show

Click here to see the complete options chain

Shriram Transport Finance Falls; Investec Downgrades To Sell

Shares of the Mumbai-based truck finance company fell as much as 6.26 percent, the most in over a month, to Rs 1,355 after brokerage firm Investec downgraded the stock to 'sell' from 'buy'.

Investec in a note said:

  • Downgraded to ‘Sell’ from ‘Buy’; raised price target to Rs 1,500 from Rs 1,340
  • Used commercial vehicles pool to see muted growth.
  • New BS-IV vehicles are structurally efficient.
  • Vehicle scrappage policy could drive growth.
  • Believe that fundamentals are weak, especially on growth, over longer term.

HUL To Integrate Food, Refreshment Categories

Shares of the Mumbai-based FMCG company recovered from intraday low levels and rose as much as 0.3 percent to Rs 1,568. Hindustan Unilever announced integration of foods and refreshments categories in South Asia effective July 1.

  • The integration of foods & refreshment categories will help HUL increase organisational agility and serve local consumers better.
  • The integration is in alignment with Unilever's global structure.

Source: HUL's Exchange Filing

Avanti Feeds Falls Most In Over Two Months

Shares of the Hyderabad-based shrimp feed maker fell as much as 16.91 percent, the most since March 26, to Rs 1,235 on the back of heavy volumes.

Trading volume was 4.3 times its 20-day average.

Small-Cap Shares Underperform Larger Peers

Shares of small-cap companies continued to underperform their larger peers for third day in a row.

The S&P BSE SmallCap index fell 1.5 percent. Asian Granito, KEI Industries and Shree Pushkar Chemicals were among the top losers from this space.

Go Back To The Drawing Board And Rebuild Your Portfolio: Kenneth Andrade

Most professional investors make a mistake of staying with legacy businesses, Kenneth Andrade, founder & chief investment officer at Old Bridge Capital told BloombergQuint in an interview.

Key highlights of the conversation:

  • Playing on arbitrage of capital efficiency
  • Staying away from businesses that demand enormous amount of money to grow
  • Biggest shift for the next twelve months would be the stage of uncertainty from a stage of euphoria
  • Mindset has moved from looking for pockets of growth to looking for pockets which help combating uncertainty
  • Investors need to restructure their portfolio for suiting uncertain times
  • Starting point is to look at a company getting incremental amounts of market share every year
  • Need to assess whether a company has the balance sheet that can support growth ambitions
  • Cash flow positive businesses are a must
  • Growing market share with positive cash flows year after year is the key
  • Lot of businesses in pharma are not doing well
  • Pharma as a space will see some stress for the next few months
  • Pharma sector will see some stability before turning around
  • Rural sector presents investment opportunity if one believes in the secularity in growth
  • Growth in rural can happen only with government spending
  • Opportunities that can grow 3-4 times in a single financial year exist in the rural space

RCom Shares Fall; Company Not To Pay NCD Interest Until Restructuring Is Over

Shares of the debt-ridden telecom operator fell over 5 percent to Rs 14.95 after the company in an exchange said that it will not pay interest on non-convertible debentures until company completes the restructuring.

Asset sale proceeds will be used for repaying debt including bonds in such manner as may be decided by the lenders’ panel, the filing added.

Sugar Stocks Surge As GST Panel Awaits Attorney General’s View On Sugar Cess

Shares of sugar manufacturers rose as much as 7 percent after after the government readied more than Rs 8,000 crore package for the sugar sector to help mills clear payment of arrears to sugarcane farmers, The Times of India reported.

Biocon Hits Record High On U.S. FDA Nod For Biosimilar Pegfilgrastim

Shares of the Bengaluru-based bio pharmaceutical company rose as much as 6.42 percent, the most in over three months, to record high of Rs 696.60 after Biocon and Mylan's biosimilar cancer drug Pegfilgrastim received approval from the U.S. drug regulator — U.S. FDA, the company said in an exchange filing.

The drug which will be sold under under the brand name Fulphila, is expected to be the first biosimilar of pegfilgrastim available in the U.S. market to help patients with non-myeloid cancer reduce the risk of infection following myelo-suppressive chemotherapy, according to a statement issued by the U.S. Food and Drug Regulator last night. Pegfilgrastim is currently being sold under the brand name Neulasta in the U.S.

Neulasta had U.S. sales of $4.2 billion for the 12 months ending March 31, 2018, according to data from pharma and consultancy firm IQVIA.

Opening Bell

Indian equity benchmarks edged lower dragged by weakness in heavyweights like Larsen & Toubro, HDFC, Hindustan Unilever and Axis Bank.

The S&P BSE Sensex fell 0.16 percent or 55 points to 34,951 and the NSE Nifty 50 index declined 0.18 percent or 19 points to 10,609.

Seventeen out of 19 sector gauges compiled by BSE were trading lower led by the S&P BSE Capital Goods index's 0.7 percent drop. On the flipside, the S&P BSE Energy index was the top gainer, up 0.3 percent.

The small-cap shares were underperforming their larger peers as the S&P BSE SmallCap index fell 0.4 percent.

Rupee Dips 5 Paise Against Dollar

The rupee was trading lower by 5 paise at 67.16 against the US dollar in early trade today amid caution ahead of RBI's policy decision tomorrow.

Forex dealers said increased demand for the US currency from importers as also the greenback's gains against rivals overseas put pressure on the rupee.

Source: Press Trust of India

Money Market Heads Up: Government Bonds Likely To Stay Under Pressure

Government bonds are likely to stay under pressure, absorbing another round of heavy debt issuances with focus broadly on the RBI's rate decision on Wednesday.

State governments will sell Rs 8,800 crore of bonds today, and that comes after the central government sold Rs 20,000 crore of 21-day cash management bills on Monday.

New Delhi will sell Rs 15,000 crore of t-bills on Wednesday and Rs 12,000 crore of bonds on Friday. The benchmark 10-year bond yield rose 3 basis points to 7.88 percent on Monday, adding to the 5 basis points increase of last week.

Sentiment will also be cautious ahead of the MPC review amid fears of a rate hike, expectations of which have gathered pace after better than expected growth data last week. Economists though, expect the RBI to keep rates unchanged.

Meanwhile, the rupee is seen opening slightly firmer after having lost some ground on Monday. It ended lower on Monday at 67.1125 per dollar, with RBI Governor Urjit Patel making a plea to the Fed Reserve to reduce pace of its balance sheet shrinkage. The Fed's action, Patel said, was leading to outflows from emerging markets and threatening global growth.

Brokerage Radar: Investec Downgrades Shriram Transport Finance To Sell

Investec on Shriram Transport Finance

  • Downgraded to ‘Sell’ from ‘Buy’; raised price target to Rs 1,500 from Rs 1,340
  • Used commercial vehicles pool to see muted growth.
  • New BS-IV vehicles are structurally efficient.
  • Vehicle scrappage policy could drive growth.
  • Believe that fundamentals are weak, especially on growth, over longer term.

Morgan Stanley on InterGlobe Aviation

  • Maintained ‘Equal-weight’ with a price target of Rs 1,205.
  • Airfare tracker indicates yields to remain weak in the current quarter.
  • Airline not raising fares enough to offset rising fuel prices.
  • September quarter to be weak because of seasonally weak demand.
  • Industry hoping yield recovery to start in the second half of this financial year with start of festive season.

Credit Suisse on Indian IT

  • IT sector outperforming due to low institutional ownership, high valuations in other sectors, hope of growth pick-up and Rupee depreciation.
  • Fundamentals have not necessarily kept up for the larger companies.
  • Mid-sized companies have witnessed significant upward revisions in 2018-19 estimates.
  • Tech Mahindra, HCL Tech, Persistent and Cyient are key stock picks.

BQ Heads Up: Who’s Meeting Whom And Insider Trades!

Who’s Meeting Whom

  • Greenlam Industries to meet HDFC AMC, ICICI Pru Life, IIFL and Others from June 5-6.
  • Tata Chemicals to meet Baron Capital Management Inc on June 5.
  • Indian Hotels Co to meet Wells Capital MA, Value Partners Ltd and Others on June 6.
  • Allcargo Logistics to meet HDFC AMC, Pabrai Funds and L&T MF on June 6.

Insider Trades

  • West Coast Papers Mills promoter Veer Enterprise Ltd acquired 6,000 shares on 1st June.
  • Fiberweb (India) promoter and director Pravin V Seth acquired 10,000 shares on June 4.
  • Bhumika Desai of Future Consumer buys 51,000 shares on May 29.

Bulk Deals, Trading Tweaks And F&O Cues To Watch

Shankara Building Products

  • Alliant Techsystems Trust sold 1.17 lakh shares or 0.5 percent equity at Rs 1,535.15 per share.

Sarda Energy and Minerals

  • Asia Mineral sold 2.65 lakh shares or 0.3 percent at Rs 398 per share.

Trading Tweaks

  • TCS bonus shares allowed to trade on exchanges.
  • Lanco Infratech and Monnet Ispat & Energy shifted to T group.
  • Leel Electricals and Caplin Point Laboratories’ circuit filter revised to 10 percent.
  • Avantel and Kwality circuit filter revised to 5 percent.
  • Indiabulls Real Estate buyback worth Rs 624 crores opens today.
  • Pitti Laminations Ltd. name changed to Pitti Engineering Limited.
  • Gruh Finance last trading day before ex-date for bonus.

F&O Cues

  • Nifty June Futures closed trading at 10,598.7, at a discount of 29.8 points versus 12.3 points
  • June series-Nifty open interest (OI) up 4 percent and Bank Nifty OI down 4 percent
  • India VIX ended 13.8, up 2.3 percent
  • Max OI for June series call at 11,000 strike price call option, OI at 39.7 lakh shares, up 7 percent
  • Max OI for June series put at 10,200 strike price put option, OI at 35.3 lakh shares, up 11 percent

Fuel Price Check

Stocks To Watch: Idea, Maruti, Vedanta , RCom And More!

  • Idea Cellular gets approval from telecom department to increase FDI limit from 67.5 percent to 100 percent.
  • Maruti Suzuki total production in May up 22 percent at 184,608 units versus 151,266 (YoY).
  • Reliance Communications won’t pay interest on NCDs to JLF until restructuring process ends.
  • Vedanta will add 1.5 MTPA of iron ore production with potential up to 2.5 MTPA to its capacity after ESL acquisition.
  • Sudarshan Chemicals divests its plastic master batch business- Prescient Color and plans to invest Rs 1000 crore over next five years.
  • Sunteck Realty its increases investment limits by foreign investors (RPFI/FII) from 24 percent to 49 percent.
  • GE Shipping gets contract to sell its bulk carrier of 52.2,000 dead weight tonnage
  • Weizmann Forex to buy back 4.4 lakh shares or 3.77 percent equity at price Rs 702 each aggregating to Rs 30.64 crore.
  • MCX completes deal to acquire 24 percent in CDSL Commodity Repository.
  • Jagran Prakashan to buyback 1.5 crore shares or 4.82 percent equity at Rs 195 each aggregating to Rs 292.5 crore.
  • NIIT enters into five-year agreement with Pitney Bowes for learning and development.
  • WestBridge Crossover Fund LLC invests Rs 64.5 crore in Kajaria Ceramics.
  • SBI fined Rs 7 crore by ED for irregularities in foreign remittances during Mar 2009-Aug 2010.
  • Supreme Court restrains finalisation of Binani Cement asset sale till further orders.

Talking Points

All You Need To Know About Apple’s Worldwide Developers Conference:

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India fell 0.27 percent to 10,580 as of 6:55 a.m.

Asian stocks struggled for traction Tuesday after pacing a global rally as investors set aside protectionist fears in favor of optimism over the U.S. economy. Treasuries steadied after yields rose for a fourth consecutive session.

Stocks edged higher in Japan, were little changed in South Korea and fell in Australia. Earlier, the S&P 500 closed at its strongest since mid-March and the Nasdaq Composite Index rose to a record high helped by Microsoft Corp. agreeing to buy coding site GitHub for $7.5 billion.

Bonds

  • The yield on 10-year Treasuries fell less than one basis point to 2.94 percent.
  • Australia’s 10-year yield rose two basis points to 2.75 percent.

Commodities

  • West Texas Intermediate crude rose 0.4 percent to $65.03 a barrel.
  • Gold rose less than 0.05 percent to $1,292.47 an ounce.
  • LME copper rose 0.2 percent to $6,987.00 per metric ton.

Here are some key events to watch this week:

  • Reserve Bank of Australia monetary policy decision is out Tuesday.
  • Tesla holds its annual shareholder meeting also Tuesday.
  • U.S. ISM non-manufacturing index out Tuesday. Growth at U.S. service industries probably improved in May for the first time in four months, indicating the economy is strengthening after a first-quarter slowdown, economists forecast.
  • Reserve Bank of India rate decision on Wednesday.
  • U.S. trade balance and Australia GDP also out on Wednesday.
  • On Thursday, Japanese Prime Minister Shinzo Abe meets with U.S. President Trump at the White House to discuss the planned U.S. summit with North Korea’s Kim Jong Un.
  • Also on Thursday, euro-zone GDP.
  • Turkey rate decision is due on Thursday.
  • G-7 Leaders’ Summit starts in Quebec Friday through to June 9.
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