Sensex, Nifty Clock Third Weekly Gain On RBI’s Neutral Stance

Indian equity benchmarks capped a third week of advances as gains in Sun Pharma, Reliance Industries, State Bank of India and Infosys were offset by losses in HDFC twins, ITC and Larsen & Toubro.

The benchmarks S&P BSE Sensex and NSE Nifty 50 closed little changed but over 0.6 percent higher for the week. The indices managed to reverse losses after the RBI kept its neutral stance despite hiking interest rates.

Ten out of the 19 sector gauges compiled by BSE Ltd. ended higher today, led by the S&P BSE Healthcare index’s 3.6 percent surge. On the other hand, the S&P BSE Power index was the top loser, down 0.74 percent.

Shares of the state-owned lenders surged as the meeting of heads of PSU banks and Finance Minister Piyush Goyal was underway in Mumbai.

The gauge of PSU banks on the National Stock Exchange — Nifty PSU Bank index rose 1.7 percent led by Andhra Bank and Allahabad Bank.

Aurobindo Pharma: The Hyderabad-based drugmaker rose as much as 5.5 percent to Rs 577.80 after it received U.S. FDA approval for Omeprazole DR tablets.

Shriram EPC: The Chennai-based infrastructure construction company rose as much as 10.51 percent to Rs 20.50 after it resolved customer dispute in Iraq. Order of $230 million was restored with its joint venture Iraqi company.

Usha Martin: The Kolkata-based steel wire maker rose as much as 20 percent to Rs 28.95 after Tata Steel placed bid of Rs 6,000 crore for Usha Martin’s specialty steels business, The Hindu BusinessLine reported.

Bajaj Finance: The Pune-based consumer finance company rose as much as 2.3 percent to record high of Rs 2,220. The stock rose for eighth day in a row and in the course of last eight sessions stock has risen 8 percent.

“Investors have already started to cut holdings of emerging-market assets where fundamentals are weaker than peers or performances are worse as the Fed continues to raise the rate,” Bloomberg reported quoting Tsutomu Soma at SBI Securities in Tokyo.

The investors seem to be shifting their funds from weaker emerging markets to U.S. assets now, Soma told Bloomberg in a telephonic interview.

Omax Autos expects to increase its revenue from railway business to Rs 500 crore from Rs 150 crore going forward, its Vice President Devashish Mehta told BloombergQuint in an interaction.

Key highlights from the conversation:

• Railways are looking to improve passenger safety.
• New capex to cater to Railway orders for improving passenger safety.
• Total of 45,000 wagons needs modification for better safety.
• Capex to add capacity only by March quarter of the current financial year.
• Don't see sporadic orders in the railways' safety segment.
• Strategy to grow railways, passenger and commercial vehicle segment.

Shares of the automaker extended gains for the third day and rose as much as rose 2.2 percent to Rs 312.05 as of 2:20 p.m.

The company’s global wholesale rose 24 percent year-on-year to 1.07 lakh units last month, according to its stock exchange notification.

Trading volume was two times its 20-day average, according to Bloomberg data. Tata Motors trades at 13.9 times trailing 12-month earnings per share and 9.5 times its estimates for the coming year.

European stocks fell as disappointing data added to a risk-off mood that also saw shares retreat in Asia.

• Germany’s 10-year yield dipped eight basis points to 0.41 percent, the largest dip in more than a week.
• Britain’s 10-year yield decreased six basis points to 1.338 percent.
• Italy’s 10-year yield climbed two basis points to 3.082 percent.

Shares of the country's largest drugmaker extended gains and rose as much as 9.2 percent, the most in over three years, to Rs 533.65.

The U.S. FDA has classified Sun Pharma's Halol plant as VAI (Voluntary Action Indicated) after the U.S. FDA team completed inspection on Feb. 23.

The U.S. drug regulator had issued three observations to Sun's plant and nature of these observations were procedural in nature.

Voluntary Action Indicated (VAI) means objectionable conditions were found and documented but the agency is not prepared to take or recommend regulatory action, according to information on U.S. FDA's website.

Halol plant contributes 11 percent towards U.S. sales and 4 percent towards total sales.

• Indian equity benchmarks continue to trade on a subdued note dragged by financials and capital goods shares.
• The S&P BSE Sensex fell 0.45 percent or 161 points to 35,300 and the NSE Nifty 50 index declined 0.43 percent or 46 points to 10,723.
• Seven out of 11 sector gauges compiled by National Stock Exchange were trading lower led by the Nifty Financial Service index's 0.9 percent drop. On the other hand, Nifty Pharma index was the top gainer, up 2.9 percent.
• The overall market breadth was neutral as 1,222 shares were declining while 1,190 were advancing on the BSE.

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Shares of pharma companies were witnessing buying interest in an otherwise subdued session.

The gauge of pharma companies on the National Stock Exchange — Nifty Pharma index rose 2.75 percent led by gains in Sun Pharma, Lupin and Dr Reddy's Labs.

Shares of the Mumbai-based drugmaker held on to gains after the company informed exchanges that it has partnered with Eli Lilly to sell diabetes drug Basaglar.

Cipla expects to sell Basaglar by end of 2018.

“We confirm the refinancing deal for AAPT has been successfully completed,” a spokeswoman says by email, referring to Adani Abbot Point Terminal.

Source: Bloomberg

• Edelweiss Financial Services has 10 lakh shares change hands in a block. Stock down 3.65 percent at Rs 319.

Buyers and sellers were not immediately known

Source: Bloomberg

• Security & Intelligence Services: The Delhi-based security service provider rose as much as 1.91 percent to Rs 1,220. Trading volume was 22.6 times its 20-day average.
• Indian Energy Exchange: The Delhi-based operator of power trading platform rose 1.3 percent to Rs 1,615. Trading volume was 8.6 times its 20-day average.
• SML Isuzu: The Chandigarh-based commercial vehicle maker rose as much as 6 percent to Rs 835. Trading volume was 7.8 times its 20-day average.
• Unitech: The Delhi-based real estate developer rose as much as 11 percent to Rs 5.50. Trading volume was 6.8 times its 20-day average.

Shares of the Vadodara-based fruit juice maker were locked in a lower circuit for tenth day in a row.

The stock has been facing selling pressure after its auditor Deloitte Haskins & Sells resigned days before the board was to approve its quarterly results.

Shares of the Hyderabad-based drugmaker rose as much as 3.06 percent to Rs 564.50 after it received U.S. FDA approval for heartburn drug.

Aurobindo Pharma has received approval from U.S. FDA for Omeprazole delayed-release tablets used for treatment of frequent heartburn, the company said in an exchange filing.

The drug is a generic equivalent of AstraZeneca's Prilosec OTC tablets. The estimated market size of Prilosec OTC is $222 million according to Nielsen data, the exchange filing added.

Shares of the Gurugram-based auto parts maker rose as much as 5 percent to Rs 153.30 after its board approved capacity expansion plan.

The company will invest Rs 100-120 crore for capacity expansion over two-three years, Omax Autos said in an exchange filing.

Shares of pharma and IT companies were trading higher tracking weakness in rupee against the U.S. dollar.

The rupee fell as much as 40 paise to 67.54 per U.S. dollar against yesterday's close of 67.14.

The Nifty IT index was the top sectoral gainer, up 1.97 percent and the Nifty IT index advanced 0.5 percent as IT and pharma companies earn sizeable amount in dollar and weak dollar will boost their revenues.

Nifty Bank 26,000 put was among the most active option contracts on the National Stock Exchange.

Premium on the contract surged 99 percent to Rs 90.85. Over 1.20 lakh shares were added to the open interest which stood at 6.37 lakh shares.

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Shares of the Mumbai-based hotel operator rose as much as 2.8 percent to Rs 174.90.

Brokerage and research firm Ventura Securities initiated ‘Buy’ rating on the stock with a price target of Rs 351, implying a potential upside of 106 percent over 24-30 months.

Shares of the Chennai-based drugmaker were locked in a 10 percent upper circuit for third day in a row at Rs 480 after its promoter acquired shares in the company.

C C Paarthipan acquired 10,427 shares or 0.013 percent in the company in an open market transaction, the company said in an exchange filing.

The stock has surged 33 percent in last three sessions. Before the surge, it had fallen as much as 28 percent between May 28 to June 5.

Shares of the Mumbai-based company reached its daily upper limit for the second day at Rs 35.75.

The company said that it would announce its financial results for 2017-18 on June 14, according to its stock exchange notification.

The stock fell 54 percent in the past month.

Shares of the Mumbai-based automobile maker rose as much as 2 percent to Rs 311.50 after international brokerages Citi and Credit Suisse maintained their positive stance on the stock.

Credit Suisse in a note said:

• Maintained ‘Outperform’ with a price target of Rs 460.
• Second month of positive retail sales though the base has been favourable.
• Demand in China should bounce back from July.
• Jaguar portfolio continues to see sharp declines.
• Discovery range have been steady; RR twins continue to be in ramp up mode.

Citi in a note said:

• Maintained ‘Buy’ with a price target of Rs 480.
• Strong show in U.K. (low base) and North America.
• Deferment of purchase in Chinese market post the reduction in import duties.
• Demand environment subdued in Europe, partly reflecting anti-diesel trend.

Indian equity benchmarks edged lower while the yield on 10-year government bond rose above 8 percent for the first time since May 2015.

The S&P BSE Sensex fell 0.33 percent or 120 points to 35,347 and the NSE Nifty 50 index declined 0.34 percent or 37 points to 10,732.

The mid- and small-cap shares were also trading lower as the Nifty Midcap 100 and Nifty Smallcap 100 indexes declined 0.2 percent.

Eight out of 11 sector gauges compiled by the National Stock Exchange were trading lower led by the Nifty Realty index's 1.1 percent drop. On the other hand, the Nifty IT index was the top gainer, up 0.7 percent.

• Yield on the 10-year government bond surged above 8 percent for the first time since May 2015.

The rupee declined by 42 paise to 67.54 per dollar in early trade due to appreciation of the American currency overseas and outflows of foreign fund.

Besides, weakness in the domestic stock market weighed on the rupee at the Interbank Foreign Exchange market.

Source: Press Trust of India

The sell-off in bonds is set to intensify with the 10-year bond yield likely to rise to hit the 8 percent mark for the first time in three years.

Rise comes following the Reserve Bank of India’s moves on Wednesday to hike the benchmark repurchase rate and change liquidity-coverage norms.

The pain in the bond market may stay for a couple of more months, traders said with bearish sentiment partly due expectation that the RBI may raise rates again and due higher statutory liquidity ratio (SLR) holdings. That would hit demand for government bonds in the short term.

The benchmark 10-year yield rose 15 basis points in the first four days of the week, the most since April 20, to end at 7.99 percent on Thursday and the highest since May 2015.

Meanwhile, the rupee is set to drop against the dollar as a risk off sentiment hits the currency. The implied opening suggests that the local currency will open at around 67.55, having ended at 67.1350 on Thursday.

Morgan Stanley on Bajaj Finance

• Maintained ‘Overweight’ with a price target of Rs 2,500.
• Strong momentum in AUM growth and customer acquisition.
• Liquidity environment challenging, but liability positioning is conservative.
• New avenues of funding to help in challenging liquidity environment.
• Mortgages to see 35-40 percent growth p.a. in medium term.

Ventura Securities on Byke Hospitality

• Initiated ‘Buy’ with a price target of Rs 351; Potential Upside 106 percent over 24-30 months.
• Expect industry to report much better performance than entire past decade.
• Byke well positioned to benefit from hotel industry uptrend.
• Positives: asset light model, strategic hotel locations and adequate new capacity.
• Expect revenue to compound at 22 percent over the financial year 2018-2021.
• Expect occupancy rate to rise to 71 percent by March 2021, despite aggressive room expansion.

JPMorgan on Asian Paints Annual Report Highlights

• Maintained ‘Neutral’ with a price target of Rs 1,300.
• Positive 2018-19 demand outlook.
• Expects healthy domestic demand and better overseas performance.
• Expanded distribution, new retail formats, product innovation and new segments to aid.
• Rising raw material prices remains the key challenge.
• FCF/Return ratios moderate owing to lower margins and higher capital deployment.

Nomura on M&M Financial

• Maintained ‘Buy’ with a price target of Rs 600.
• Management upbeat on growth trends.
• Confident of normalisation of asset quality and credit costs in 2018-19.
• RoE ramp-up to be faster with improving asset quality and strong growth trends.
• Current valuations look undemanding.

JPMorgan on Vedanta

• Maintained ‘Overweight’ with a price target of Rs 400.
• Vedanta addresses key investor concerns related to copper smelter.
• Vedanta says that plant follows Zero Liquid Discharge policy.
• Past sample checks by regulator found no abnormalities in water.
• Plant accounted for 33% of India’s copper market.

Brokerages On Tata Motors

Credit Suisse

• Maintained ‘Outperform’ with a price target of Rs 460.
• Second month of positive retail sales though the base has been favourable.
• Demand in China should bounce back from July.
• Jaguar portfolio continues to see sharp declines.
• Discovery range have been steady; RR twins continue to be in ramp up mode.

Citi

• Maintained ‘Buy’ with a price target of Rs 480.
• Strong show in U.K. (low base) and North America.
• Deferment of purchase in Chinese market post the reduction in import duties.
• Demand environment subdued in Europe, partly reflecting anti-diesel trend.

Who's Meeting Whom

• Thyrocare Technologies to meet Samatva Investments on June 8.
• Endurance Technologies to meet Citigroup Global Markets India and American Century Investments on June 8.
• Shriram Transport Finance to meet LionRock Capital and Columbia Wanger Asset Management on June 8.

Insider Trades

• Piramal Enterprises promoter Piramal Corporate Services sold 1.70 lakh shares from June 4-5.
• Panama Petrochem promoter acquired 27,841 shares from June 5–6.
• Asian Granito promoters acquired 17,649 shares on June 6.
• Viaan Industries promoter Shilpa Shetty Kundra acquired 20,000 shares on June 6.
• Alkem Laboratories promoters acquired 14,000 shares from June 4–5.
• Laurus Labs promoter Dr. Satyanarayana Chava acquired 1.70 lakh shares from June 4–6

(As reported on June 6)

Bulk Deals

Future Retail

• PI Opportunities Fund I bought 2.27 crore shares or 4.5 percent equity at Rs 560 each.
• Pioneer Investment Fund bought 71.42 lakh shares or 1.4 percent equity at Rs 560 each.
• Cedar Support Services sold 3.03 crore shares or 6 percent equity at Rs 560 each.

Ashiana Housing

• Goldman Sachs India Fund sold 28.94 lakh shares or 2.8 percent equity at Rs 147 each.

Indoco Remedies

• DSP Blackrock MF sold 15 lakh shares or 1.6 percent equity at Rs 190 each.

Sharda Cropchem

• Goldman Sachs India Fund sold 13.70 lakh shares or 1.5 percent equity at Rs 400 each.

Trading Tweaks

• Kwality, Excel Realty and Oceanaa Biotek placed under additional surveillance measure (ASM) by BSE.
• FII window opened for HDFC Bank, Indusind Bank and Cyient.
• Soril Holdings and Ventures name changed to Indiabulls Integrated Services Limited.

F&O Cues

• Nifty June Futures ended at 10,765.2 with a discount of 3.1 points versus premium of 1.6 points.
• June series- Nifty open interest (OI) up 6 percent and Bank Nifty OI up 3 percent.
• India VIX ended 12.7, up 1.8 percent.
• Max OI for June series call at 11,000 strike price call option, OI at 39.9 lakh shares, down 4 percent.
• Max OI for June series put at 10,600 strike price put option, OI at 43.2 lakh shares, up 7 percent.

• IIFL Real Estate Investment Trust receives certificate of registration from SEBI to undertake REIT activities.
• Omax Autos approves expansion of existing capacity for an investment of Rs 100- 120 crore over 2-3 years.
• Electrosteel Castings says promoter holding reduced to 11.11 percent from 45.23 percent post allotment of shares to lenders.
• Shriram EPC resolves customer dispute in Iraq; order of $230 million restored with its joint venture Iraqi company.
• Indian Bank hikes MCLR by 10 basis points for different tenures.
• Time Technoplast receives order worth Rs 40 crore.
• McNally Bharat issues 1.20 lakh CCPS to promoters.

• Did Mukesh Ambani get a raise this year?
• Hatred and intolerance dilutes national identity: Pranab Mukherjee at RSS headquarters
• Trump says he doesn’t need to ‘prepare very much’ for Kim summit
• Aviation will create value over next 15 years, says Raamdeo Agrawal
• Government seeks explanation from Facebook over data sharing
• Government hasn’t given up on Air India stake sale yet
• The five things that keep Asia equity investors up at night
• Homebuyers as financial creditors: An inelegant solution?
• Just when they need leadership, India’s state banks are headless
• Buffett and Dimon are shortsighted about investors
• India’s plan to make solar panels may be delayed by new China policy
• Five factors that could mess up global growth
• A pre-emptive rate hike, but uncertainty keeps stance in neutral

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India fell 0.46 percent to 10,772 as of 6:42 a.m.

Asian stocks edged lower Friday after a risk-off session in global markets where technology stocks retreated and Brazilian assets slumped. Treasury yields recovered some of Thursday’s decline.

Japanese, Australian and South Korean stocks showed modest losses. U.S. benchmarks closed mixed, with the Nasdaq 100 falling the most in three weeks.

Bonds

• The yield on 10-year Treasuries rose two basis points to 2.94 percent.
• Australia’s 10-year yield declined two basis points to 2.819 percent.

Commodities

• West Texas Intermediate crude rose 0.3 percent to $66.13 a barrel.
• Gold rose less than 0.05 percent to $1,297.26 an ounce.
• LME copper sank 1 percent to $7,257.00 per metric ton.

Here are some key events to watch this week:

• A potentially tumultuous G-7 Leaders’ Summit starts in Quebec Friday, through to June 9.
• China reports monthly trade data Friday.