Sensex Ends At Record High As Modi Slashes Tax, Wins Trust Vote

India's S&P BSE Sensex rose to a record closing high as investors cheered Prime Minister Narendra Modi's trust vote win and Goods and Services Tax (GST) rate cut.

The S&P BSE Sensex rose 0.61 percent or 222 points to 36,718.60 and the NSE Nifty 50 index climbed 0.68 percent or 75 points to 11,084.75.

Rally in today’s session was led by FMCG and consumer durable shares after a government panel cut GST rates on over 50 goods including refrigerators, televisions, footwear and paints etc. to 18 percent from 28 percent.

All sector gauges barring the Nifty IT index ended higher led by the Nifty FMCG index's 2.46 percent gain.

The mid- and small-cap shares outperformed their larger peers as the Nifty Midcap 100 index rose 1.1 percent and Nifty Smallcap 100 index advanced 0.7 percent.

• UPL: The Mumbai-based fertilizer maker rose as much as 15.5 percent, the most in over four years, to Rs 635 after brokerages gave thumbs up to Arysta Deal saying it would be value accretive.
• VST Industries: The Hyderabad-based cigarette maker rose as much as 20 percent, the most in over 10 years, to Rs 2,993 after it reported June earnings. Its net profit rose 54 percent to Rs 61 crore on revenue of Rs 243 crore.
• Shalimar Paints: The Kolkata-based paint maker rose as much as 7.8 percent to Rs 125.50 after government panel cut goods and Services Tax (GST) rate on paints and varnishes to 18 percent from 28 percent.
• Bajaj Finserv: The Pune-based insurance and consumer finance company rose as much as 4.89 percent to record high of Rs 6,990 on heavy volumes. Trading volume was 3.2 times its 20-day average.

• GMR Infra has 5.34 crore shares change hands in a four block deals. Stock up 2.5 percent at Rs 18.25.

Buyers and sellers were not immediately known

Source: Bloomberg

European stocks fell and U.S. equity futures pointed to a weaker open as investors digested warnings from the world’s financial leaders about the impact of protectionism on growth. The yen rose and Japanese government bonds slid on speculation about the Bank of Japan’s stimulus.

• Indian equity benchmarks rose to intraday highs led by gains in ITC, ICICI Bank, Maruti Suzuki and Hindustan Unilever.
• The S&P BSE Sensex rose 0.5 percent or 202 points to 36,698 and the NSE Nifty 50 index climbed 0.6 percent or 65 points to 11,075.
• The overall breadth was positive as 1,412 shares were advancing while 1,110 were declining on the BSE.

L&T Finance Holdings expects a 20-25 percent growth in consolidated loan book size for the next two-to-three years, said managing director and CEO Dinanath Dubhash.

The company’s net profit grew 59 percent year-on-year to Rs 540 crore in June quarter while income from operations rose 32 percent to Rs 3,041 crore.

The results were “sharply ahead” of broking firm JPMorgan’s estimates, which believes the infrastructure book drag is behind the company after its transition to IND-AS accounting standards. “The rural and housing continue to report strong growth and ROEs.”

Key highlights from Dinanath Dubhash’s interview:

• Sell down of around Rs 5,000 crore in loan book part of strategy.
• All 3 rural segments of farm, two-wheeler and micro loans have done well
• Detailed decisions on manning, concentration on collection efforts has led to improvement of rural NPAs

• Slowing down and being very selective with our LAP business
• Just focusing on large and A category builders for builder financing is playing out well
• Builder financing portfolio is ‘absolutely clean’
• Our target for these three businesses is one third each
• ROEs in single digits due to accelerated provisions taken for legacy portfolios
• Since the legacy portfolios are provided for, wholesale ROE is at 15.6 percent
• Business is capable of producing ROE between 15-17 percent

The Mumbai-based non-banking finance company rose as much as 9 percent to Rs 169.70. Trading volume was 5.9 times its 20-day average.

• Bank of Baroda has 11.4 lakh shares change hands in a block deal. Stock up 4.7 percent at Rs 125.90.

Buyers and sellers were not immediately known

Source: Bloomberg

Stocks Moving On Heavy Volumes

• Take Solutions: The Chennai-based healthcare service provider fell 6.7 percent to Rs 200.50. Trading volume was 10.1 times its 20-day average.
• Bajaj Electricals: The Mumbai-based electrical equipment maker rose as much as 14.5 percent to Rs 620. Trading volume was 8.6 times its 20-day average.
• Bata India: The Gurugram-based footwear maker rose as much as 7 percent to record high of Rs 901.70. Trading volume was 7.4 times its 20-day average.

Shares of two-wheeler makers extended decline with Bajaj Auto and Hero MotoCorp hitting fresh 52-week lows.

• Hero MotoCorp fell 6.7 percent to Rs 3,151
• Bajaj Auto declined 5.9 percent to Rs 2,672
• TVS Motor Company slumped 4.25 percent to Rs 541

Shares of the Mumbai-based fertiliser maker extended gains and rose as much as 15 percent to Rs 631.35 as brokerages maintained their positive stance on its plan to acquire Arysta Lifescience.

CLSA in a note maintained its buy on UPL for target price of Rs 940. It said Arysta acquisition offers scale benefits and discovery capabilities.

Domestic brokerage firm IDFC Securities maintained 'outerperformer' for target price of Rs 982 saying that it is positive on Arysta transaction on the back of potential meaningful upsides.

Shares of the Bengaluru-based government-owned bank rose as much as 7.23 percent to Rs 53.40 after its asset quality improved slightly in June quarter.

Key earnings highlights:

• Net profit down 43 percent at Rs 144.34 crore versus Rs 254.69 crore (YoY)
• Net interest income up 28 percent at Rs 1,206.72 crore versus Rs 943.8 crore (YoY)
• Gross non-performing assets as a percentage of total advances at 6.19 percent versus 6.34 percent (QoQ)
• Net non-performing assets as a percentage of total advances at 4.10 percent versus 4.32 percent (QoQ)
• Provisions for bad loans at Rs 659.38 crore versus Rs 423.20 crore (YoY)

The S&P BSE MidCap index was outperforming the S&P BSE Sensex index as it rose 0.5 percent compared with a gain of 0.2 percent gain in Sensex.

Havells India, L&T Finance, Vakrangee and IDFC Bank were among the top gainers from the mid cap basket of shares.

• Indian equity benchmarks held on to gains led by FMCG and consumer durable shares which rose after the government cut goods and services tax (GST) rate on over 50 goods from 28 percent to 18 percent.
• The S&P BSE Sensex rose 0.24 percent or 87 points to 36,582 and the NSE Nifty 50 index advanced 0.3 percent or 32 points to 11,042.
• Thirteen out of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE FMCG index's 2.3 percent gain. On the flipside, the S&P BSE Auto index was top loser, down 0.8 percent.
• The overall market breadth was marginally positive as 1,227 shares were advancing while 1,045 were declining on the BSE.

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Shares of the Thrissur-based private sector lender fell as much as 18.67 percent, the most in nearly seven years, to Rs 18.30 after its asset quality deteriorated in April-June quarter.

Key earnings highlights:

• NII grew 7.3 percent to Rs 494.3 crore.
• Net profit down 77 percent to Rs 23 crore.
• Other income at Rs 146 crore versus Rs 219 crore.
• GNPA at 4.54 percent versus 3.59 percent.
• NNPA at 3.27 percent versus 2.60 percent.

Nifty 11,100 strike price call option was among the most active option contracts on the National Stock Exchange.

Premium on the contract fell 1.88 percent to Rs 33.90. Over 2.71 lakh shares were added to the open interest which stood at over 40.60 lakh shares.

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Shares of the Hyderabad-based cigarette maker rose as much as 20 percent, the most in over 10 years, to Rs 2,992.85 after it reported June quarter earnings.

Key earnings highlights:

• Revenue down 53.2 percent to Rs 263 crore.
• EBITDA up 48 percent to Rs 96.7 crore.
• Margin at 39.8 percent versus 31.1 percent.
• Net profit up 54 percent to Rs 61.2 crore.

Shares of the Gurugram-based airline operator rose as much as 9.5 percent to Rs 114.80 after an arbitration tribunal rejected the Rs 1,323-crore damages claim from Spicejet and a bid to take control of the airline by its previous owner Kalanithi Maran and his company Kal Airways.

SpiceJet informed the exchanges that on July 20, an arbitration tribunal rejected Maran's claim of damages of Rs 1,323 crore for not issuing convertible warrants and preference shares to him and Kal Airways.

Asian Paints, Berger Paints, Relaxo Footwears, Bata India, Havells India and Procter & Gamble shares all climb to record high closing levels after the government cut goods and services tax rate.

GST panel on Saturday reduced goods and services tax on more than 50 products.

Value limit of footwear was raised from Rs 500 to 1,000 for 5 percent rate; GST on paints, refrigerators, washing machines, vacuum cleaners, water heaters, small TVs reduced to 18 percent from 28 percent.

Shares of the Mumbai-based agricultural chemical maker rose as much as 7.93 percent, the most in over two years, to Rs 593.20 after it agreed to acquire agri-pesticides maker Arysta LifeScience Inc. for $4.2 billion in cash to become one of the world’s largest crop protection companies.

Its wholly owned subsidiary UPL Corporation Ltd. signed a definitive agreement with Platform Specialty Products Corporation to acquire Arysta LifeScience and its subsidiaries, the Indian agrochemicals company said in a press statement. The deal, subject to regulatory approvals, is expected to be completed by early next year.

Shares of the Azim Premji-led IT company fell as much as 7 percent, the most in over 20 months, to Rs 263.35 despite beating earnings estimates in June quarter.

Net profit rose 16.3 percent over the previous quarter to Rs 2,094 crore in the April-June period, according to the company’s exchange filing. That compares with Rs 1,975 crore estimated by analysts tracked by Bloomberg.

Revenue grew 3.4 percent to Rs 14,231 crore, higher than the Rs 13,981-crore estimate. Revenue in dollar terms, however, fell 1.7 percent to $2,026 million.

Shares of the country's largest private sector lender fell as much as 2.3 percent, the most in over a month, to Rs 2,139.95 after its profit missed Bloombrg consensus estimates in June quarter.

Net profit for the quarter ended June rose 18.2 percent to Rs 4,601 crore, India’s largest private lender by assets said in an exchange filing today. Analysts tracked by Bloomberg had forecast a profit of Rs 4,786 crore. Net interest income, or the core income from operations, rose 15.4 percent to Rs 10,813.6 crore.

Indian equity benchmarks edged higher, but gains were capped as the country’s largest private sector lender - HDFC Bank fell after it missed profit estimates in June quarter.

The S&P BSE Sensex rose 0.2 percent or 76 points to 36,570 and the NSE Nifty 50 index advanced 0.2 percent or 28 points to 11,038.

Seven out of 11 sector gauges compiled by National Stock Exchange were trading higher led by the Nifty FMCG index's 1.14 percent gain. On the other hand, the Nifty IT index was top loser, down 0.2 percent.

The mid- and small-cap shares were in line with their larger peers as the Nifty Midcap 100 index rose 0.4 percent and the Nifty Smallcap 100 index climbed 0.2 percent.

• Rupee opens higher at 68.67 per dollar against Friday's close of 68.85.

ICICI Direct on ABB India

• Initiated ‘Buy’ with a price target of Rs 1,400
• Capex in power T&D, smart grid solutions, railways gives strong visibility
• Industry solutions, renewables, E-cars to bring new growth opportunities
• Positives: strong competencies and technology leadership, proven expertise in execution, healthy b/s and large anticipated capex spends
• Expect revenue, Ebitda and net profit to compound at 14 percent, 20.5 percent and 21 percent over 2017-2019.
• ABB trades at premium multiples due to its strong technical capabilities.

Angel Broking on Yes Bank

• Initiated ‘Buy’ with a price target of Rs 435.
• CASA growth and rating improvement to support NIM.
• Expect asset quality to improve and minimal impact of stress resolution.
• Expect YES Bank’s advances to grow at a CAGR of 32 percent over FY18-20.
• YES trades attractive valuations considering growth prospects.

UBS on Petronet LNG

• Upgraded to ‘Buy’ from ‘Sell’; raised price target to Rs 245 from Rs 235.
• Strong LNG imports driving the short-term outlook.
• Lower utilisation due to higher regas capacity additions is priced in.
• Strong utilisation rates and a 5 percent increase in regas tariffs to drive 2018-19 earnings.
• Triggers: Mundra terminal delay and Kochi-Mangalore pipeline commissioning.

Credit Suisse on Havells

• Maintained ‘Outperform’; raised price target to Rs 725 from Rs 670.
• June quarter was very strong on the back of good revenue growth and margin expansion.
• Main positive was the strong pick-up in switchgears.
• Lloyd growth positive, especially weak air conditioner season.

JPMorgan on L&T Finance Holding

• Maintained ‘Neutral’ with a price target of Rs 170.
• June quarter’s net profit sharply ahead expectations.
• Rural and housing continue to report strong growth and ROEs.
• Believe with transition to INDAS, infrastructure book drag is now behind.

CLSA on Kansai Nerolac

• Maintained ‘Buy’ with a price target of Rs 550.
• June quarter’s Ebitda was slightly ahead of estimates; Revenue growth momentum continued .
• Expect higher input prices to keep margins under pressure.
• Company continues to negotiate product price hikes in auto and industrial segments.

Nomura on Justdial

• Maintained ‘Buy’ with a price target of Rs 730.
• June quarter’s revenue and margin came in ahead.
• Momentum in paid listings alongside improving realisations is positive.
• Traffic trends continue to be positive despite lower Ad spend in last two quarters.
• Expect a positive reaction in the stock.

Kotak Securities on Asian Paints

• Maintained ‘Reduce’; raised price target to Rs 1,275 from Rs 1,100.
• GST rate cut - definitive kicker to earnings growth for paints companies.
• Expect higher volume growth as pricing gap versus unorganized segment reduces.
• Expect likely acceleration in pace of premiumisation.
• Raise volume, realization and margin assumptions.

Kotak Securities on CDSL

• Initiated ‘Buy’ with a price target of Rs 320.
• Repeat business in multiple offerings provides stability to operating income.
• Strong operating activities and limited capex to keep FCF strong.
• Positives: stable growth in annual issuer charges, increased market traction, higher number of IPO and inflow in MFs.
• Expect revenue, Ebitda and earnings per share to compound at 11 percent. 11 percent and 10 percent over FY18-20.

Brokerages On HDFC Bank

IDFC Securities

• Maintained ‘Outperform’ with a price target of Rs 2,515.
• Margins and asset quality were soft in June quarter.
• Pressure on NIMs driven by lower yields and higher cost of funds.
• Key Reasons For Miss: higher than expected agri-slippage and decline in NIMs.
• Expect these to improve through the year.

Goldman Sachs

• Maintained ‘Buy’; raised price target to Rs 2,613 from Rs 2,487.
• In-line core operating profit growth.
• Positives: Efficiency gains, strong fee income and robust retail lending growth.
• Negatives: marginal blip in asset quality and slower growth in NII.
• Expect NIMs to improve significantly in second half of the current financial year.

Brokerages On Bajaj Auto

Macquarie

• Maintained ‘Neutral’ with a price target of Rs 2,800.
• Reported lower-than-expected margins and net profit in June quarter.
• Cut in prices hurting profitability.
• Struggling to balance growth and profitability.
• Exports growth to continue in the near-term.

Deutsche Bank

• Maintained ‘Hold’ with a price target of Rs 3,000.
• June quarter’s operating results below estimates despite strong volume performance.
• Bajaj paying the price for market-share gains.
• Company is willing to use pricing as a lever to gain market-share.
• Expect margin pressures due to competitive intensity and elevated commodity prices.

Brokerages On Wipro

Macquarie

• Maintained ‘Neutral’ with a price target of Rs 300.
• June quarter missed estimates at margin level; revenue at higher end range.
• Struggle in verticals extended from healthcare to manufacturing; BFSI remains strong.
• Expect Wipro to post weakest growth amongst large cap Indian IT names in 2018-19.
• Wipro is cheap; triggers for re-rating remain amiss.

Nomura

• Maintained ‘Neutral’ with a price target of Rs 260.
• June quarter’s margins and guidance miss expectations.
• Guidance for September quarter suggests flattish growth at midpoint of the range.
• Except for BFSI, none of the other segments provide comfort.
• Expect stock to react negative on results.

Brokerages On UPL

IDFC Securities

• Maintained ‘Outperformer’ with a price target of Rs 982.
• Positive on Arysta transaction on the back of potential meaningful upsides.
• Deal valued at 9.9 times EV/EBITDA, excluding synergies.
• Expect significant cost/revenue synergies.
• Significant performa cash flows to take care of leverage ratio.

CLSA

• Maintained ‘Buy’ with a price target of Rs 940.
• Arysta acquisition offers scale benefits and discovery capabilities.
• Complementary portfolio; UPL to get scale benefits.
• Acquisition valued at 10 times EV/EBITDA and is EPS accretive.

Brokerages On GST Changes

IDFC Securities

• Expect boost to consumption demand propelled by a fall in prices.
• Companies will pass on lower GST rate and thereby not see benefit in form of margins.
• Sectors which saw tax rate cut have big share of unorganised players.
• Move should help them come under tax net.
• Expect paint companies, P&G hygiene, footwear manufacturers, Whirlpool, Dixon, Havells, Voltas and select hotels to be key beneficiaries.

Kotak Securities

• GST rate cuts should be meaningful earnings kicker for paints companies.
• Indirect benefits market share gains and premiumisation to boost earnings.
• ITC: No revision would normally be seen as a positive.
• United Spirits: Could bounce back on non-inclusion of ENA.

F&O Cues

• Nifty July Futures closed trading at 11,024.8, premium of 14.6 points versus 16.4 points.
• July series-Nifty Open Interest up 1 percent and Bank Nifty Open Interest down 1.4 percent.
• India VIX ended at 13.5, down 0.4 percent.
• Maximum Open Interest for July series at 11,100 call, Open Interest at 37.8 lakh, Open Interest unchanged
• Maximum Open Interest for July series at 10,800 Put, Open Interest at 47.7 lakh, Open Interest up 3 percent.

Insider Trades

• Bharat Forge promoter Sundaram Trading & Investment Pvt Ltd acquired 16,000 shares from July 18–19.
• Sequent Scientific promoter Rajitha Gopalakrishnan acquired 50,000 shares on July 18.
• GTPL Hathway promoter Gujarat Digi Com Private Limited acquired 53,000 shares on July 19.

(As reported on July 20)

• ACC
• Delta Corp
• Granules India
• Hindustan Zinc
• ICICI Securities
• Indiabulls Ventures
• L&T Infotech
• L&T Technology Services
• United Spirits
• Vijaya Bank

Earnings Reaction To Watch

Wipro (Q1, QoQ)

• Revenue up 3.4 percent to Rs 14,231 crore.
• Net profit up 16.3 percent to Rs 2,094 crore.
• EBIT up 19.7 percent to Rs 2,254 crore.
• Margins at 15.8 percent versus 13.7 percent.

HDFC Bank (Q1, YoY)

• Net profit up 18.2 percent to Rs 4,601 crore.
• Net interest income up 15.4 percent to Rs 10,813 crore.
• Net interest margins at 4.2 percent versus 4.3 percent.
• GNPA at 1.33 percent versus 1.30 percent (QoQ).
• NNPA at 0.41 percent versus 0.40 percent (QoQ).

L&T Finance Holdings (Q1, YoY)

• Income from operations up 32 percent to Rs 3,041 crore.
• Net profit grew 59 percent to Rs 540 crore.

MCX (Q1, YoY)

• Revenues up 24 percent to Rs 73 crore.
• Net profit down 77 percent to Rs 6 crore.
• Exceptional loss of Rs 24 crore in current quarter.
• EBITDA doubled to Rs 26 crore.
• Margins at 35.6 percent versus 22 percent.

Bata India (Q1, YoY)

• Revenue grew 7.3 percent to Rs 797.3 crore.
• EBITDA grew 38 percent to Rs 131.8 crore.
• Margin at 16.5 percent versus 13 percent.
• Net Profit grew 36.7 percent to Rs 82.5 crore.

Just Dial (Q1, YoY)

• Revenue up 11.3 percent to Rs 211.4 crore.
• EBITDA up 76.9 percent to Rs 57.4 crore.
• Margin at 27.2 percent versus 17.1 percent.
• Net profit up 1 percent to Rs 38.5 crore.

VST Industries (Q1, YoY)

• Revenue down 53.2 percent to Rs 263 crore.
• EBITDA up 48 percent to Rs 96.7 crore.
• Margin at 39.8 percent versus 31.1 percent.
• Net profit up 54 percent to Rs 61.2 crore.

South Indian Bank (Q1, YoY)

• NII grew 7.3 percent to Rs 494.3 crore.
• Net profit down 77 percent to Rs 23 crore.
• Other income at Rs 146 crore versus Rs 219 crore.
• GNPA at 4.54 percent versus 3.59 percent.
• NNPA at 3.27 percent versus 2.60 percent.

• Kalanithi Maran loses Rs 1,323 crore arbitration against Spicejet; but gets Rs 571 crore refund
• UPL to acquire Arysta Lifescience in an all cash deal worth $4.2 billion.
• Wipro guided for IT services revenues to be in range of $2,009 million to $2,049 million in the second quarter. The company will acquire U.S.-based Alight Solutions' India operations for $117 million.
• Just Dial approved buyback of 27.5 lakh shares, or 24.26 percent equity, at Rs 800 each. The buyback amount to not exceed Rs 220 crore.
• Havells to merge all India-based subsidiaries with self.
• Hathway Cable to raise Rs 100 crore via preferential allotment of equity shares to promoter.
• Muthoot Finance received primary SEBI nod for AMC business.
• IMP Powers started production of Kinetic Energy Turbine in Silvassa.
• Sintex Plastics clarified that change in auditors has been effected only post audit and not abruptly.
• Lyka Labs board accepted in-principle approval received from Dena Bank for compromise settlement of their account.
• Alok Industries said that their liquidation application has been withdrawn.
• Cadila Healthcare’s Zydus received final approval from the U.S. FDA for Acetylcysteine Injection.
• BPCL’s board approved transfer of Gas Business Division to subsidiary Bharat Gas Resources Limited. The transaction to be completed in three-four months.

• What went down at Rahul Gandhi’s first CWC meet as president
• Modi defeats no-confidence vote as widely expected
• Modi could have deflected Rahul’s yorker, instead of playing all over it
• GST council meet: Rates reduced, return simplified
• Pakistan needs an independent civilian government
• CBDT asks income tax department to add 1.25 crore fresh tax filers this year
• Infosys on full impact of higher visa rejections
• Factors that will work in favour of Indian equities
• Trade tensions threaten global economic growth, G-20 cautions
• If someone’s going to get fired for this it should be me - Zuckerberg

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India was little changed at 11,021 as of 7:25 a.m.

Asian stocks were mixed. Japan’s 10-year benchmark bond yield matched the biggest increase since the Bank of Japan shifted the focus of its monetary stimulus to controlling the yield curve back in 2016.

The yen pared some of its gain after the BOJ offered to buy bonds at the first fixed-rate operation since February, in a sign the central bank was trying to rein yields.

Currencies

• The yen jumped 0.3 percent to 111.06 per dollar.
• The offshore yuan rose 0.1 percent to 6.7763 per dollar.
• The euro climbed 0.2 percent to $1.1742.
• The Bloomberg Dollar Spot Index fell 0.1 percent after slumping 0.8 percent Friday, the most since March 21.

Commodities

• West Texas Intermediate crude for September delivery fell 0.2 percent to $68.11 a barrel.
• Gold increased 0.2 percent to $1,232.32 an ounce.

These are some key events coming up this week:

• Earnings season continues with the following tech companies among those reporting: Alphabet, Facebook, AT&T, Amazon.com, Twitter, Advanced Micro Devices, Qualcomm and Intel. They are joined by global financial giants Deutsche Bank, UBS, Nomura and Visa. Others include Halliburton, Michelin, Boeing, Lockheed, Nissan and Shell.
• Pakistan holds national elections Wednesday.
• PM Modi will visit Rwanda, Uganda and South Africa July 23-27.
• European Central Bank’s policy decision Thursday.
• U.S. gross domestic product probably increased by about 4 percent at an annualized rate in the second quarter, the most since 2014, economists forecast ahead of Friday’s data.