Sensex, Nifty Snap Two-Day Fall As Focus Shifts Back To Earnings 

Indian equity benchmarks snapped their two-day decline as focus shifted back to earnings after Sun Pharma and Grasim beat Bloomberg consensus estimates in June quarter.

The S&P BSE Sensex rose 0.55 percent or 207 points to 37,852 and the NSE Nifty 50 index climbed 0.7 percent or 79 points to 11,435.

Thirty-five of the Nifty 50 companies have reported in-line or better-than-estimated earnings in June quarter, data compiled by BloombergQuint showed.

Fifteen out of 19 sector gauges compiled by BSE ended higher led by the S&P BSE Healthcare index’s 2.5 percent gain. On the other hand, the S&P BSE Capital Goods index was top loser, down 0.5 percent.

Shares of the Gurugram-based budget airline operator fell as much as 3.8 percent to Rs 86 after it reported loss in June quarter.

Key earnings highlights:

• Net loss at Rs 38.06 crore versus profit of Rs 175.23 crore (YoY)
• Revenue up 18.5 percent at Rs 2,199.70 crore versus Rs 1856.13 crore (YoY)
• Fuel cost up 52 percent at Rs 812.44 crore versus Rs 534.37 crore (YoY)
• Aircraft lease rentals at Rs 280 crore versus Rs 231 crore (YoY)
• Ebitdar down 21.4 percent at Rs 363.2 crore versus Rs 462.3 crore (YoY)
• Ebitdar margin at 16.2 percent versus 24.7 percent (YoY)

Shares of the Mumbai-based public-sector lender fell as much as 3.7 percent to Rs 58.20 after its asset quality worsened in June quarter.

Key earnings highlights:

• Net interest income up 16 percent at Rs 1,638.62 crore versus Rs 1,401.9 (YoY)
• Net loss widens to Rs 2,410 crore versus loss of Rs 853 crore (YoY)
• Gross non-performing assets as a percentage of total advances at 30.78 percent versus 27.95 percent (QoQ)
• Net non-performing assets as a percentage of total advances at 18.76 percent versus 16.69 percent (QoQ)
• Provisions for bad loans at Rs 4,602.55 crore versus 10,773 crore (QoQ)

Grasim Industries Ltd. reported its highest quarterly profit in nearly nine years and surpassed estimates. Shares of Grasim fluctuated between gains and losses to trade at Rs 983 apiece as of 2:35 p.m.

Key earnings highlights (Q1, YoY):

• Net profit up 85 percent at Rs 642.5 crore.
• Revenue up 74.8 percent at Rs 4,789 crore.
• Ebitda up 90 percent at Rs 1,054 crore.
• Margin at 22 percent versus 20.3 percent.

Shares of the country's largest pharmaceutical company rose as much as 4.5 percent, the most since June 22, to Rs 589. The company's net profit during April-June period surpassed estimates.

Key earnings highlights (Q1, YoY):

• Revenue up 16 percent at Rs 7224 crore.
• Net profit at Rs 982 cr vs loss of 425 crore.
• Ebitda up 47 percent at Rs 1607 crore.
• Margin at 22.2 percent versus 17.6 percent.

Shares of the Hyderabad-based defence equipment maker fell as much as 3.88 percent to Rs 365 after its profit declined in June quarter.

Key earnings highlights:

• Net profit down 19 percent at Rs 81.81 crore versus Rs 101.42 crore (YoY)
• Revenue down 29 percent at Rs 461 crore versus Rs 653.42 crore (YoY)

Indian equity benchmarks extended gains led by Reliance Industries, Axis Bank, ITC and ICICI Bank.

The S&P BSE Sensex rose 0.65 percent or 245 points to 37,890 and NSE Nifty 50 index climbed 0.74 percent to 86 points 11,441.

Fourteen out of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Energy index's 1.45 percent gain. On the other hand, the S&P BSE Telecom index was top loser, down 0.3 percent.

Overall market breadth was marginally negative as 1,310 shares were declining while 1,219 were advancing.

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Cipla shares rose as much as 1.6 percent to Rs 638.50. The company’s Uganda-based subsidiary Cipla Uganda has set IPO price at 256.5 Ugandan shillings per share, Bloomberg reported citing company’s comments in the prospectus.

Shares of the Kolkata-based public-sector lender fell as much as 5.96 percent, the most in over a month, to Rs 40.20 after it reported loss in June quarter.

Key earnings highlights:

• Net interest income up 37 percent at Rs 1,703.65 crore versus Rs 1,242.69 crore (YoY)
• Net loss at Rs 1,944.37 crore versus profit of Rs 28.84 crore (YoY)
• Gross non-performing assets as a percentage of total advances at 15.97 percent versus 15.96 percent (QoQ)
• Net non-performing assets as a percentage of total advances at 7.32 percent versus 8.04 percent (QoQ)
• Provisions for non-performing loans at Rs 2,590.37 crore versus Rs 5,126 crore (QoQ)
• Bank provided Rs 532.42 crore in June quarter for nine accounts in NCLT

• Shriram City Union Finance: The Chennai-based consumer loan provider rose as much as 3.59 percent to Rs 2,023.95. Trading volume was 33.9 times its 20-day average.
• IIFL Holdings: The Thane-based brokerage firm fell as much as 2.7 percent to Rs 709. Trading volume was 6.2 times its 20-day average.
• Cadila Healthcare: The Ahmedabad-based drugmaker fell as much as 4.9 percent to Rs 337. Trading volume was 7.3 times its 20-day average.
• Great Eastern Shipping: The Mumbai-based owner and operator of cargo ships fell as much as 1.7 percent to Rs 308. Trading volume was 6.7 times its 20-day average.

Shares of the Gujarat-based vitrified tiles maker fell as much as 11.45 percent to Rs 225 after its net profit fell in June quarter.

Key earnings highlights:

• Net profit down 64 percent at Rs 2.63 crore versus 7.29 crore (YoY)
• Revenue down 2.4 percent at Rs 207.71 crore versus Rs 212.66 crore (YoY)

Shares of the country's largest drugmaker rose as much as 0.55 percent to Rs 567 ahead of its June quarter earnings. Below are Bloomberg consensus earnings estimates for April-June quarter.

• Revenues seen at Rs 6,949 crore versus Rs 6,209 crore, up 12 percent (YoY)
• Net profit seen at Rs 911 crore versus net loss of Rs 321 crore (YoY)
• Ebitda seen at Rs 1,536 crore versus Rs 1,248 crore, up 23 percent (YoY)
• Margins seen at 22.1 percent versus 20.1 percent (YoY)

Shares of the Mumbai-based airline operator fell as much as 2.77 percent to Rs 278.65 after the National Stock Exchange of India sought clarification from the company for delaying its quarterly results announcement from the scheduled date of Aug. 9.

NSE queried if Jet Airways management sought extension from audit panel or if audit committee didn’t approve the results.

Shares of Page Industries rose as much as 5.27 percent to a record high of Rs 34,099.95 while Vakrangee slumped as much as 17 percent to Rs 41.60 after MSCI made changes to its MSCI Global Standard Index for India.

Page Industries will replace Vakrangee in MSCI Global Standard Index for India. The changes will take effect from closing on Aug. 31.

Shares of the Anil Ambani-led telecom company rose as much as 5.6 percent to Rs 21.70 after its meeting of the holders of $300 million notes, which was scheduled for Aug. 10, was adjourned to Aug. 24 for want of quorum, the company said in an exchange filing.

Shares of the Mumbai-based steel maker rose as much as 3.2 percent to Rs 587 after its profit more than doubled in June quarter.

Key earnings highlights:

• Revenue up 27.6 percent to Rs 37,833 crore.
• Net profit doubled to Rs 1,954 crore.
• Ebitda up 30 percent to Rs 6,468 crore.
• Margin at 17.1 percent versus 16.8 percent.

Indian equity benchmarks rebounded after two sessions of losses paced by Tata Steel, Axis Bank, State Bank of India and HDFC.

The S&P BSE Sensex rose 0.4 percent or 154 points to 37,799 and the NSE Nifty 50 index climbed 0.4 percent or 42 points to 11,397.

All sector gauges compiled by National Stock Exchange were trading higher led by the Nifty PSU Bank index's 1.3 percent gain.

The mid- and small-cap shares were also witnessing buying interest as the Nifty Midcap 100 and Nifty Smallcap 100 indexes rose 0.6 percent each.

Sovereign bonds have something to cheer about after data print showed inflation slowed to 4.17 percent last month from 4.92 percent in June. Now this may help bond yields to ease provided the rupee too applies brakes on its downward slide, analysts said.

The 10-year yield that jumped 7 basis points in the last session to 7.82 percent due to the financial crisis in Turkey.

The Indian rupee is at a kissing distance to breaching the psychological 70 mark against the dollar as Turkey crisis remains a sense of worry.

Implied opening though suggests it may open at 69.87 but dealers don’t rule out a brief surge to 70 and a pull back to 69 a dollar in the day.

Rupee has weakened 8.7 percent this year to be Asia’s worst performer.

CLSA on Lemon Tree

• June quarter results implied a strong start for 2018-19.
• Network expansion on track; Incremental focus shifting to asset-light model.
• Changing industry dynamics to support premium valuations.
• Will review estimates post the earnings call on Aug. 16.

Brokerages On Tata Steel

Credit Suisse

• Maintained ‘Outperform’ with a price target of Rs 860
• Bhushan Steel acquisition drove net profit miss; Adjusted Ebitda was inline.
• India business inline; Europe business beats estimates.
• Cut EV/Ebitda multiple as cyclical profitability of industry improves.

CLSA

• Maintained ‘Buy’ with a price target of Rs 855.
• Good operational results in June quarter.
• Steel margins expand QoQ in both India and Europe.
• Margins to ease sequentially from Q1 high.
• Iron ore integration can provide a boost to Bhushan Steel margins.

Investec

• Maintained ‘Buy’; raised price target to Rs 730 from Rs 720.
• Operational beat across geographies on back of stronger spreads.
• Balance sheet remains a concern.
• An expensive Bhushan power win and volatility in currencies are near term risks.
• Management refrained from commenting on Bhushan power.

Brokerages On Cadila Healthcare

Credit Suisse

• Maintained ‘Neutral’; cut price target to Rs 370 from Rs 400
• Ebitda missed estimates as decline in the U.S. was led by Tamiflu.
• Cut EPS for the current and the next financial year by 6 percent and 7 percent respectively to factor weak June quarter results.
• Stay Neutral due to high concentration.

CLSA

• Maintained ‘Buy’; cut price target to Rs 440 from Rs 460.
• Sales and operating income came inline; net profit beat driven by other income.
• U.S. expected to pick-up from the second half of the current financial year; India to remain stable.
• Strong U.S. along with improving India outlook are key potential earnings drivers.

Brokerages On Cummins India

Credit Suisse

• Maintained ‘Outperform’ with a price target of Rs 850.
• Positives: exports grew, margins expanded & domestic does not reflect a worrying decline.
• Maintained guidance despite divergent performance in exports and domestic.
• Believe next quarter could possibly carry an upgrade.
• Sharp correction and underperformance in last two years driving reasonable valuations.

Macquarie

• Maintained ‘Outperform’; raised price target to Rs 975 from Rs 965.
• Expect 100 basis points margin improvement for 2018-19.
• Mix improvement, better pricing and favourable currency movements to expand margins.
• Tax rate hike limits earning upgrades, but confidence in earnings should still rise.
• Management commentary most positive; Cummins is the cheapest Indian industrial stock.

Bulk Deals

• NCL Industries: HDFC Mutual Fund acquired 9.9 lakh shares, or 2.19 percent equity at Rs 147 each.

F&O Cues

• Nifty August futures ended at 11,381, with a premium of 25.4 points versus 9.7 points.
• August series-Nifty open interest (OI) down 1 percent and Bank Nifty OI down 7 percent.
• India VIX ended at 13.4, up 4.2 percent.
• Maximum open interest for August series call at 11,500 strike price call option. Open interest at 45.5 lakh shares, up 10 percent.
• Maximum open interest for August series put at 11,000 strike price put option. Open Interest at 50.4 lakh shares, down 1 percent.

Nifty Earnings To Watch

• Grasim
• Sun Pharma

Other Earnings To Watch

• Allahabad Bank
• Bharat Dynamics
• Cox & Kings
• Dilip Buildcon
• Finolex Cables
• Fortis Healthcare
• Gujarat Fluorochemicals
• Housing Development & Infra
• IDBI Bank
• GMR Infrastructure
• Indiabulls Real Estate
• Indiabulls Ventures
• LA Opala RG
• MMTC
• Navkar Corp
• NLC India
• Rain Industries
• Rajesh Exports
• Shankara Building
• SpiceJet
• Suprajit Engineering
• Suven Life Sciences

Earnings Reaction To Watch

Tata Steel (Q1, YoY)

• Revenue up 27.6 percent to Rs 37,833 crore.
• Net profit doubled to Rs 1,954 crore.
• Ebitda up 30 percent to Rs 6,468 crore.
• Margin at 17.1 percent versus 16.8 percent.

Shaily Engineering Products (Q1, YoY)

• Revenues up 28.4 percent to Rs 89.1 crore.
• Net profit up 29.5 percent to Rs 5.7 crore.
• Ebitda up 19.3 percent to Rs 13.6 crore.
• Margins at 15.3 percent versus 16.4 percent.

Kesoram Industries (Q1, YoY)

• Revenues up 6.1 percent to Rs 931.7 crore.
• Net loss of Rs 63.4 crore versus loss of Rs 122.6 crore.
• Ebitda at Rs 40 crore versus Rs 0.9 crore.

Repco Home Finance (Q1, YoY)

• Net interest income up 6.9 percent to Rs 118.5 crore.
• Net profit up 8.7 percent to Rs 60.9 crore.

Apex Frozen Foods (Q1, QoQ)

• Revenues up 17.8 percent to Rs 239.3 crore.
• Net profit up 21.1 percent to Rs 21.2 crore.
• Ebitda up 30.1 percent to Rs 32.4 crore.
• Margins at 13.5 percent versus 12.3 percent.

DHFL (Q1, YoY)

• Net Interest Income up 42.7 percent to Rs 956.6 crore.
• Net profit up 34.9 percent to Rs 435 crore.

Oil India (Q1, QoQ)

• Revenues up 13.1 percent to Rs 3,390.5 crore.
• Net profit down 18.8 percent to Rs 703.2 crore.
• EBITDA up 75.9 percent to Rs 1408.4 crore.
• Margins at 41.5 percent versus 26.7 percent.

Lemon Tree Hotels (Q1, YoY)

• Revenue up 18.1 percent to Rs 127.9 crore.
• Net profit at Rs 2.3 crore versus net loss of Rs 2.4 crore.
• Ebitda up 30.3 percent to Rs 34.8 crore.
• Margin at 27.2 percent versus 24.7 percent.

AstraZeneca Pharma India (Q1, YoY)

• Revenue up 26.6 percent to Rs 161.4 crore.
• Net profit up 10.3 percent to Rs 6.4 crore.
• Ebitda up 50 percent to Rs 9.3 crore.
• Margin at 5.8 percent versus 4.9 percent.

Oracle Financial Services (Q1, QoQ)

• Revenue up 25.1 percent at Rs 1,345 crore.
• Net profit up 70.3 percent at Rs 402 crore.
• EBIT up 81.3 percent at Rs 611 crore.
• Margin at 45.4 percent versus 31.3 percent.

• Page Industries will replace Vakrangee in MSCI Global Standard Index for India.
• Delta Corp will be removed from MSCI Small Cap Index.
• Shaily Engineering Plastics set up new furniture plant and has purchased 17 acres of land in Halol.
• Confidence Petroleum raised Rs 78 crore via private placement from Jasol Investment and Global Strong Growth Fund.
• Navneet Education to decide on buy back of shares on Aug. 20.
• Kirloskar Pneumatic won orders worth Rs 63.3 crore from ONGC.
• Jet Airways clarified that stake sale to private equities is speculative.
• Prism Johnson won bid for 47900 TPA of coal from Coal India, awaiting allotment letter.
• Indiabulls Ventures to consider funds raising plans.
• TCS says its Ignio Automation Solution gets deal from ALDO Group. (Bloomberg)

• Turkey rout complicates RBI's inflation-targeting job in India
• Emerging markets contagion? Maybe. crisis? No.
• Regional parties will be key in 2019, says Sharad Pawar
• It’s Alagiri vs Stalin as succession battle begins in DMK
• India’s consumer price inflation eases from five-month high
• Rupee hits all-time low as lira spurs EM currency selloff
• Netflix’s CFO to step down following cash-fueled expansion
• Facebook wins deal to show top-flight Spanish soccer in India
• How emerging-market investors are playing Turkey’s crisis
• India at 71: Can India fill a China trade gap?
• Government to remove former PNB chief Ananthasubramanian
• Sexual pleasure is immoral: So says the Indian patent office

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India fluctuated between gains and losses to trade little changed at 11,398.50.

Asian stocks tentatively rose as the contagion from the economic crisis in Turkey remained relatively contained in developed markets overnight. The dollar held near its highest in 14 months and Treasuries were little changed.

Equities climbed in Japan as the yen pared some of Monday’s rise. Australia’s shares nudged higher and were little changed in South Korea.

Currencies

• The Japanese yen was little changed at 110.73 per dollar.
• The offshore Chinese yuan was steady at 6.8979 per dollar.
• The euro dipped 0.1 percent to $1.1401.
• The Bloomberg Dollar Spot Index was little changed near the highest since June 2017.
• The Turkish lira fell 0.6 percent to 6.9268 per dollar.

Commodities

• West Texas Intermediate crude rose 0.3 percent to $67.42 a barrel.
• Gold was flat at $1193.27 after falling 1.4 percent Monday.

Here are some key events coming up this week:

• China releases industrial production, fixed-asset investment and retail sales data Tuesday.
• Germany releases gross domestic product data for the second quarter and the U.K. publishes unemployment figures Tuesday.
• Earnings are due this week from companies including Tata Steel, Maersk, Home Depot, China Unicom, Tencent, Cisco, Walmart, and Carlsberg.
• Brexit talks between the EU and the U.K. resume in Brussels Thursday.
• Retail sales data in the U.S. is on Wednesday, followed by housing data on Thursday.