Sensex, Nifty Extend Record Highs Led By Capital Goods Stocks

Indian equity benchmarks surged to record highs paced by gains in capital goods and metal stocks.

The S&P BSE Sensex rose 0.9 percent or 331 points to 38,279 and the NSE Nifty 50 index climbed 0.7 percent or 81 points to 11,552.

Sixteen out of 19 sector gauges compiled by BSE ended higher led by the S&P BSE Capital Goods index's 3.7 percent surge. On the flipside, the S&P BSE IT index was top loser, down 1.2 percent.

The mid-cap stocks witnessed buying interest as the S&P BSE MidCap index rose 1.05 percent.

• Power Finance Corporation has 12.5 lakh shares change hands in a block. Stock up 0.12 percent to 82.60.

Buyers and sellers were not immediately known

Source: Bloomberg

Shares of the Hyderabad-based software developer were locked in a 5 percent upper crcuit at Rs 42.15 after it acquired Karix Mobile for Rs 340 crore, Tanla Solutions said in an exchange filing.

Shares of the Mumbai-based educational book publisher rose as much as 6.1 percent to Rs 129.50 after its board approved buyback of up to 46.9 lakh shares or 2.01 percent equity at Rs 160 per share, Navneet Education said in an exchange filing.

Shares of the Anil Agarwal-led metal conglomerate rose as much as 3.4 percent to Rs 222.50 after the National Green Tribunal formed a panel on reopening Vedanta's Tuticorin copper unit.

National Green Tribunal said:

• Panel to take decision on reopening Vedanta's Tuticorin copper unit in 6 weeks.
• Tamil Nadu, Vedanta can challenge panel's decision

Source: Bloomberg

• Indian rupee extended gains and rose as much as 0.8 percent or 56 paise to 69.60 per dollar.

A gauge of capital goods companies on the BSE was the top sectoral gainer.

The measure rose as much as 3.8 percent, the most since October 2017, to 18,537 led by gains in Larsen & Toubro, Elgi Equipments and Havells India.

Rajnish Kumar, chairman of the State Bank of India in Mumbai said because of the stress in the banking sector the atmosphere has gotten vitiated and this is why there has been a trust deficit in the system.

Key highlights from Rajnish Kumar’s speech:

• Need to bring back the trust in the banking industry and good business leaders
• Rate of interest on fixed deposits (FDs) being offered by banks are lower than the returns on other financial products and that is the reason behind a drop in deposit growth
• There are eleven banks are under Prompt Corrective Action (PCA) framework and they have not been able to participate in credit growth
• There is a need to take into consideration any probable delays in repayments when loans are being approved

• India's S&P BSE Sensex extended gains and rose over 350 points to trade above 38,300 for the first time.

• Indian equity benchmarks rose to record highs led by Larsen & Toubro, Reliance Industries and HDFC twins.
• The S&P BSE Sensex rose as much as 0.9 percent or 334 points to a record high of 38,282 and the NSE Nifty 50 index climbed 0.7 percent or 81 points to 11,552.
• Mid-cap stocks were witnessing good buying interest as the S&P BSE MidCap index advanced over a percent.
• The overall market breadth was positive as 1,479 shares were advancing while 1,072 were declining on the BSE.

Click here for more stock market statistics

India’s policy environment has defied expectations and remained relatively benign despite upcoming elections in 2019. Macro stability is strong, backed by a central bank committed to keeping real rates positive, said Morgan Stanley in a report co-authored by Ridham Desai and Sheela Rathi.

Key Highlights From The Report Titled ‘Why Is India Behaving Differently?’

• India’s growth is accelerating relative to emerging markets.
• India’s yield curve is undergoing bullish steepening—the yield curve correlates positively with stocks. Compare this to say the U.S. where bond markets are pointing to a recession in the coming quarters.
• Domestic equity flows are in the midst of a structural uptrend, resulting in a persistent bid for stocks.
• FPIs have trimmed their India weight to 2011 lows. India’s outperformance could cause FPI flows to return.
• Improving growth underpins a shift in factor performance to growth from quality or value—different other places such as the U.S., where the Morgan Stanley strategist thinks the market is likely moving from growth to value.

Key Risks

• A recovery in emerging markets can end India’s outperformance; a collapse can lead India to fall like quality stocks do when in a bear market.
• The election cycle which brings its own set of uncertainties such as inflation or fiscal slippage.
• Relative valuations are nudging higher, making the market less attractive, especially if the pace of the recent outperformance persists.

Portfolio Strategy

• Likes large-cap growth at a reasonable price stocks among banks, discretionary consumption and industrials.
• Underweight on healthcare, staples, utilities, global materials and energy.

• Cadila Healthcare: The Ahmedabad-based drugmaker rose as much as 8 percent to Rs 385.95. Trading volume was 7.7 times its 20-day average.
• 3M India: The Bengaluru-based container and packaging company rose as much as 3 percent to record high of Rs 26,000. trading volume was 7.4 times its 20-day average.
• Federal Bank: The Kerala-based private sector lender fell as much as 5 percent to Rs 80.70. Trading volume was 6.7 times its 20-day average.
• SJVN: The Shimla-based power generation company fell as much as 0.5 percent to Rs 29.75. Trading volume was 7.1 times its 20-day average.

Nifty 11,600 strike price call option contract was among the most active option contracts on the National Stock Exchange.

The premium on the contract rose 44 percent to Rs 55.45. Over 2.29 lakh shares were added to the open interest which stood at 38.23 lakh shares.

Click here to see the complete options chain

Shares of the calcine and refine maker were locked in a five percent upper circuit at Rs 795.25 after it resumed operations at Goa plant upon completion of the maintenance work, the company said in an exchange notification.

Shares of the Bengaluru-based fertiliser maker rose as much as 17 percent to Rs 64.90 after ministry of environment, forest and climate change gave environmental clearance for project expansion and modernisation of fertliser plant, Mangalore Chemicals said in an exchange filing.

Shares of the Mukesh Ambani-led company rose as much as 1.3 percent to Rs 1,219.30 after a report suggested that Alibaba may invest $5 billion in Reliance Retail to challenge the dominance of Flipkart and Amazon in India’s e-commerce market, The Mint reported citing two unidentified people aware of the matter.

Alibaba's executive chairman Jack Ma met Reliance Industries chairman Mukesh Ambani in July-end in Mumbai to discuss the proposal, the report added.

Shares of the country's largest infrastructure construction company rose as much as 4.9 percent, the most in over nine months, to Rs 1,300.95 after it informed exchanges that its board will meet on Aug. 23 to discuss share buyback proposal.

Indian equity benchmarks rose to record highs led by Larsen & Toubro after it announced that its board will meet on Aug. 23 to consider share buyback proposal.

The S&P BSE Sensex rose 0.47 percent or 179 points to 38,126 and the NSE Nifty 50 index climbed 0.41 percent or 46 points to 11,517.

Sixteen out of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Capital Goods index's 2.5 percent gain. On the other hand, the S&P BSE IT index was top loser, down 1.5 percent.

The mid- and small-cap shares were also witnessing buying interest as the S&P BSE MidCap index rose 0.7 percent and the S&P BSE SmallCap index advanced 0.4 percent.

Rupee recovered from record low levels against the dollar. The local unit rose 37 paise or 0.5 percent to 69.79 per dollar against its previous close of 70.16.

• Impact of currency weakness on India's sovereign credit profile is likely to be limited by relatively strong external finances, especially the low level of external debt, says Fitch Ratings
• Currency depreciation to add to existing pressures in the corporate and banking sectors.

Market will reopen after a holiday on Friday, with last week witnessing solid movement following the crisis in Turkey.

The rupee weakened about 0.4 percent to end at 70.16 on Thursday when it touched an all-time low of 70.39, breaching the earlier low of 70.08 reached on Tuesday.

The implied opening from forwards suggests spot may start trading at around 69.7550 on Monday.

In the bond market, securities could open higher after the RBI minutes suggested the central bank may opt for a pause after back-to-back interest-rate hikes to assess its impact on economic activity.

Governor Urjit Patel who led the MPC in increasing rates for the second time since June to curb inflation, said domestic growth indicators were reasonably strong but there is a rising threat from trade wars, which could potentially impact domestic investment and hit India’s exports. The benchmark 10-yr yield rose 4 basis points to end at 7.86 percent on Thursday.

BofAML on Dalmia Bharat

• Initiated ‘Buy’ with a target price of Rs 3,335.
• Best placed for 'Housing for All' on higher share in east.
• Cost controls to keep profitability above average of peers.
• Premiumisation, acquisitions to spur EPS growth and return on equity.
• Ongoing litigation for Binani Cement acquisition remain an overhang.

ICICI Direct on Elgi Equipment

• Initiated ‘Buy’ with a target price of Rs 350.
• Aspiring market leader with solid fundamentals.
• Indian manufacturing cycle uptick to strongly benefit Elgi.
• Sustained turnaround in foreign subsidiaries remains key.
• Expect revenue, operating income and net profit to grow at a compounded annual growth rate of 18 percent, 22 percent and 29 percent over FY18-20.

JPMorgan on Life Insurance

• Believe low penetration and rapid growth justify premium over China’s peers.
• SBI Life and ICICI Prudential Life are most attractive.
• New India Assurance: Moderation of underwriting cycle and new IFRS accounting to benefit.
• General Insurance Corp: Product mix limits underwriting margin improvement potential.
• HDFC Standard Life and ICICI Lombard: Outstanding insurers, but their strong positives look priced in.
• SBI Life: Initiated ‘Overweight’ with a target price of Rs 1,000.
• ICICI Prudential: Maintained ‘Overweight’; raised target price to Rs 560 from Rs 520.
• HDFC Life: Initiated ‘Neutral’ with a target price of Rs 520.
• New India: Initiated ‘Overweight’ with a target price of Rs 360.
• ICICI Lombard: Initiated ‘Neutral’ with a target price of Rs 710.
• General Insurance Corp: Initiated ‘Neutral’ with a target price of Rs 390.

Deutsche Bank on BHEL

• Maintained ‘Buy’ with a target price of Rs 112.
• Fructification of FGD orders has just started; Rs 17,000 crore potential in 2018-19.
• Elections could delay finalization to 5.6GW in 2018-19 out of 14GW opportunity.
• Rising power tariffs on demand recovery - indicator for new investments.
• Buy on compelling valuations and expected recovery of capital cycle in power.

Nomura on AIA Engineering

• Maintained ‘Neutral’; raised target price to Rs 1,955 from Rs 1,585.
• Strong recovery in volumes and margin stabilisation visible from the second half of the current financial year.
• Stabilising ferro-chrome prices and rising volumes key drivers.
• Rupee depreciation to further increase competitiveness.
• Stock rally appears to price in growth; Valuation turning expensive.

CLSA on Indian Pharma

• June quarter was the second-consecutive stable quarter for Indian pharma.
• Pace of earnings downgrades eases significantly.
• U.S. sales decline on a sequential basis, but likely to pick-up in the second half of the current financial year; commentary improving.
• Redesign of cost structure continues.
• Remain positive on pharma; Sun and Cipla best ideas.

BofAML on Infosys

• Infosys announced the resignation of its CFO.
• Resignation is unlikely to have parallels with resignation of prior CFO and others in October 2015.
• Triggers: Pace of improvement in US, financial services business and dollar-rupee.

Brokerages On Godrej Consumer

Macquarie

• Maintained ‘Outperform’ with a target price of Rs 1,465.
• The current financial year can be a turnaround year led by HI recovery and distribution expansion.
• Lower competitive intensity and new product launches to drive recovery in HI segment.
• Doubling sales in general trade by March 2021 can be a game changer.

CLSA

• Fairly impressed with strategy and execution in Indonesia.
• June quarter showed pick-up with festive season witnessing expansion after a few years.
• Strong launch pipeline with disruptive products to aid distribution expansion.
• Double-digit growth and sustaining its margin are its targets for the current financial year.

Who’s Meeting Whom

• Great Eastern Shipping to meet ULJK on Aug. 20.
• Wipro to meet investors on Aug. 20.
• DCM Shriram to meet Ambit Capital on Aug. 20.
• Lemon Tree Hotels to meet investors on Aug. 20.

Insider Trades

• Chambal Fertilisers & Chemicals promoter acquired 10,000 shares on Aug. 16.
• Nava Bharat Ventures promoter acquired 10,000 shares on Aug. 16.
• R Systems International promoter acquired 26,600 shares from Aug. 14-16.
• Page Industries promoters sold 9,000 shares from Aug. 14-16.
• Skipper promoters acquired 56,200 shares on Aug. 16.

(As reported on Aug. 17)

Bulk Deals

• Hatsun Agro Product: Promoter Chandramorgan RG acquired 10 lakh shares or 0.66 percent equity at Rs 719.99 each.

Trading Tweaks

• Stocks added to ASM list: Responsive Industries, International Paper APPM, Tamil Nadu Newsprint & Papers, Lincoln Pharmaceuticals and WPIL.

F&O Cues

• Nifty August futures ended at 11,488.4, with a premium of 17.7 points versus 25.9 points.
• August series-Nifty open interest (OI) up 3 percent and Bank Nifty OI up 3 percent.
• India VIX ended at 13.1, down 3.5 percent.
• Max OI for August series call at 11,500 strike price call option, OI at 36.5 lakh shares, down 20 percent.
• Max OI for August series put at 11,000 strike price put option, OI at 46.1 lakh shares, down 4 percent.

• Infosys CFO MD Ranganath resigns
• L&T to consider share buyback on Aug. 23.
• Goa Carbon’s Goa unit resumed operations after maintenance.
• IHH Group makes open offer to acquire 19.7 crore shares of Fortis Healthcare at Rs 170 each.
• CG Power & Industrial Solutions entered into agreement with Malaysia based Tenaga Switchgear.
• Jet Airways clarified that it will keep evaluating alternatives for fleet utilisation.
• Prism Johnson awarded LOI for 5 captive solar power projects, to invest Rs 8 crore for 26 percent stake in JV.
• Mangalore Chemicals & Fertilizers received environmental clearance for expansion of a fertiliser plant.
• Navin Fluorochemicals MD Shekhar Khanlokar resigned.
• Alibaba has revived talks with Reliance, Tata on India push (Economic Times).
• BSE, NSE may suspend nine firms’ trading from Sept. 10. (PTI).
• BPCL Hydrocracker unit may stay shut for at least two months (Reuters).
• SJVN seen as possible selloff candidate by Government, NHPC likely suitor (Times of India).
• Amazon along with Goldman Sachs and Samara Capital to form a consortium to acquire Aditya Birla Group's More at an enterprise valuation of Rs 4,500 - Rs 5,000 crore (Economic Times).

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.33 percent to 11,515 as of 7:08 a.m.

Asian equities open mixed Monday as traders look for clues from earnings reports, developments in the trade war and a meeting of central bankers in Jackson Hole later in the week to gauge the outlook for markets.

Japan’s shares were off to a muted start, while South Korea’s equities rose and futures indicated Hong Kong shares may open with small declines.

Currencies

• The yen ticked higher to 110.44 per dollar.
• The offshore yuan was steady at 6.8385 per dollar.
• The Bloomberg Dollar Spot Index was little changed. It declined 0.5 percent Friday.
• The euro bought $1.1435.

Commodities

• WTI crude slipped 0.2 percent to $65.79 a barrel.
• Gold was flat at $1,184.39 an ounce.

Here are some key events coming up this week:

• Companies announcing earnings include Alibaba, Royal Bank of Canada, Lowe’s, Target, BHP Billiton, Qantas, Ping An and China’s Bank of Communications.
• Central bankers gather at the Kansas City Fed’s annual Jackson Hole symposium, where Federal Reserve Chairman Jerome Powell speaks Friday.
• Fed releases the minutes from its July 31 - Aug. 1 FOMC meeting.