Sensex, Nifty Close Higher As Metals Rally Led By Tata Steel

Indian equity benchmarks closed higher on the back of a rally in metal stocks triggered by Tata Steel's quarterly earnings.

The S&P BSE Sensex ended 0.87 percent higher at 39,067.33 and the NSE Nifty 50 ended at 11,754.65, up 0.97 percent. The broader market index represented by the NSE Nifty 500 Index ended 0.63 percent higher.

The market breadth, however, was tilted in favour of sellers. About 753 stocks advanced and 957 shares declined on National Stock Exchange.

Eight out of 11 sectoral gauges compiled by NSE ended higher, led by the NSE Nifty Metal Index’s 1.83 percent gain. On the flipside, the NSE Nifty Auto Index was the top sectoral loser, down 1.10 percent.

Shares of the Aditya Birla Group-company rose 2 percent intraday to Rs 200.50.

The company sold its aluminium foil making unit at Kollur in Telangana on a slump sale basis to Mundhra Alufoil, according to its exchange filing.

The stock declined 12 percent so far this year compared to 8.3 percent advance on the Sensex.

European equities were little changed on the final trading day of a week that’s lacked real direction as corporate earnings proved tricky to digest.

Shares of the mining conglomerate slumped 5 percent intraday, the most in 2019, to Rs 23,642 apiece.

The trading volume was more than four times its 20-day average, according to Bloomberg data. However, the stock advanced 17 percent in the last 12 months compared to 12 percent gain on Sensex.

The U.S.-based company slashed its annual profit forecast as it reported that operating income dropped in all five business units. The company also announced it would cut 2,000 jobs.

Nifty Auto Index was the biggest sectoral losers among the gauges compiled by NSE.

Maruti Suzuki, the country's largest carmaker reported its quarterly earnings on Thursday. The company forecast a lower sales growth for 2019-20 than the previous financial year, signalling that India’s auto slowdown is far from over.

Shares of the private lender declined nearly a percent to Rs 1,347.15 apiece.

The bank’s unit executed share purchase agreement to sell its entire 19.8 percent stake in Matrix Business Services for Rs 10.32 crore, according to its exchange filing.

The stock traded 7.4 times its estimated earnings per share for the coming year Bloomberg data showed. The lender is scheduled to report its fourth quarter earnings on April 30.

Shares of the engineering services provider surged 9 percent intraday to Rs 636.65.

The company reported its fourth quarter earnings on Thursday. The Hyderabad-based company’s net profit nearly doubled to Rs 176 crore, while its revenue fell 2.1 percent to Rs 1,162.9 crore.

Twenty six of the 27 analysts tracked by Bloomberg had a ‘Buy’ recommendation on the stock while one analyst recommended ‘Hold’, the trading volume was 16 times the 20-day avaerage for this time of the day, Bloomberg data showed.

Shares of the steel maker rose 3.6 percent, the most in over a week, to Rs 529 apiece. The stock was the top gainer on Nifty. The company reported its March quarter results on Thursday.

The trading volume was more than six times the 20-day average for this time of the day, Bloomberg data showed. The stock traded 7.4 times its estimated earnings per share for the coming year.
Here’s what brokerages had to say on the stock:

Investec

• Maintained ‘Buy’; hiked target price to Rs 800 from Rs 750.
• Q4 results reported operational beat with deleveraging playing out.
• Management guided for $1 billion of deleveraging into FY20 - a positive.
• Retain Tata Steel as preferred ferrous proxy.

CLSA

• Maintained ‘Sell’ with target price of Rs 395.
• Good volumes, but sharp margin drop in India Business.
• Asian steel prices have recovered on iron ore disruption, but have likely peaked.
• Expect margins to remain under pressure in FY20.

Indian equity benchmarks opened higher as Brent crude prices retreated after hitting $75-per-barrel mark.

The S&P BSE Sensex rose as much as 0.35 percent to 38,869 and the NSE Nifty 50 rose as much as 0.45 percent to 11,690.05. The broader market index represented by the NSE Nifty 500 Index rose as much as 0.40 percent higher.

The market breadth was tilted in favour of buyers. About 883 stocks advanced and 584 shares declined on National Stock Exchange.

Ten out of 11 sectoral gauges compiled by NSE advanced, led by the NSE Nifty Metal Index’s 0.82 percent gain. On the flipside, the NSE Nifty Auto Index was the only sectoral loser, down 0.58 percent.

The Indian rupee opened higher against the U.S. dollar. The home currency appreciated as much as 0.17 percent to 70.14 against the greenback.

The rupee is headed for its worst week this year after the dollar rallied to a four-month high. The greenback had depreciated 0.6 percent in the last session taking the pair to 70.26. For the session today, dealers see the dollar trading in a range of 70-70.50 per dollar.

Benchmark sovereign bond saw yield climb 3 basis points in the last session to 7.45 percent as surging crude oil prices remained a concern. The weekly auction is scheduled today and dealers will be closely watching the cutoffs after underwriters had to rescue a part of it last week. Yields may trade in a range of 7.42-7.50 percent.

F&O Cues

Futures

• Nifty open interest across series up 13 percent, adds 27,600 shares in open interest.
• Nifty May futures closed trading at 11,730.8, premium of 89 points.
• Bank Nifty open interest across series down 2 percent, sheds 50,000 shares in open interest.
• Nifty rollover 81 percent, Bank Nifty rollover 74.8 percent.

Options

• Nifty PCR at 1.61 versus 1.65 (across all series).

Nifty Weekly Expiry 2 May

• Max open interest concentration at 11,800 Call (16.4 lakh shares), 11,700 Call (13.2 lakh shares) 11,600 Put (11.4 lakh shares)
• Max open interest addition seen at 11,800 Call (+11.6 lakh shares) and 11,700 Call (+6.4 lakh shares)

Nifty Monthly Expiry 30 May

• Max open interest concentration on Put side at 11,000 (23.3 lakh shares).
• Max open interest on call side at 12,000 (10.4 lakh shares).

On Maruti Suzuki

CLSA

• Maintained ‘Buy’ with target price of Rs 8,000.
• Margin sequentially better, but below estimates.
• Demand environment remains weak.
• Expect better margins in H1FY20; competitive intensity remains benign.

UBS

• Maintained ‘Buy’ with target price of Rs 8,200.
• Q4 margins disappoint despite rationalised discounts.
• Lower margin estimates for FY20/21; cut EPS estimates by 12 percent/8 percent.
• Expect depressed near-term earnings due to ramp-up cost of new plant and regulatory transition.

Investec

• Downgraded to ‘Hold’ from ‘Buy’; cut target price to Rs 6,300 from Rs 6,800.
• Operational miss, near term outlook subdued.
• Competition could restrict outperformance.
• Cut our EPS estimates by 13 percent/7 percent for FY20E/21.

Credit Suisse

• Maintained ‘Neutral’; hiked target to Rs 6300 from Rs 6100
• Successive misses; H1FY20 likely to be weak as well.
• Demand situation remains very weak right now.
• Entire stock correction driven by earnings downgrades and there is more to go.

CLSA on Axis Bank

• Maintained ‘Buy’; hiked target price to Rs 890 from Rs 840.
• NPLs stable and stressed loan ratio declines.
• CASA growth disappoints & lifts cost of funds.
• Expect earnings to turnaround in FY20.

UBS on Axis Bank

• Maintained ‘Buy’ with target price of Rs 1,010.
• Strong operating performance; Asset quality continues to improve.
• Expect Axis to clean-up the back book, increase provisions and even slower growth in H1FY20.
• Believe the stock could double in next 2.5 years.

Investec on Tata Steel

• Maintained ‘Buy’; hiked target price to Rs 800 from Rs 750.
• Q4 results reported operational beat with deleveraging playing out.
• Management guided for $1 billion of deleveraging into FY20 - a positive.
• Retain Tata Steel as preferred ferrous proxy.

CLSA on Tata Steel

• Maintained ‘Sell’ with target price of Rs 395.
• Good volumes, but sharp margin drop in India Business.
• Asian steel prices have recovered on iron ore disruption, but have likely peaked.
• Expect margins to remain under pressure in FY20.

HSBC on Hindustan Unilever

• Maintained ‘Buy’; hiked target price to Rs 2,010 from Rs 1,940.
• “High PE hence expensive” construct is very misleading.
• HUL captures growth at lowest cost in the sector.
• Growth strategy is evolving, which will result in a tangible lift in its structural growth trajectory.
• Focus on accelerating earnings growth is the most sensitive lever for its value.

Edelweiss on Natco Pharma

• Maintained ‘Buy’; cut target price to Rs 625 from Rs 800.
• Diversifying into agrochemicals, taking a cue from MNCs.
• Weaning off from U.S. to take 2-3 years of sustained investments.
• Earnings growth may remain muted over the next two years.

UBS on SBI Life Insurance

• Maintained ‘Buy’ with target price of Rs 740.
• Robust premium growth; VNB margins improvement led by mix change.
• Expect improvement in average ticket size, banca productivity and persistency
• Protection remains focus; aim on growth and margin.

Nifty Results

• Yes Bank
• Hero MotoCorp

Earnings Reaction To Watch

Axis Bank (Q4, YoY)

• Net interest income up 20.6 percent to Rs 5,705.59 crore.
• Net profit at Rs 1,505.06 crore versus net loss of Rs 2,188 crore.
• Gross NPAs at 5.26 percent versus 5.75 percent. (QoQ)
• Net NPAs at 2.06 percent versus 2.36 percent. (QoQ)
• Gross slippages for the quarter stood at Rs 3,012 crore.
• NIMs at 3.44 percent versus 3.47 percent (QoQ)

Tata Steel (Q4 Consolidated, YoY)

• Revenue up 25.9 percent to Rs 4,2423.9 crore.
• Net profit down 76.1 percent to Rs 2,431 crore.
• Adjusted Ebitda up 33 percent to Rs 7,814 crore.
• Margin at 18.4 percent versus 17.3 percent.
• Consolidated volume up 26.5 percent to 7.21 MT.
• Ebitda/tonne up 5 percent to Rs 10,838.
• Declares dividend of Rs 13 per share.
• Exceptional gains of Rs 11,376 crore in base quarter.
• Deferred tax expense of Rs 683.4 crore.

Cyient (Q4 Consolidated, QoQ)

• Revenue down 2.1 percent to Rs 1,162.9 crore.
• Net profit up 90.3 percent to Rs 176 crore.
• Ebitda down 3.5 percent to Rs 141.3 crore.
• Margin at 12.1 percent versus 12.3 percent.
• Other Income of Rs 78.9 crore.
• Declares dividend of Rs 9 per share.

Biocon (Q4 Consolidated, YoY)

• Revenue up 30.7 percent to Rs 1,528.8 crore.
• Net profit up 63.9 percent to Rs 213.7 crore.
• Ebitda up 73 percent to Rs 403 crore.
• Margin at 26.4 percent versus 19.9 percent.
• Other income down 58 percent to Rs 28.2 crore.
• Inventory gain of Rs 79.1 crore.
• Other expenses up 59 percent to Rs 380.4 crore.
• Approves issue of bonus shares in the ratio of 1:1 (Rs 300 crore will be utilised for this issue).

GHCL Standalone (Q4, YoY)

• Revenue up 26.2 percent to Rs 911.3 crore.
• Net profit up 44.3 percent to Rs 118.6 crore.
• Ebitda up 31.5 percent to Rs 238.1 crore.
• Margin at 26.1 percent versus 25.1 percent.
• Inorganic chemicals segment revenue up 20 percent to Rs 604.8 crore.
• Home textiles segment revenue up 40 percent to Rs 306.5 crore.
• Declares dividend of Rs 5 per share.

SBI Life Insurance (Q4, YoY)

• Net Premium Income up 23 percent to Rs 11,333 crore.
• Net profit up 20 percent to Rs 457.7 crore.
• Solvency Ratio at 2.13 versus 2.06.

MCX (Q4 Consolidated, YoY)

• Revenue up 12 percent to Rs 79.1 crore.
• Net profit up 78.4 percent to Rs 61 crore.
• Ebitda up 9.6 percent to Rs 25.1 crore.
• Margin at 31.7 percent versus 32.4 percent.
• MAT Credit entitlement of Rs 19.7 crore.
• Other Income up 22 percent to Rs 31.7 crore.
• Declares dividend of Rs 20 per share.

Rallis India (Q4 Consolidated, YoY)

• Revenue down 8.5 percent to Rs 339.7 crore.
• Net profit down 92.4 percent to Rs 1.5 crore.
• Ebitda down 80.5 percent to Rs 6.8 crore.
• Margin at 2 percent versus 9.4 percent.
• RM as percent of sales at 76 percent versus 60 percent.
• Inventory gain of Rs 69.8 crore.
• Other income of Rs 11 crore.

Stocks To Watch

• Tata Steel: Board approved merger of Bamnipal Steel and Tata Steel BSL into the company by way of amalgamation and recommended a merger ratio of 1 equity share of the company for every 15 equity shares held by the public shareholders of Tata Steel BSL.
• Nestle India declared a dividend of Rs 23 per share for financial year 2019.
• Oriental Hotels: Board approved termination of GDR agreement. The company plans to delist its GDRs from Luxembourg Stock Exchange.
• Kotak Mahindra Bank’s unit executed share purchase agreement to sell its entire 19.8 percent stake in Matrix Business Services for Rs 10.32 crore.
• IRB InvIT Fund to consider declaring fourth distribution for the financial year 2019 on May 2. If the distribution is declared the record date for such action is set as May 10.
• Apcotex Industries: Board approved share split from face value of Rs 5 to Rs 2 per share. The company said the expected time of completion for this action will be done by Aug. 31.
• Bank of Baroda: Board approved issuance of fresh equity shares of Rs 5,042 crore to Government of India on preferential basis.
• Raymond: Board appointed Ravi Uppal as the new chairman for the group’s two arms— Ring Plus Aqua and JK Files.
• Boeing removed orders worth $25 billion at list prices from Jet Airways. The aircraft manufacturer also stated that contractual agreements with Jet Airways remains the same, but they have removed the order for 200 Boeing 737s and 10 787s from Jet Airways. (Bloomberg News)

• Brent crude fell 0.24 percent to $74.04 per barrel.
• West Texas Intermediate crude fell 0.7 percent to $64.73 a barrel.
• Gold was little changed at $1,278.35 an ounce.

• Aluminium ended 0.80 percent lower.
• Copper ended lower, down 1.29 percent.
• Tin snapped its six-day falling streak, up 0.61 percent.
• Lead ended higher for the second session in a row, up 0.36 percent.
• Nickel ended 0.66 percent lower.
• Zinc ended lower for the fourth day, down 0.04 percent.

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, traded flat at 11727.50 as of 7:50 a.m.

Asian stocks fell back Friday after mixed messages from U.S. benchmarks and as earnings season continued. Shares declined in Japan, Korea and Australia, and U.S. futures ticked lower.

Short on time? Well, then listen to this podcast for a quick summary of the article!