Sensex, Nifty Rebound After Worst Week In Over Two Years

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India fell 0.1 percent or 12 points to 10,287 as of 7:09 a.m.

Asian stocks began the week mixed and the yuan slipped as investors assessed the latest move by the People’s Bank of China to loosen monetary policy. Chinese shares sank as traders returned from a week-long holiday that encompassed the rout in Treasuries.

Equities in Hong Kong and South Korea were little changed, while they fell in Australia. Japan is shut for a holiday, and Columbus Day in the U.S. means no Treasuries trade on Monday.

Currencies

• The yen dipped 0.1 percent to 113.83 per dollar.
• The offshore yuan lost 0.2 percent to 6.9019 per dollar. Onshore it dropped 0.5 percent to 6.9058 per dollar.
• The Bloomberg Dollar Spot Index was little changed.
• The euro bought $1.1517.

Commodities

• West Texas Intermediate crude fell 0.6 percent to $73.89 a barrel.
• Gold futures slipped 0.4 percent to $1,199.33 an ounce.

Here are some key events coming up this week:

• The U.S. Treasury has $230 billion worth of debt auctions this week.
• The IMF presents its World Economic Outlook on Tuesday. IMF Managing Director Christine Lagarde has warned that trade wars and tighter credit are darkening the global outlook.
• U.S. President Donald Trump holds the latest in a series of rallies ahead of the Nov. 6 mid-term elections, this time in Council Bluffs, Iowa.
• A gauge of U.S. consumer prices probably remained elevated in September and rose 2.3 percent from a year earlier, according to forecasts ahead of Thursday’s release.

• Worst week in two years has India stock investors taking cover
• Fundraising via IPO slumps 53% in April-September
• Foreign investors pull out Rs 9,300 crore in four trading sessions
• RBI to tighten asset-liability norms for NBFCs
• The IL&FS effect: Indian financiers brace for tighter regulation
• Why Modi wasn’t on the tarmac to trap Putin in a bear hug
• Crop insurance: Waiting for a technological breakthrough
• Startup street: Where India stands in global startup revolution
• Rupee bearing the burden of balance of payments adjustment, says Neelkanth Mishra
• Global M&A appetite wanes amid geopolitical concerns

• Housing finance company Aavas Financiers, which raised Rs 1,734 crore through an initial public offering recently, will list its shares on the exchanges today. The IPO, which opened from Sept. 25-27, was subscribed 97 percent at a price band of Rs 818 to Rs 821 per share.

• Yes Bank finalised “search and selection committee” to find a new CEO. The board inducted TS Vijayan, former chairman of IRDAI and LIC, and OP Bhatt, former CMD of State Bank of India, as external experts in the committee. The internal members include Brahm Dutt, Mukesh Sabarwal and Subhas Chander Kalia. The bank has invited proposals from global leadership advisory firms specialising in banking, financial services and insurance. The first meeting of the committee will be on Oct. 11.
• Sobha Ltd. (quarterly update): The company is poised to launch one affordable housing project each in north Bengaluru and GIFT city in the second half of the financial year. Total sales up 9.7 percent year-on-year to Rs 740.8 crore.
• IDBI Bank announced Rakesh Sharma as managing director and chief executive officer for six months. He was formerly the MD and CEO of Canara Bank.
• Himachal Futuristic Communications received advanced purchase order of Rs 879 crore from TCIL. This includes operations and maintenance services of optical fibre cables and GPON equipment in Madhya Pradesh under the government’s BharatNet Phase II programme, being implemented by BSNL.
• Texmaco Rail and Engineering signed an MoU with international division of Russian Railways ‘RZD International LLC’ for working in collaboration for various domestic and international projects in the railways and infrastructure space.
• PNB Housing Finance raised first ECB of $200 million (Rs 1470 crore) under Automatic Route of RBI.
• Gravita India’s Rs 300 crore order with Singapore based Kyen Resources is cancelled due to some management and financial issues at the end of Kyen Resources. Management is of the view that termination of above contract will not have any material impact on the financials.
• Gati’s long- and short-term bank facilities and deposits worth Rs 228 crore downgraded by CARE ratings on account of revenue decline and additional debt taken.
• CARE Ratings downgraded long-term and short-term ratings of Reliance Power’s unit Sasan Power to 'CARE BBB+ (Stable Outlook)' and 'CARE A2' respectively, attributing to steep depreciation in rupee against the dollar, which would expose Sasan to higher interest outgo on the unhedge.
• GMR Infra’s board approved allotment of optionally convertible debentures worth Rs 402 crore to Doosan Power Systems India Pvt. Ltd.
• Sagar Cements’ production rose 43 percent to 2,18,519 MT, while sales rose 41 percent to 2,12,048 MT.
• Goa Carbon’s production fell 9 percent to 16271.7 MT, while sales down 36 percent to 14454.7 MT.

Trading Tweaks

• A2Z Infra Engineering Ltd placed under ASM framework.

Insider Trades

• JSW Steel promoter acquired 13 lakh shares from Oct. 1-3.
• Apollo Tyres promoter group PTL Enterprises Ltd. acquired 4.75 lakh shares on Oct. 1.
• Greaves Cotton promoters acquired 2 lakh shares on Oct. 4.
• Bodal Chemicals promoters acquired 3.65 lakh shares on Oct. 3.
• Shakti Pumps promoter group acquired 14,600 shares from Oct. 3-4.
• Cox & Kings promoter acquired 50,000 shares on Oct. 4.
• IRB InvIT Fund promoter and director Deepali Mhaiskar acquired 1.3 lakh shares on Oct. 3.

(As reported on Oct. 5)

Who’s Meeting Whom

• Shriram Transport Finance to meet Wellington Management on Oct. 11.

• Nifty October Futures ended at 10,347, with a premium of 31 points.
• Nifty October open interest up 8.5 percent; Nifty Bank October open interest down 8 percent.
• Maximum open interest for October series call at 10,800 strike price call option contract. Open interest at 28.7 lakh shares.
• Maximum open interest for October series put at 10,500 strike price put option contract. Open interest at 36.1 lakh shares.

JPMorgan on Hindustan Zinc

• Initiated ‘Neutral’ with a price target of Rs 290, implying a potential upside of 3 percent from the last regular trade.
• Best-in-class mining company, but zinc markets entering surplus.
• Expect largely balanced market in 2019, and a surplus market in 2020.
• Strong cash-rich balance sheet; Expect elevated dividend payout.
• Prefer parent Vedanta at current valuations.

Maybank on Hexaware Tech

• Upgraded to ‘Buy’ from ‘Hold’; raised price target to Rs 470 from Rs 440, implying a potential upside of 15 percent from the last regular trade.
• Believe fundamentals are improving led by the rupee depreciation and stronger U.S. economy.
• Catalysts: potential large contract wins and accelerating revenue and EPS growth.
• Expect third quarter to be another strong quarter.

CLSA on Maruti

• Maintained ‘Buy’; cut price target to Rs 9,200 from Rs 11,300, implying a potential upside of 34 percent from the last regular trade.
• Some demand headwinds but sanguine on Maruti’s volume.
• Weaker rupee poses a headwind for its margin.
• Believe sharp correction provides an entry point.

JPMorgan on Vedanta

• Maintained ‘Overweight’; cut price target to Rs 345 from Rs 400, implying a potential upside of 49 percent from the last regular trade.
• Cut EPS estimates by 19-20 percent for FY19-20 driven by lower zinc business.
• Macro is unhelpful, but progress on projects should be a positive catalyst.
• Given growth prospects, diversified earnings and attractive valuations, share price should rebound.

UBS on Power Financing NBFCs

• Rural Electrification Corp.: Maintained ‘Buy’; cut price target to Rs 145 from Rs 190, implying a potential upside of 44 percent from the last regular trade.
• Power Finance Corp.: Maintained ‘Buy’; cut price target to Rs 115 from Rs 150, implying a potential upside of 52 percent from the last regular trade.
• Expect net interest margins to decline by 50 basis points in the current financial year.
• Rising cost of funds and a lag in increasing lending rates to impact NIMs.
• Loan growth to remain subdued; RoEs to remain in 12-14 percent range.
• Risk-reward favourable given low asset quality risks and high dividend yields.

CIMB on Chemicals

• Seeds posing increasing competition to agrochemicals.
• RM cost pressure and new product launches by innovators negative for generic agrochemical makers.
• Business model of Indian agchem distribution companies is at risk.
• SRF and Navin fluorine are doing well because of refrigerants.
• Maintain Neutral on sector, PI and UPL remain top Reduce.

Brokerages On RBI Policy

Morgan Stanley

• RBI policy review: Surprise Pause but hikes to continue.
• RBI's decision could partly be in response to manage the liquidity situation.
• View this as only a delay of impending monetary tightening, since the external environment remains challenging.
• Attracting marginal capital flow will require an increase in real rates in an environment where India runs a current account deficit of meaningful size.
• Maintain view of another 25-50 basis point of rate hikes in the current financial year.

Credit Suisse

• Remain more pessimistic about India’s inflation outlook.
• Continue to expect further policy rate hikes in the coming quarters, although December may still be too early.
• A continued rise in oil prices might pull hikes forward to December.
• In contrast, if the recent liquidity stress in the NBFC sector accelerates the slowing in credit growth, it might argue against further hikes.

Goldman Sachs

• Policy decision and the change in stance in line with expectations.
• See 100 basis points hike by RBI in 2019.

JPMorgan

• Continue to believe that inflation in the first half of 2019 will average 5 percent or above.
• Higher inflation will necessitate more monetary tightening.
• Still pencil in 50 basis points of tightening across the December and February reviews.

The rupee may accumulate losses further after the central bank kept its rates on hold on Friday, surprising the market. Implied opening from forwards suggest the pair may open around 73.91 a dollar, which is just a whisker away from 74.

Traders are expecting the rupee to further depreciate towards 75 amid difficult global and local conditions. So, a range of 73.85-74.30 a dollar is seen today.

Government bonds that staged a big rally after RBI's surprise decision to hold rates is closely watch the rupee market and the hardening yields in the U.S. market today.

Traders will likely consolidate at the current levels and yield on the 10-year note may trade in a range of 8-8.10 percent.

Indian rupee extended losses and fell as much as 20 paise of 0.3 percent to 73.97 per dollar after the Reserve Bank of India held rates on Friday.

Indian equity benchmarks declined paced by losses in Hindalco, Vedanta, HDFC and Bajaj Finance.

The S&P BSE Sensex fell 0.5 percent or 179 points to 34,199 and the NSE Nifty 50 Index declined 0.6 percent or 58 points to 10,258.

twelve of 19 sector gauges compiled by BSE were trading lower led by the S&P BSE Metal Index's 1.7 percent drop. On the flipside, the S&P BSE Oil & Gas Index was top gainer, up 0.8 percent.

Selling was broad-based as the S&P BSE MidCap Index declined 0.7 percent and the S&P BSE SmallCap Index slipped 0.5 percent.

From top down approach India suffers most among emerging markets when oil prices rise, Nilesh Shah, MD of Kotak AMC told BloombergQuint in an interview.

Key highlights of the conversation:

• People are redjusting their portfolios
• FII selling also on account of India's out performance in last 3 years
• Market across capitalisation have reached historical average
• Believe majority of the negative macros factored in by the market
• Market could see bounce back if oil rally stalls
• RBI has taken adequate steps to control inflation
• Market expects more rates hike from RBI going forward
• Expect earnings growth to sustain based on September quarter expectation
• Seeing FII withdrawal on account of multiple factors
• Many NBFCs are into consumer credit please do not equate them to IL&FS
• Expect NBFCs without governance issues to perform well

Shares of the Anil Agarwal-led mining conglomerate fell as much as 8.5 percent, the most since November 2016, to Rs 212.15 on heavy volumes.

Trading volume was 1.6 times its 20-day average for this time of the day, data compiled by Bloomberg showed.

• Infibeam Avenues has 23 lakh shares change hands in two blocks. Stock down 0.25 percent at Rs 59.40.

Buyers and sellers were not immediately known

Source: Bloomberg

Aavas Financiers settled at a discount of 7.67 percent Rs 758 per share in the pre-open price discovery session on the BSE.

Company sold shares at Rs 821 per share in IPO.

Aavas Financiers shares listed at a discount of 7.67 percent at Rs 758 against issue price of Rs 821.

The stock fell as much as 13.4 percent to Rs 710.45 on the BSE.

Aavas Financiers Ltd.’s Rs 1,734-crore initial public offering saw 97 percent subscription on its final day of bidding.

Shares of the Mumbai-based private lender rose as much as 4.30 percent to Rs 214.85 after its board finalised “search and selection committee” to find a new CEO.

The board inducted TS Vijayan, former chairman of IRDAI and LIC, and OP Bhatt, former CMD of State Bank of India, as external experts in the committee. The internal members include Brahm Dutt, Mukesh Sabarwal and Subhas Chander Kalia.

Meanwhile, the banks' founder and current CEO Rana Kapoor tweeted: Very pleased that the Board’s 3 member Nomination and Remuneration Commitee has expeditiously finalised two external experts for the Search & Selection Committee, ahead of committed timelines to find my successor.

Shares of the Secunderabad-based courier service provider fell as much as 12.88 percent to Rs 70 after ratings agency CARE Ratings downgraded its long and short term bank facilities.

The downgrade came on account of revenue decline and additional debt taken.

Shares of the non-banking finance companies fell after the Reserve Bank of India indicated that stricter regulations are in the offing to ward off default risks rising from the so-called asset liability mismatch.

The central bank last week warned stricter regulations are in the offing to ward off default risks rising from the so-called asset liability mismatch. Depending on short-term debt to garner a bigger share of the South Asian nation’s lending market is a “myopic strategy,” Reserve Bank of India Deputy Governor Viral Acharya said in a briefing on Friday.

As investors focus on non-bank financiers “it is creating incentives for bond fund managers to not buy NBFC paper,” Neelkanth Mishra, strategist at Credit Suisse Group AG in Mumbai said in an interview with BloombergQuint. “For some of the

smaller NBFCs there is going to be no option to survive. The good thing is that, systemically it doesn’t matter. It hurts those firms, which is fine.”

• IIFL Holdings fell 6.55 percent
• Edelweiss Financial Services fell 6.25 percent
• Dewan Housing Finance fell 5.62 percent
• Magma Fincorp fell 5.26 percent
• JM Financial fell 7.13 percent
• Gruh Finance fell 2.76 percent
• Aditya Birla Capital fell 2.82 percent
• Manappuram Finance fell 2.34 percent
• Motilal Oswal Financial Services fell 2.3 percent

Shares of the state-run oil retailers rebounded after a two-day selloff after the government on Thursday asked them to cut fuel prices by Re 1 per litre.

• Indian Oil rose 4.8 percent
• HPCL rose 6.6 percent
• BPCL rose 0.83 percent

Shares of the Mukesh Ambani-led oil-to-telecom conglomerate snapped its four-day losing streak and rose as much as 4.2 percent to Rs 1,092.50.

The stock tested its 200-day moving average placed at Rs 1,081.15, according to data compiled by Bloomberg.

Meanwhile, trading volume was three times its 20-day average for this time of the day.

Nifty's 10,500 strike price call option contract was among the most active option contracts on the National Stock Exchange.

Premium on the contract rose 3.6 percent to Rs 120.25. Over 8.42 lakh shares were added to the open interest which stood at 28.45 lakh shares.

Shares of the telecom equipment maker rose as much as 4.5 percent to Rs 19.75 after it advanced purchase order of Rs 879 crore from TCIL.

This includes operations and maintenance services of optical fiber cables and GPON equipment in Madhya Pradesh under the government’s BharatNet Phase II programme, being implemented by BSNL.

Shares of the Jaipur-based lead maker fell as much as 9.33 percent to Rs 69 after its order worth Rs 300 crore with Singapore based Kyen Resources crore was cancelled due to some management and financial issues at the end of Kyen Resources. Management is of the view that termination of above contract will not have any material impact on the financials.

Indian equity benchmarks reversed decline and rebounded from worst week in two years led by Reliance Industries, Kotak Mahindra Bank and ICICI Bank.

The S&P BSE Sensex rose 0.26 percent or 88 points to 34,465 and the NSE Nifty 50 Index 0.3 percent or 32 points to 10,348.

Twelve of 19 sector gauges compiled by BSE were trading lower led by the S&P BSE Realty Index's 1.8 percent drop. On the other hand, the S&P BSE Energy Index's 3.5 percent gain.

The mid- and small-cap shares were underperforming their larger peers as the S&P BSE MidCap Index fell 0.9 percent and the S&P BSE SmallCap Index declined 0.7 percent.

• Oberoi Realty has 10 lakh shares change hands in a single block. Stock falls 3.2 percent to Rs 378.

Buyers and sellers were not immediately known

Source: Bloomberg

• Shares of the Mumbai-based lender extended gains and rose as much as 10.51 percent to Rs 227.65.

Shares of metal companies were trading lower led by National Aluminium Company, Hindalco and Vedanta's 5-6 percent drop.

The metal index on the National Stock Exchange — Nifty Metal Index declined 1.8 percent.

• Indian rupee extended decline and depreciated as much as 25 paise or 0.33 percent to 74.01 per dollar.

India's second largest IT outsourcing company will announce its September quarter earnings on Oct. 16.

Infosys stock was trading 1.3 percent lower at Rs 714.95.

Indian equity benchmarks erased gains as dragged by weakness in HDFC, ITC, TCS and Vedanta.

The S&P BSE Sensex fell 0.2 percent or 67 points to 34,309 and the NSE Nifty 50 Index declined 0.23 percent or 22 points to 10,296.

Fifteen or 19 sector gauges compiled by BSE were trading lower led by the S&P BSE Metal Index's 2.8 percent drop.

Market breadth was negative as 1,690 shares were declining while 790 were advancing on the BSE.

Click here for more stock market statistics

India's gauge of expected market volatility — India VIX rose as much as 8.34 percent to 21.38, its highest level since Feb. 8.

• Varun Beverages: The Gurugram-based bottler of PepsiCo fell as much as 0.9 percent to Rs 740. Trading volume was 7 times its 20-day average.
• Finolex Industries: The Pune-based PVC pipes maker fell as much as 2.3 percent to Rs 510. Trading volume was 6 times its 20-day average.
• Karur Vysya Bank: The Tamil Nadu-based private sector lender rose as much as 4.11 percent to Rs 81.10. Trading volume was 6.4 times its 20-day average.
• Oberoi Realty: The Mumbai-based real estate developer fell as much as 7.3 percent to Rs 361.55. Trading volume was 5 times its 20-day average.

The mid- and small-cap stocks were underperforming their larger peers as the S&P BSE MidCap Index fell 2.2 percent and the S&P BSE SmallCap Index plunged 2 percent.

Top Losers In Mid-Cap Space

• Dewan Housing Finance down 15.3 percent
• Edelweiss Financial Services down 12.7 percent
• Shriram Transport Finance down 10.57 percent
• Godrej Properties down 10.16 percent
• Bajaj Holdings down 9.08 percent

Top Losers In Small-Cap Space

• Goa Carbon down 18.67 percent
• Texmaco Infrastructure down 15.83 percent
• JM Financial down 14.17 percent
• DCM Shriram down 13.20 percent
• Trigyn Technologies down 12.40 percent

Trade war pressure, downward shift in global manufacturing and global GDP growth revisions are impacting emerging markets, Nikolaos Panigirtzoglou, MD, global market strategy at JPMorgan told BloombergQuint in an interview.

Key highlights of the conversation:

• Trade war pressure, downward shift in global manufacturing and global GDP growth revisions impacting emerging markets
• India equities and bonds were consensus overweight
• Fed has been hawkish and that has been negative for emerging markets
• Expect oil to stabilise around $85/bbl in Q4
• As U.S.-China trade war escalates PBOC will let the currency weaken further
• Big problem for Indian rupee will be anchoring of Chinese currency above 7 per dollar

Shares of the Uday Kotak-led private sector lender rose as much as 6.14 percent, the most since May 31, to Rs 1,116.80 on heavy volumes.

Trading volume was 1.4 times its 20-day average, according to data compiled by Bloomberg.

As many as 4.38 lakh shares changed hands on the BSE compared with an average of 2.31 lakh shares traded daily in the past two weeks.

• Total assets under management (AUM) down 13 percent at Rs 22.04 lakh crore versus Rs 25.2 lakh crore (MoM)
• Equity AUM down 7.1 percent at Rs 7.47 lakh crore versus Rs 8.04 lakh crore (MoM)
• Balanced fund AUM down 5.8 percent at Rs 1.77 lakh crore versus Rs 1.87 lakh crore

Source: AMFI Wesbite

Indian equity benchmarks rebounded after posting their worst weekly performance in 31 months led by Reliance Industries, Kotak Mahindra Bank and State Bank of India.

The S&P BSE Sensex rose 97 points or 0.28 percent to 34,474 and the NSE Nifty 50 Index climbed 0.3 percent or 32 points to 10,348.

Today's session was highly volatile as the Nifty 50 Index swung over 10 times between gains and losses as metal, realty and financials came under heavy selling pressure.

Twelve of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Metal Index's 3.2 percent drop. On the other hand, the S&P BSE Energy Index was top gainer, up 4.4 percent.

Mid- and small-cap shares underperformed their larger peers as the S&P BSE MidCap and SmallCap Indices fell 2 percent each.

The rupee weakened for the fifth consecutive session and closed below the 74 to the dollar mark for the first time.

The Indian currency closed at 74.07 per dollar, after the monetary policy committee kept interest rates on hold on Friday. The MPC left its repurchase rate at 6.5 percent, while changing its policy stance to “calibrated tightening” from “neutral”.