Sensex, Nifty Log Worst Single-Day Fall Of 2019

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.3 percent to 12,044 as of 7:45 a.m.

Stocks opened mixed in Asia as discussions between the Donald Trump administration and Mexican officials on tariffs ended without an agreement on Wednesday.

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• Brent crude fell 2.2 percent to $60.63 per barrel.
• West Texas Intermediate crude declined 0.2 percent to $51.57 a barrel.
• Gold rose 0.2 percent to $1,332.80 an ounce after sliding.

London Metal Exchange

• Copper halted a three-day fall, closed 0.2 percent higher.
• Zinc ended lower for the second day, down 2.2 percent.
• Aluminium closed 0.98 percent lower.
• Nickel ended loser for the second day, down 1.2 percent.
• Lead closed higher for the second day, up 0.28 percent.
• Tin ended 2.32 percent higher.

• DHFL Ltd.’s commercial papers were downgraded to ‘D’ (Default) by CRISIL and ICRA owing to liquidity concerns. This comes a day after the non-bank lender delayed interest payments to investors.
• Aurobindo Pharma Ltd. said it had received Form 483 with ten observations from U.S. FDA for its formulation manufacturing facility in Hyderabad. In the press release, the pharma company also stated that these observations are repetitive and procedural in nature. The Form 483 will not have an impact on existing business of this facility. This release was made as a clarification to the exchanges.
• Lupin Ltd.: Japan’s PMDA completed inspection of its Mandideep facility with no critical or major observations. The inspection was conducted between May 14-19.
• Vedanta Ltd.: A hearing on the liquidation of Vedanta’s Zambian unit, Konkola Copper Mines, has been postponed to June 11, according to court documents, even as President Edgar Lungu said the India-based investor will be forced out. (Bloomberg News)
• ICICI Bank Ltd. clarified on Fitch’s downgrade and said that all ratings for the bank were unsolicited. The release also states that the issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure. Thus, the event was not reported to exchanges.
• Natco Pharma filed ANDA with the U.S. FDA for generic version of Bosentan tablets (Tracleer) for the U.S. market.
• Muthoot Capital Services Ltd. completed securitisation of Rs 140.4 crore on May 31.
• Cimmco Ltd.: Promoter Titagarh Wagons said it plans to sell 4.49 percent stake in the company at Rs 29 per share aggregating to Rs 3.6 crore.
• Omax Autos Ltd.: The company’s Speedomax unit in Haryana received closure notice from concerned authorities, subject to necessary regulatory compliance, and such units are expected to be closed within sixty days.
• GMR Infrastructure’s subsidiary GMR Warora Energy Ltd. was downgraded by CARE to D for bank facilities and C for NCDs due to delay in servicing debt. Power Distribution Companies have been delaying payment of normal and regulatory dues to GWEL against energy supplied which had led accumulation of receivables with total receivables exceeding 5 months of turnover.
• India Cements promoter released pledge on 24.5 lakh shares (0.79 percent).
• State Bank of India: NCLT approved merger of SBI Business Process Management Services and SBI Cards Payment Services.
• Tata Motors: JLR and BMW announce collaboration for next generation electrification technology. Collaboration seeks to advance development of electrification technology to support transition to autonomous, connected, electric, shared future. Joint investment in research & development, engineering and procurement will provide the necessary economies of scale to support increased consumer adoption of electric vehicles.
• HEG Ltd. to increase stake in Bhilwara Energy Ltd. from 29.48 percent to 49 percent.
• PSP Projects Ltd. received new work order worth Rs 155.6 crore so far during FY20.
• Hathway Cable & Datacom Ltd.’s credir rating upgraded to ‘IND AAA’ from ‘IND A-’ by India Ratings.

Mahindra Logistics

• Kotak Funds acquired 30.15 lakh shares (4.22 percent) at Rs 490 each.
• Goldman Sachs acquired 6.1 lakh shares (0.85 percent) at Rs 490 each.
• Reliance Capital acquired 4.25 lakh shares (0.59 percent) at Rs 490 each.
• Normandy Holdings sold 64.15 lakh shares (8.98 percent) at Rs 490.2 each.

NCL Industries

• Promoter NCL Holdings sold 2.56 lakh shares (0.57 percent) at Rs 147 each.

• Zuari Agro Chemicals revoked pledge of 15.6 lakh shares on May 31.
• JSW Steel promoter HSW Techno Projects Management revoked pledge of 18.18 lakh shares on May 30.
• Future Retail promoter Future Corporate Resources revoked pledge of 32.65 lakh shares on May 31.
• Gati promoter Mahender Kumar Agarwal & Sons invoked pledge of 47,000 shares on May 30.

CLSA on Eicher Motors

• Maintained ‘Outperform’ with target price of Rs 22,500.
• A new network expansion strategy for smaller markets.
• Improved R&D and product development capabilities.
• Focused on enhancing its brand and not too perturbed by competition.
• Remains optimistic on overseas markets although ramp-up gradual.

CLSA on Adani Ports

• Maintained ‘Buy’; hiked target price to Rs 510 from Rs 475.
• A large buy-back and a better pay-out policy.
• Buy-back to boost return on equity; cut EPS estimates but better earnings quality.
• Good guidance for FY20 on a high base.

CLSA on Dr. Reddy’s

• Maintained ‘Buy’ with target price of Rs 3,330.
• Strong FCF generation along with delivery on cost controls.
• Streamlining of manpower in front-end markets.
• Strengthening presence in emerging markets, selectively focused on the U.S.

June Futures

• Nifty futures closed at 12,056, premium of 34 points Vs 16 points
• Nifty Futures open interest down 2.6 percent, sheds 5 lakh shares in open interest
• Bank Nifty futures closed at 31,640.6, premium of 51 points Vs 26 points
• Bank Nifty futures open interest up 3 percent, adds 65,000 shares in open interest

Options

• Nifty PCR at 1.53 Vs 1.75 (across all series)

Nifty Weekly Expiry 6 June

• Max open interest call side at 12,200 (19 lakh shares), 12,100 (18.2 lakh shares)
• Max open interest on put side at 11,900 (18.4 lakh shares), 12,000 (17.8 lakh shares)
• open interest addition seen at 12,200P (+6.4 lakh shares), 12,050 C (+4.7 lakh shares)
• open interest shedding seen at 12,000P (-8 lakh shares), 11,900 P (-6.7 lakh shares)

Nifty Monthly Expiry 27 June

• Max open interest on call side at 12,500 (19.4 lakh shares)
• Max open interest on put side at 11,500 (26 lakh shares)

The Indian rupee opened lower against the U.S. dollar. The home currency weakened as much as 0.22 percent to 69.41 against the greenback. Dealers see the currency pair trading in a range of 68.80-69.30 a dollar in today’s trade.

Also, the focus for investors will be the treasury bill auction after yield on the 10-year benchmark note slipped below 7 percent in the last session. A crash in crude oil prices and slower growth had prompted the rally.

Indian equity benchmarks fluctuated in opening trade as RBI's monetary policy committee is schedule to meet today.

The S&P BSE Sensex fell as 0.15 percent to 40,027 and the NSE Nifty 50 fell as much as 0.22 percent to 11,996 as of 9:22am. The broader market index represented by the NSE Nifty 500 Index fell as much as 0.21 percent.

The market breadth was slightly tilted in favour of buyers. About 730 stocks advanced and 685 shares declined on National Stock Exchange.

Seven out of 11 sectoral gauges compiled by NSE declined, led by the NSE Nifty PSU Index’s 1.58 percent fall. On the flipside, the NSE Nifty Metal Index was the top sectoral gainer, up 0.30 percent.

Shares of the non-banking lender declined as much as 18.3 percent to Rs 91.30 apiece, its lowest since December 2013.

CARE Ratings downgraded all borrowings of DHFL to D from BBB-, according to iots statement. Also, its commercial papers were downgraded to ‘D’ (Default) by CRISIL and ICRA owing to liquidity concerns. This comes a day after the non-bank lender delayed interest payments to investors.

The trading volume was more than 8 times its 20-day average for this time of the day, Bloomberg data showed. An extraordinary general meeting of shareholders is scheduled to conducted today.

Shares of the state-owned gas distributor fell 9.7 percent intraday, the most in eight months, to Rs 323.40 per share.

The Petroleum & Natural Gas Regulatory Board approved an integrated tariff rate for two of the key pipelines managed by GAIL. While the new rate is 18 percent higher than the previous, it’s nearly 58 percent lower than what the gas producer had asked.

Trading in the company's call options totalled 1,491 contracts, compared with the average of 1,011 over the past 20 days. Trading in the company's put options totalled 886 contracts, compared with the average of 359 over the same period.

Nifty FMCG Index was the only sectoral gainer among the 11 gauges compiled by National Stock Exchange. Nifty PSU Bank Index—the top sectoral loser snapped its two-day rally and declined as much as 1.6 percent.

Shares of the Mumbai-based consumer finance company halted its six-day falling streak and gained close to 6.3 percent to Rs 44 per share.

The stock has advanced 34 percent in the past 12 months compared to a 14 percent gain in the Sensex.

India’s Monetary Policy Committee on Thursday decided to cut the benchmark interest rate.

• The committee cut the repo rate by 25 basis points to 5.75 percent—the lowest in nine years.
• Monetary policy stance was changed to “Accomodative” from “Neutral”.
• All six members voted unanimously for a rate cut.

Bond yields fall after RBI cut repo rate for the third time this year.

The yield on the benchmark 10-year debt fell 11 basis points to 6.91 percent. Yields fell 38 last month, and are hovering near their lowest since Nov. 2017. The rupee was trading down 0.2 percent to 69.39 to a dollar.

Monetary policy committee lowers the growth forecast of current financial year to 7 percent from 7.2 percent earlier.

Fourth quarter of FY19 indicate that domestic investment activity has weakened and overall demand has been weighed down partly by slowing exports.

Weak global demand due to escalation in trade wars may further impact India’s exports and investment activity. Further, private consumption, especially in rural areas, has weakened in recent months.

Borrowings of Public Sector Undertakings such as NHAi and NTPC should be seen as a capital expenditure and not as a borrowing from the government, said RBI Governor Shaktikanta Das in a press meet.

RBI Played Its Part, Over To Government

The MPC statement is an acknowledgment that growth has slowed significantly and the economy does need stimulus for growth to revive, says Pankaj Murarka.

Glass Half Empty, Half Full: Mihir Vora

The credit policy is a glass half empty, half full situation. Half full for the bond markets, half empty for the equity markets, says Max Life Insurance's Mihir Vora

Shares of the Hyderabad-based drugmaker declined for the fifth-straight session after it declined as much as 4.2 percent to Rs 626.

Aurobindo Pharma said it had received Form 483 with ten observations from U.S. FDA for its formulation manufacturing facility in Hyderabad. In the press release, the pharma company also stated that these observations are repetitive and procedural in nature. The Form 483 will not have an impact on existing business of this facility. This release was made as a clarification to the exchanges.

The relative strength index on the stock was below 30, indicating the stock may be oversold.

Indiabulls Real Estate

• Stock rose as much as 5.1 percent intraday to Rs 129.90 apiece.
• Trading volume was more than three times its 20-day average for this time of the day.

JK Cement

• Stock fell 3.2 percent to Rs 1,004 per share.
• Trading volume was more than eight times its 20-day average for this time of the day.

General Insurance Corporation

• Stock fell 3.4 percent to Rs 216.30 per share.
• Trading volume was more than three times its 20-day average for this time of the day.

Star Cement

• Stock jumped 7.2 percent to Rs 137.90 per share.
• Trading volume was more than seven times its 20-day average for this time of the day.

Indian equity benchmarks were trading at day’s low. Sensex fell 1.34 percent or 550 points and Nifty traded near 11,850, down 1.45 percent.

Benchmarks declined as short-term gains were taken off the table after the Modi government's return to power for a second term, according to Sindhu Sameer, Co-head of Equity Sales at Emkay Global. "Low-hanging fruits have been plucked."

However, there were many stocks that could return 12-15 percent CAGR in terms of earnings in the medium term, he said.

Here are some opportunities according to Sameer:

• Can look at the PSU banks in the short-term. There could be some policy action to fix the problems.
• There are some opportunities in the cement sector too.
• Infrastructure can provide serious buying opportunities.
• Consumption will remain an all-weather bet.
• In all these sectors, there are 100-120 companies that investors can look at.

European equities advance as investors switched to defensive assets such as utilities and healthcare shares amid uncertainty associated with tariff talks.

Shares of the private bank fell as much as 2.1 percent to Rs 805.80 each.

Around 10.6 lakh shares changed hands in a block deal, according to Bloomberg data. Buyers and sellers were not known immediately.

Gautam Shah of JM Financials said the benchmarks are likely to go through a 'patch of correction' over the next four to six weeks after their run to record highs.

India cannot continue to outperform at a time when other markets are seeing a downturn, Shah said. “The market is ignoring the negatives,” he told BloombergQuint in an interview adding, "It's difficult to see Nifty rally past 12,000 in short-term."

Meanwhile, here are the top three sectors Gautam Shah is betting on.

Indian equity benchmarks suffered their worst single-day in 2019 after corporate credit rating downgrades dampened sentiment even as the central bank cut its key policy rate as expected.

“Investors were worried after DHFL missed interest payments on non-convertible debentures,” Avinash Gorakshakar, Research Head, Joindre Capital Services told BloombergQuint. “They expect that this could have a contagion effect on public sector banks as well as other non banking finance companies leading to increased non performing assets on their books.

The S&P BSE Sensex slid 1.38 percent to 39,529 while the NSE Nifty 50 index dropped 1.48 percent to 11,843. Both the indices fell the most since Dec. 2018.

The advance decline too was in favour of the sellers at 4:1 on the NSE. All sectoral indices compiled by the bourse declined led by the Nifty PSU Bank index.

Rate Cut Was Already Factored In: Indianivesh

Indian equity indices registered their biggest fall of this year as investors had already factored the “positives” of a rate cut. That’s according to Dharmesh Kant, head of research at Indianivesh Securities Ltd, in a comment to Bloomberg.

It’s A Surprise! : IIFL

Hardrien Mendonca, senior technical analyst at IIFL said he was “surprised” to witness a 190-point decline in the Nifty Index. “There's going to be more consolidation and it may take more time for prices to move higher.”

Investors Assessing Liquidity Issues: Angel Broking

The markets declined as investors were still trying to “decipher” the problems associated with cash crunch in the Indian business environment. That’s according to Mayuresh Joshi, fund manager at Angel Broking.

“Steps that the central bank takes over the next few weeks to address the NBFC issues will be critical,” said Joshi adding that demand slowdown and global growth concerns are also influencing market sentiments.