Sensex, Nifty Halt Three-Day Winning Streak As Autos, Financials Drag

Indian equity benchmarks snapped their three-day up move after financial and auto stocks came under selling pressure.

The S&P BSE Sensex fell 1.09 percent or 383 points to 34,780 and the NSE Nifty 50 Index dropped 1.24 percent or 132 points to 10,453.

For most part of the day, the benchmarks traded firmly higher but a selloff in non-banking financial, banking and auto stocks intensified in noon deals which wiped out entire intraday gains.

From the day's highest level, the Sensex fell as much as 878 points while the Nifty fell below psychologically important level of 10,450.

Seventeen of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Realty Index’s 3.2 percent drop. Auto, Bankex, Basic Materials, Consumer Discretionary Goods & Services, Metal and Oil & Gas Indices on the BSE also fell over 2 percent each. On the flipside, the S&P BSE FMCG Index was top gainer, up 0.1 percent.

The mid- and small-cap shares underperformed their larger peers as the S&P BSE MidCap and S&P BSE SmallCap Indices tumbled 2.2 percent each.

Shares of the government-owned banks fell dragged by weakness in Indian Bank, Canara Bank and Union Bank of India.

Nifty's PSU Bank Index fell as much as 3.5 percent to 2,682.

• LA Opala RG has 43.3 lakh shares change hands in a block on BSE. Stock up 0.2 percent at Rs 233.15.

Buyers and sellers were not immediately known

Source: Bloomberg

Nifty 50 Index dropped over 150 points from day's high as banking, finance and auto stocks came under selling pressure.

The Nifty 50 Index declined 19 points or 0.2 percent to 10,565 and the S&P BSE Sensex was little changed at 35,163.

Top Five Nifty Losers

• Indiabull Housing Finance fell 8.9 percent
• Yes Bank fell 5.3 percent
• Bajaj Finance drops 4.3 percent
• BPCL down 4.2 percent
• Axis Bank down 3.4 percent

Shares of the Noida-based IT services company swung between gains and losses after it reported July-September quarter earnings.

Key earnings highlights:

• Net profit up 30 percent at Rs 112 crore versus Rs 85.8 crore; Bloomberg estimate of Rs 93.61 crore (QoQ)
• Revenue up 10 percent at Rs 907.4 crore versus Rs 825 crore (QoQ)
• EBIT up 32.7 percent at Rs 130.4 crore versus Rs 98.3 crore (QoQ)
• Margin at 14.4 percent versus 11.9 percent (QoQ)

• KRBL: The Delhi-based rice exporter rose as much as 5.6 percent to Rs 365. Trading volume was 29 times its 20-day average.
• Rupa & Co.: The Kolkata-based innerwear maker rose as much as 12.21 percent to Rs 363. Trading volume was 13.5 times its 20-day average.
• Dilip Buildcon: The Bhopal-based road construction company fell as much as 14.7 percent to Rs 458. Trading volume was 8 times its 20-day average.
• Century Plyboards: The Kolkata-based plywood maker fell as much as 8.4 percent to Rs 189. Trading volume was 7 times its 20-day average.

Shares of the housing finance companies came under selling pressure after Indiabulls Housing Finance slumped over 10 percent.

India's NSE Nifty 50 Index wiped out intraday gains as auto, housing finance and real estate shares came under selling pressure.

The Nifty 50 Index fell 0.1 percent to 10,577 and the S&P BSE Sensex rose 0.3 percent or 113 points to 35,275.

Eight of 11 sector gauges compiled by the National Stock Exchange declined led by Nifty Realty and Nifty Auto Indices' over 1.5 percent fall. On the flipside, the Nifty FMCG Index was top gainer, up 1 percent.

Mid- and small-cap shares were underperforming larger peers as the Nifty Midcap 100 Index declined 0.9 percent and the Nifty Smallcap 100 Index dropped 1 percent.

Shares of the Mumbai-based non-banking mortgage lender fell as much as 13.26 percent, the most since Sept. 25, to Rs 787 on heavy volumes.

Trading volume was three times its 20-day average, data compiled by Bloomberg showed.

As many as 95 lakh shares changed hands on the National Stock Exchange, according to information on the National Stock Exchange.

Shares of the country's largest two-wheeler maker swung after its profit met Bloomberg consensus in September quarter.

Key earnings highlights:

• Revenue up 8.6 percent at Rs 9,091 crore.
• Net profit down 3.4 percent at Rs 976.3 crore.
• Ebitda down 5.3 percent at Rs 1,378.7 crore.
• Margin at 15.2 percent versus 17.4 percent.
• Other Income at Rs 223.7 crore versus Rs 117.6 crore.

Nifty's 10,800 strike price call option contract was among the most active option contracts on the National Stock Exchange.

Premium on the contract rose 14 percent to Rs 33.95. Over 2.93 lakh shares were added to the open interest which stood at 33.34 lakh shares.

• ITC has 11.9 lakh shares change hands in a block deal. Stock up 2.6 percent at Rs 290.

Buyers and sellers were not immediately known

Source: Bloomberg

Shares of the Coimbatore-based industrial machinery maker rose as much as 8.2 percent, the most in over seven months, to Rs 6,290.

Lakshmi Machine Works informed exchanges that its board will meet on Oct. 22 to consider buy back of equity shares.

Shares of the Mumbai-based private sector lender slumped as much as 8.2 percent to Rs 228.50 underperforming S&P BSE Sensex's 0.6 percent gain.

Trading volume was 24 percent its 20-day average at this time of the day, data compiled by Bloomberg showed.

Shares of the Mumbai-based auto parts maker rose as much as 5.5 percent to Rs 272 after its profit jumped 74 percent to Rs 43 crore.

Key earnings highlights:

• Revenue up 21.7 percent at Rs 652.5 crore.
• Net profit up 73.9 percent at Rs 42.6 crore.
• Ebitda up 36.8 percent at Rs 80.3 crore.
• Margin at 12.3 percent versus 10.9 percent.

Shares of the Srinagar-based private sector lender rose as much as 18.5 percent to Rs 49.70 after its profit rose 31 percent to Rs 94 crore.

Key earnings highlights:

• Gross non-performing assets as a percentage of total advances at 9.00 percent versus 9.83 percent (QoQ)
• Net non-performing assets as a percentage of total advances at 3.91 percent versus 4.65 percent (QoQ)

Indian equity benchmarks rose sharply led by gains in Infosys after its profit met Bloomberg consensus estimates in July-September.

The S&P BSE Sensex rose 1 percent as much as 1.3 percent or 443 points to 35,605 and the NSE Nifty 50 Index climbed 1.2 percent or 125 points to 10,710.

The country’s second largest IT company’s net profit rose 13.6 percent sequentially to Rs 4,110 crore surpassing Bloomberg’s consensus estimates of Rs 4,042 crore.

All 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Information Technology Index’s 1.3 percent gain.

The Mukesh Ambani-led oil-to-telecom conglomerate will report its July-September quarter earnings later in the day. Here’s what to expect from the company in second quarter of current financial year.

• Revenue seen rising 8.3 percent to Rs 98,723 crore versus Rs 91,159 crore (QoQ)
• Ebitda seen advancing 1.6 percent to Rs 15,393 crore versus Rs 15,154 crore (QoQ)
• Ebitda margin seen at 15.6 percent versus 16.6 percent (QoQ)
• Net profit seen flat at Rs 8,853 crore versus Rs 8,820 crore (QoQ)
• GRMs seen down 4 percent at $10/barrel versus $11/barrel (QoQ)

Estimates compiled by BloombergQuint

Rupee opened higher at 73.34 per dollar against yesterday's close of 73.47 tracking gains in Asian equities.

A sale of treasury bills and RBI's Rs 12,000 crore open market operation to buyback bonds will be in close focus in the sovereign debt market.

A series of positive news and data has helped yield on the 10-year bond to decline 20 basis points in the last five sessions. It fell 5 basis points on Tuesday to 7.87 percent. The positive momentum may continue, and the yield may stay in a range of 7.85-7.90 percent in the day.

In the currency market, rupee is set to gain further tracking gains in Asian equities. The closely-tracked South Korean won rose 0.3 percent against the dollar. Implied opening from forwards suggest the pair may open at around 73.3668 and trade in a range of 73.20-73.60 a dollar in the day.

Brokerages On Infosys

BofAML

• Maintained ‘Buy’; raised price target to Rs 805 from Rs 790, implying a potential upside of 16 percent from the last regular trade.
• Improved growth outweighs margin miss in the second quarter.
• Expect a return to double-digit revenue growth by the end of the current financial year.
• Attrition rates likely to normalize in next two quarters.

Nomura

• Maintained ‘Reduce’ with a price target of Rs 670, implying a potential downside of 4 percent from the last regular trade.
• September quarter review: Beat on growth, margin miss a negative.
• Unchanged revenue growth and EBIT margin guidance despite easy asking rates a disappointment.
• Growth was broad-based; Outlook appears optimistic on BFSI and Retail.

CLSA

• Maintained ‘Buy’ with a price target of Rs 950, implying a potential upside of 36 percent from the last regular trade.
• September quarter review: Sharp revenue beat and stellar deal wins, soft margins and guidance.
• Digital focus keeps client relevance strong.
• Growth acceleration potential at reasonable multiples.

Macquarie

• Maintained ‘Outperform’; raised price target to Rs 775 from Rs 770, implying a potential upside of 11 percent from the last regular trade.
• Focusing on investments for medium-term growth is a step in right direction.
• Large deal wins were strong at $2 billion.
• Believe Infosys deserves to trade at a 20 percent discount to TCS.

UBS

• Maintained ‘Buy’ with a price target of Rs 890, implying a potential upside of 28 percent from the last regular trade.
• Constant currency revenue grew higher than estimates.
• Strong revenue growth and contract wins are early signs of investments paying off.
• Expect a positive stock reaction.

Credit Suisse

• Maintained ‘Neutral’ with a price target of Rs 680, implying a potential downside of 2 percent from the last regular trade.
• September quarter results were mixed; Large deal wins were nearly twice that in the first quarter.
• Revenue was encouraging across many segments.
• Weaker-than-expected margins take away the sheen from strong growth.

Brokerages On Hero MotoCorp

Morgan Stanley

• Maintained ‘Underweight’ with a price target of Rs 2,795, implying a potential downside of 4 percent from the last regular trade.
• September quarter results largely in line.
• Ebitda growth to remain weak due to competitive and inflationary pressures.
• Market shares in scooters and premium bikes is key to monitor.

CLSA

• Maintained ‘Sell’; cut price target to Rs 2,800 from Rs 3,000, implying a potential downside of 3 percent from the last regular trade.
• Weak operating results due to higher input cost and expiry of duty benefits at Haridwar plant.
• Higher ownership costs impacting two wheeler demand; Hero expects improvement.
• Margin concern continues given high competitive intensity amidst a cost push.

UBS

• Maintained ‘Buy’ with a price target of Rs 3,500, implying a potential upside of 21 percent from the last regular trade.
• September quarter results came inline.
• Expect growth to be supported by better demand momentum in rural.
• For urban, see slower two wheeler demand outlook; Financing not yet an issue.

BofAML

• Maintained ‘Buy’; cut price target to Rs 3,500 from Rs 3,800, implying a potential upside 21 percent from the last regular trade.
• September quarter results were largely in line as higher volumes have offset pricing competition.
• Tailwind from rural uptick likely to keep volumes healthy.
• Recent correction makes risk reward favourable.

Credit Suisse

• Maintained ‘Neutral’; cut price target to Rs 3,020 from Rs 3,500, implying a potential upside of 4 percent from the last regular trade.
• September quarter results were almost in line with estimates.
• Mgmt. says availability of finance is not a concern for growth in festive season.
• Lower valuation multiple on concerns related to two wheeler industry growth.

Brokerages On Federal Bank

Deutsche Bank Research

• Maintained ‘Buy’; cut price target to Rs 110 from Rs 115, implying a potential upside of 35 percent from the last regular trade.
• Asset quality held up well despite floods; Core business momentum is strong.
• Growth is steady and granular; CASA growth is also strong.
• Lower recoveries and upgrades resulted in 11 percent rise on a sequential basis in GNPA.

UBS

• Maintained ‘Buy’ with a price target of Rs 95, implying a potential upside of 16 percent from the last regular trade.
• Strong loan growth and stable margins drove second quarter earnings
• Expect loan book growth of 23 percent over FY18-20; RoA and RoE to improve to 0.8 percent and 10.3 percent respectively by March 2020.
• Maintain buy due to inexpensive valuation.

Kotak

• Maintained ‘Buy’ with a price target of Rs 105, implying a potential upside of 29 percent from the last regular trade.
• Strong performance led by strong loan growth even as higher provisions dented earnings.
• Focus likely to shift back to RoE improvement.
• Expect a re-rating going forward.

Brokerages On Reliance – Hathway And Den Deal

CLSA

• Potential deal to give RIL access to broadband homes and subscribers.
• Absolute investment for acquisition would be small compared to its telecom capex.
• Acquisition to help get permissions; Still investment in laying last mile fibre required.
• Deal to drive market share gains and help gain wallet share among consumers at top-end.

Macquarie

• Primary benefit of this deal would be access to the last mile.
• Blending of Hathway and DEN’s cable operations with Jio’s plans will be key monitorable.
• Deal to put pressure on urban-focussed DTH operators like Tata Sky and Airtel.
• Deal to strengthen bargaining power of Hathway and DEN with regard to broadcasters.

More Brokerage Calls

Goldman on Industrials

• The rupee depreciation, refinancing risks and higher borrowing costs impacted share performance.
• Expect firms with good earnings visibility and reasonable valuations to outperform.
• Downgrade Thermax to Sell as lower RoE improvement does not justify premium valuations.
• Upgrade Blue Dart to Neutral post significant underperformance.
• L&T best-placed in current macro environment; Remains our top pick.
• Prefer NTPC, Powergrid and Tata Power which offer stable earnings and valuation support.

HSBC on Maruti Suzuki

• Maintained ‘Buy’; cut price target to Rs 9,000 from Rs 10,000, implying a potential upside of 26 percent from the last regular trade.
• Changing consumer patterns and slow income growth had an impact on new car demand.
• Major car markets are already showing signs of stagnation.
• Remains strong long-term play, but weak festive season and margin pressures are near-term risk.

• Nifty October futures closed trading at 10,587, premium of five points.
• Nifty October open interest up 4.2 percent; Nifty Bank October open interest down 1.7 percent.
• Max open interest for October series at 11,000 strike value call option (open interest at 47.3 lakh shares).
• Max open interest for October series at 10,000 Strike value put option (open interest at 35.8 lakh shares).

Insider Trades

• Mukand promoter group Baroda Industries acquired 50,000 shares from Oct.10-11.
• Cox & Kings promoter acquired 31,800 shares on Oct. 12.

(As reported on Oct. 16)

Trading Tweaks

• Thyrocare Technologies to discontinue its share buy back.
• Capital India Finance added to ASM Framework.
• Gravita India and Adlabs Entertainment price band revised to 5 percent.
• Aptech, GTPL Hathway and TD Power Systems price band revised to 10 percent.
• Arshiya, RSWM and HEG price band revised to 10 percent.

Nifty Earnings To Watch

• Reliance Industries

Other Earnings To Watch

• NIIT Technologies
• 5paisa Capital
• ACC
• Aditya Birla Money
• Cyient
• DCB Bank
• Havells India
• Mindtree
• MphasiS

Earnings Reactions To Watch

Infosys (Q2, QoQ)

• $ Revenue up 3.2 percent at $2,921million.
• Revenue up 7.7 percent at Rs 20,609 crore.
• Net profit up 13.8 percent at Rs 4,110 crore.
• EBIT up 7.9 percent at Rs 4,894 crore.
• Margin flat at 23.7 percent.

Hero MotorCorp (Q2, YoY)

• Revenue up 8.6 percent at Rs 9,091 crore.
• Net profit down 3.4 percent at Rs 976.3 crore.
• Ebitda down 5.3 percent at Rs 1,378.7 crore.
• Margin at 15.2 percent versus 17.4 percent.
• Volume growth of 5.5 percent boost topline growth.
• Other Income at Rs 223.7 crore versus Rs 117.6 crore.

Mahindra CIE Automotive (Q3, YoY)

• Revenue up 21.7 percent at Rs 652.5 crore.
• Net profit up 73.9 percent at Rs 42.6 crore.
• Ebitda up 36.8 percent at Rs 80.3 crore.
• Margin at 12.3 percent versus 10.9 percent.

CRISIL (Q2, YoY)

• Revenue up 3.9 percent at Rs 425.5 crore.
• Net profit up 29.7 percent at Rs 90 crore.
• Ebitda up 3 percent at Rs 112 crore.
• Margin at 26.3 percent versus 26.5 percent.
• Other Income of Rs 28.8 crore this quarter.

Shakti Pumps (Q2, YoY)

• Revenue up 104.9 percent at Rs 138.7 crore.
• Net profit up 210 percent at Rs 9.3 crore.
• Ebitda up 90.8 percent at Rs 20.8 crore.
• Margin at 15 percent versus 16.1 percent.

• Cochin Shipyard said it will buy back 44 lakh shares representing 3.23 percent of equity shares at Rs 455 per share, aggregating to Rs 200 crore. The record date for buy back is set for Oct. 31.
• Lakshmi Machine Works said it will consider buy back of equity shares on Oct. 22
• IIFL Holdings’ wealth management arm acquired Chennai-based ‘Wealth Advisors India’ for Rs 253.6 crore. This acquisition will increase the company’s client base and further expand wealth management business in South India. Besides, its another subsidiary—IIFL Home Finance Ltd. has raised Rs 1,000 crore from National Housing Bank and another $50 million from SBI through external commercial borrowing route.
• Lemon Tree Hotels signed a license property for 70 room property in Mumbai. The hotel is expected to be operational by June 2019.
• NHPC: Bairasiul Power Station (180MW) in Himachal Pradesh said it was going for a complete shutdown for six months, starting Oct. 15 for renovation and modernisation works.
• NBCC signed a MoU with Ministry of External Affairs to construct convention center in West Africa’s Niger. Apart from this, the company said that eight more convention centres will come up in Africa, with the government spending for all these projects pegged at Rs 200 crore.
• Federal Mogul Goetze (India) said its open offer for 25.02 percent capital, comprising 1.4 crore equity shares, will be offered to public at Rs 420.05 apiece by the America based acquirer Tenneco. The offer closing date is Dec. 12.

• India’s 200 Mph bullet train can’t get started
• How India’s largest hedge fund deals with volatility
• China cuts U.S. treasury holdings for third straight month
• U.S. firms seek another 12 months to meet data localisation rules
• Flipkart deal to hit Walmart earnings
• Tenth round of city gas distribution auctions by December
• General provident fund interest rate raised to 8% for October-December quarter
• How India’s richest man shook up its phone industry, in charts
• Now transfer money from one mobile wallet to another
• Trade deficit fall pointing towards weakening domestic demand?
• Uber valued at $120 billion in an IPO? maybe

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India rose 1 percent or 100 points to 10,685 as of 7:06 a.m.

Stocks in Asia tracked a strong U.S. session after earnings handed investors a welcome distraction from trade tensions and rising yields. The dollar held declines and Treasuries were steady.

Japanese, South Korean and Australia shares climbed. Nasdaq futures pointed to a second day of gains in New York trading after profit at Netflix Inc. trounced estimates, building on a hearty Tuesday for U.S. equities that was led by technology shares.

Currencies

• The yen was at 112.33 per dollar after sliding 0.5 percent.
• The offshore yuan was at 6.9125 per dollar.
• The Bloomberg Dollar Spot Index was flat.
• The euro was steady at $1.1579.
• The British pound added 0.1 percent to $1.3189.

Commodities

• West Texas Intermediate crude rose 0.5 percent at $72.25 a barrel.
• Gold climbed less than 0.1 percent to $1,225.32 an ounce.

Here are some key events coming up this week:

• China’s new yuan loans may have risen to 1.36 trillion yuan ($196 billion) in September from August’s 1.28 trillion yuan as officials sought to buoy economic growth.
• Third-quarter GDP for China comes Friday, with headline growth forecast to slow to 6.6 percent year on year from 6.7 percent, in addition to last month’s retail sales and factory output.
• Minutes from the Fed are due on Wednesday.