Sensex, Nifty Post Worst Two-Day Fall Since Demonetisation

Indian equity benchmarks slumped for third day and rupee fell to record low of 74 per dollar after the Reserve Bank of India kept rates unchanged.

The S&P BSE Sensex slumped 2.25 percent or 792 points to 34,376 and the NSE Nifty 50 Index dropped 2.7 percent or 283 points to 10,316.

The Reserve Bank of India surprised markets by keeping interest rates unchanged, as it awaits for greater clarity on the evolving growth-inflation scenario in the economy. The Reserve Bank of India maintained the main repurchase rate at 6.5 percent, an outcome forecast by only nine of 49 economists surveyed by Bloomberg.

It was the authority’s move to change its policy stance to calibrated tightening that pushed the benchmark equity index further into the red after briefly paring losses soon after the policy decision.

Sixteen of 19 sector gauges compiled by BSE ended lower dragged the S&P BSE Oil & Gas Index's 12.68 percent drop, its worst intraday drop in 10 years. Rate sensitive banking, realty and auto indices also fell 2-3.2 percent after the Reserve Bank of India kept the repo rate unchanged.

Indian equity benchmarks slumped after the Reserve Bank of India held rates unchanged and changed its stance to ‘calibrated tightening’ from ‘neutral’.

The Sensex plunged 2.5 percent or 880 points to 34,297 and the Nifty 50 Index declined 2.8 percent or 322 points to 10,277.

Change in stance to ‘calibrated tightening’ indicates there are two options either the RBI increase rates or maintain status quo but with ‘neutral’ stance there was a chance of a cut as well, Reserve Bank of India Governor Urjit Patel while addressing media after the policy meeting.

RBI is more focused on protecting the financial system and making sure that the NBFCs have enough liquidity than obsessing about inflation, Saurabh Mukherjea founder of Marcellus Investment Managers told BloombergQuint.

The Indian rupee weakened past the 74 per dollar mark after Reserve Bank of India (RBI) kept the repo rate unchanged at 6.50 percent.

Yesterday rupee touched record low of 73.81 per dollar, ended down 24 paise versus Wednesday's close 73.34 per dollar.

Rupee continues to remain under pressure and sell-off in equity markets, strength in the dollar and surge in global crude oil prices contribute to weakness in the currency.

MPC says its decision is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for CPI inflation of 4 percent.

Indian equity benchmarks were highly volatile and the rupee breached 74 per dollar for the first time after the Reserve Bank of India kept repo rate unchanged at 6.5 percent while it changed stance from 'neutral' to 'calibrated tightening'.

Reserve Bank of India's Monetary Policy Committee maintained repo rate unchanged at 6.5 percent while it changed its stance from ‘neutral’ to ‘calibrated tightening’.

Key highlights from RBI's Monetary Policy Review:

• The decision of the MPC is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 percent, while supporting growth.
• Inflation is projected at 4.0 percent in second quarter of current fiscal, 3.9-4.5 per cent in second half of current fiscal and 4.8 percent in first quarter of next financial year.
• GDP growth for first quarter of FY20 is now projected marginally lower at 7.4 percent as against 7.5 percent in the August resolution, mainly due to the strong base effect.
• Private consumption has remained robust and is likely to be sustained even as the recent rise in oil prices may have a bearing on disposable incomes.
• Improving capacity utilisation, larger FDI inflows and increased financial resources to the corporate sector augur well for investment activity.

Indian equity benchmarks continue to trade on weak note weighed down by energy, auto and realty stocks ahead of Reserve Bank of India's monetary policy decision.

The Sensex fell 1.5 percent or 517 points to 34,652 and Nifty 50 Index slumped 1.8 percent or 194 points to 10,405.

Market breadth was negative as over 1,700 shares were declining while 800 were advancing on the BSE.

Mid- and small-cap shares were also declining as the S&P BSE MidCap Index declined 1.5 percent and the S&P BSE SmallCap Index fell 1.2 percent.

Click here to see more stock market statistics

The finance ministry will next week call a meeting to discuss an alternative payment mechanism, especially for oil imports, people familiar of the matter told Bloomberg.

The meeting will explore, among other things, the possibility of rupee payments for trade with countries such as Russia, Venezuela, Iran and other oil-exporting nations, the people mentioned above said, asking not to be identified as they aren’t authorized to speak with the media.

• Deferred payments to Russia for import of diamonds will also be discussed in the meeting
• The decision to hold a separate meeting on payment mechanism was taken at an inter-ministerial meeting held Thursday
• D.S. Malik, the spokesman for finance ministry, refused to comment, while a commerce ministry spokesperson couldn’t be immediately reached for comments

• Grindwell Norton: The Mumbai-based abrasive maker fell as much as 4.5 percent to Rs 482. Trading volume was 61 times its 20-day average.
• GE T&D: The Noida-based power transmission and distribution equipment maker fell as much as 3.5 percent to Rs 256.45. Trading volume was 16 times its 20-day average.
• TI Financial Holdings: The Chennai-based holding company fell as much as 4 percent to Rs 500.05. Trading volume was 11.2 times its 20-day average.
• Emami: The Kolkata-based beauty and healthcare products maker fell as much as 12.4 percent, the most in nearly seven years, to Rs 415. Trading volume was 10 times its 20-day average.

Shares of the state-run oil exploration company fell as much as 14.5 percent, the most since October 2012, to Rs 147.35 on fears of subsidy sharing burden resuming in the after the government asked oil retailers to cut fuel prices by Re 1 per litre.

Interest rate sensitive banking, real estate and auto shares were trading lower ahead of the Reserve Bank of India's monetary policy decision.

The Reserve Bank of India is widely expected to raise interest rate by 25 basis points in the backdrop of rising crude to contain inflation.

• Nifty Bank Index declines 0.25 percent
• Nifty Auto Index drops 1.82 percent
• Nifty Realty Index tumbles 2.35 percent

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

Premium on the contract fell 38 percent to Rs 75.55. Over 12.31 lakh shares were added to the open interest which stood at over 26.48 lakh shares.

Click here to see the complete options chain

Shares of the Mumbai-based public sector lender rose 1.23 percent to Rs 57.65 after LIC raised its stake in the bank.

LIC acquired 33.98 crore shares of the bank via way of preferential allotment and raised its stake from 7.98 percent to 14.89 percent, IDBI Bank said in its exchange notification.

Shares of cement makers continue to trade with a negative bias after the Supreme Court stayed Competition Commission of India's Rs 6,300 crore penalty on cement companies for cartelisation.

• ACC fell 2.74 percent
• Ambuja Cements declined 1.66 percent
• India Cements fell 0.6 percent
• JK Cement dropped 1.14 percent
• Ramco Cements declined 2.8 percent
• UltraTech Cement fell 2.8 percent

Indian equity benchmarks extended decline dragged by oil & gas, FMCG and metal stocks.

The S&P BSE Sensex fell 405 points to 34,765 and the NSE Nifty 50 Index dropped 151 points to 10,447.

With today's decline Nifty has wiped out all its gain made in 2018. Till Aug. 28, India was among best performing Asian markets till end of August. However, rising crude oil and falling rupee have weighed on the overall market sentiment.

Shares of the Chandigarh-based steel wheel rim maker recovered from low levels and rose as much as 1.5 percent to Rs 1,036 after it won euro 6 million order from Opel Germany.

The company won order for supplying 650,000-wheel rims over a period of six years starting October 2019, SSWL said in an exchange filing.

The markets have corrected from very expensive valuation to less expensive valuation and there can be a further downside, Gautam Chhaochharia, ED & head of India research at UBS told BloombergQuint in an interview.

Key highlights of the conversation:

• The rupee depreciation is earnings accretive
• Liquidity environment has changed now
• Do not justify trading at these valuation levels
• The macro economic situation is a lot better than 2012-13
• See scope for further downside in the market
• Non-SIP part of the mutual funds has dried up
• Have a neutral stance on metals and mining space, a full-blown trade war could be negative for commodities
• Currency depreciation and rising local demand to be positives for Indian metal companies
• Like selective NBFC companies and prefer retail driven private banks
• Continue to remain underweight on the aviation sector
• Don’t rule out a rate hike given the macro-economic backdrop

Shares of the Noida-based consumer electronic products maker rose as much as 3.7 percent to Rs 2,600 after it started production of Mi LED TVs for Xiaomi, the company said in an exchange filing.

The TVs will be manufactured from its facility in Tirupati, Andhra Pradesh.

Shares of the Bengaluru-based jewellery and watch retailer rose as much as 4 percent, the most in over two months, to Rs 808.40 after its jewellery business picked up pace in the September quarter and market share rose on the back of new launches, the company said in a quarterly update.

Meanwhile, HSBC has maintained its buy call on the stock for target price of Rs 1,050, indicating an upside of 31 percent from yesterday's closing.

The brokerage in a note said:

• Maintained ‘Buy’ with a price target of Rs 1,050.
• June quarter’s statement paints an outlook of a strong operating performance.
• Should assuage market concern on whether 2018-19 guidance is achievable.
• Stock has corrected in market sell-off; Strong earnings momentum will be key catalyst.

Indian equity benchmarks extended decline ahead of the Reserve Bank of India's monetary policy decision dragged by oil & gas stocks.

The S&P BSE Sensex fell 0.3 percent or 125 points to 35,044 and the NSE Nifty 50 Index declined 0.74 percent or 78 points to 10,520.

Nine of 19 sector gauges compiled by BSE were trading lower dragged by the S&P BSE Oil & Gas Index, which fell as much as 13 percent, its worst fall in a decade after the government asked state run oil marketing companies to cut retail fuel price by Re 1 per litre.

The mid- and small-cap shares were muted as both the indices were little changed on the BSE.

Indian rupee swung in opening deals ahead of the Reserve bank of India’s rate decision.

The rupee opened lower at 73.64 but soon appreciated to 73.54 per dollar against yesterday’s close of 73.58.

The markets are focused on the central bank’s policy decision, where the monetary policy committee is likely to increase interest rates for the third straight meeting.

The increase comes at a time when the rupee has been testing new record lows, while bonds have also tracked losses.

According to a Bloomberg Survey, 40 of the 49 economists expect the RBI to increase its benchmark repo rate by 25 basis points to 6.75 percent. However, interesting would be whether the central bank will change its stance from neutral to hawkish, setting the stage for further rate increases amid a surge in crude oil prices which is expected to stoke inflation.

The rupee weakened to close at 73.58 on Thursday after hitting an all-time low of 73.82 per dollar with the implied opening from forwards suggesting the rupee may start trading at 73.67.

In the bond market, the yield on benchmark 10-year bond rose 5 basis points on Thursday to close at 8.16 percent after surging to a high of 8.21 percent intraday. The yield has climbed 13 basis points so far this week to Oct. 4. Besides, foreigners sold $150.3 million of rupee-denominated bonds this week to Oct. 3, taking total outflows this year to $7.3 billion.

Brokerages On ICICI Bank

UBS

• Maintained ‘Buy’; raised price target to Rs 440 from Rs 410.
• Kochhar’s exit is positive for the bank as stakeholders will focus on core banking business.
• Loan book clean-up should contribute to improvement in earnings.
• Core banking business and retail franchise key to our Buy thesis.

Macquarie

• Maintained ‘Outperform’ with a price target of Rs 416.
• Chanda Kochhar resignation removes a major overhang.
• Don’t expect any challenges by RBI on Sandeep Bakshi’s appointment as CEO.
• RoE to improve due to falling credit costs; Expect the stock to rerate.

Brokerages On Oil Marketing Companies

JPMorgan

• Subsidies effectively return for OMCs.
• Policy step makes the entire Indian energy space un-investable in the near term.
• Earnings impact is manageable for IOCL and BPCL; much larger for HPCL.
• Positives: private sector market share effectively capped, oil price point much higher than expected.

CLSA

• IOCL: Maintained ‘Sell’; cut price target to Rs 105 from Rs 155.
• BPCL: Maintained ‘Sell’; cut price target to Rs 240 from Rs 390.
• HPCL: Maintained ‘Sell’; cut price target to Rs 150 from Rs 270.
• Government's move will bring down the EPS by 23-46 percent.
• Raise fears of return of subsidy regime if crude spikes further in upcoming elections.
• ONGC and GAIL may also be impacted but these already build-in risk.

Motilal Oswal

• IOCL: Maintained ‘Buy’; cut price target to Rs 164 from Rs 254.
• BPCL: Maintained ‘Buy’; cut price target to Rs 393 from Rs 535.
• HPCL: Downgraded to ‘Neutral’ from ‘Buy’; cut price target to Rs 203 from Rs 428.
• Marks U-turn from deregulation and raises possibility of return to subsidy regime.
• Changed scenario warrants different valuation method; value OMCs on price-to-book.
• Cut in marketing margins would result in 24-28 percent cut in EPS.

Goldman Sachs

• IOCL: Maintained ‘Neutral’; cut price target to Rs 125 from Rs 185.
• BPCL: Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 260 from Rs 470.
• HPCL: Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 170 from Rs 345.
• HPCL has the highest exposure to fuel retailing followed by BPCL and IOCL.
• Move confirms reversal of de-regulation of fuel retail market.
• Lower EV/EBITDA multiple to four times - low end of OMCs trading range in last 10-years.

More Brokerages

UBS on Delta Corp

• Initiated ‘Buy’ with a price target of Rs 310.
• New casino policy should unlock the sector's potential.
• Positives: rising popularity of Goa and casinos, increasing traffic for poker site.
• Positives: less chances of issuance of new casino licenses, high option value of Daman license and increasing traction for the Sikkim casino.
• Market may not be pricing in Delta's growth sustainability.

HSBC on Titan

• Maintained ‘Buy’ with a price target of Rs 1,050.
• June quarter’s statement paints an outlook of a strong operating performance.
• Should assuage market concern on whether 2018-19 guidance is achievable.
• Stock has corrected in market sell-off; Strong earnings momentum will be key catalyst.

• Nifty October futures ended at 10,631, with a premium of 32 points.
• Nifty October open interest up 10.2 percent; Nifty Bank October open interest down 13.5 percent.
• Maximum open interest for October series call at 11,000 strike price call option (open interest at 38.8 lakh shares).
• Maximum open interest for October series put at 10,500 strike price put option (open interest at 44.4 lakh shares).

Bulk Deals

Navkar Corporation

• Reliance Mutual Fund acquired 35 lakh shares, or 2.33 percent equity at Rs 78 each.
• Goldman Sachs India Fund sold 39.8 lakh shares, or 2.64 percent equity at Rs 78 each.

Trading Tweaks

• IL&FS Transportation Networks Ltd price band revised to 10 percent.
• IL&FS Engineering and Construction Company Ltd price band revised to 10 percent.
• 5paisa Capital Ltd price band revised to 5 percent.

Insider Trades

• Grasim Industries promoter group acquired 12 lakh shares on Sept. 28.
• Hindalco Industries promoter group acquired 6.7 lakh shares on Sept. 28.
• Greaves Cotton promoter DHB International Pvt acquired 1.07 lakh shares on Oct. 1.
• Deepak Fertilizers & Petrochemicals Corporation promoter group acquired 10,000 shares on Oct. 1.
• IRB InvIT Fund promoter and director Deepali Mhaiskar acquired 2 lakh shares on Oct. 1.

(As reported on Oct. 4)

Who’s Meeting Whom

• Finolex Industries to meet Peerless Securities on Oct. 5.
• Mahanagar Gas to meet Maquarie Capital Securities and Jupiter Asset Management on Oct. 5.

• Titan: Jewellery business picked up pace in the September quarter and market share rose on the back of new launches, the company said in a quarterly update. On a year to date basis the company has added 35,000 square feet of retail space. Strong growth momentum in the watch segment continues and the eyewear segment has shown a muted growth this quarter, it added.
• Cadilla Healthcare’s biologics managing facility at Ahmedabad received an establishment inspection report from the U.S. FDA with zero Form 483 observations.
• Lupin launched generic potassium chloride oral solutions, after the company received an approval from U.S. FDA.
• Dixon Technologies has started manufacturing Mi LED TVs for Xiaomi. The TVs will be manufactured at its Andhra Pradesh facility.
• Dilip Buildcon received letter of acceptance for an EPC project for a dam in Rajasthan for Rs 601 crores. The order has been given by Water Resource Department of Kota.
• TVS Motor launched TVS Jupiter Grande scooter for the festive season.
• Jai Prakash Power says ICICI Bank has filed an application initiating corporate insolvency process against the company.
• Jet Airways: ICRA downgraded long term rating to B from BB. The rating downgrade has primarily been attributed to the impact of steep increase in jet fuel prices and rupee depreciation as well as the delays in implementation of liquidity initiatives by the company.
• United Spirits Chairman MK Sharma said in the company’s annual general meeting that the company needs to resolve some legacy issues and will reduce financial leverage by selling interest bearing debt by disposal of non-core or surplus assets.

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India plunged 0.6 percent or 64 points to 10,540 as of 7:02 a.m.

Asian stocks rounded out a tough week with further declines after U.S. equities fell to a three-week low amid the surge in bond yields. Treasuries steadied, and the dollar was little changed as traders turned their focus to U.S. employment data Friday.

Shares in Japan and Australia declined, and futures indicated losses when trading begins in Hong Kong. The Nasdaq 100 Index notched its worst day since June following Bloomberg’s report that China infiltrated American companies with hardware hacks. The 10-year Treasury yield stabilized at 3.19 percent after hitting the highest since 2011 this week. Crude oil climbed back toward $75 a barrel.

Currencies

• The yen traded at 113.90 per dollar.
• The offshore yuan held at 6.8936 per dollar, having breached the 6.9 level this week.
• The Bloomberg Dollar Spot Index rose 0.1 percent Thursday.
• The euro was flat, buying $1.1518.

Commodities

• West Texas Intermediate crude fell 2.3 percent to $74.63 a barrel. It’s up 1.9 percent this week.
• Gold was steady at $1,199.81 an ounce.

Here are some key events scheduled for the remainder of this week:

• The U.S. government’s September jobs report comes Friday, with investors looking for signs of wage growth that could accelerate Fed tightening plans.
• The RBI’s policy decision is due Friday afternoon.