Sensex, Nifty Fall For Third Day As RIL, IndusInd Bank Drag

Indian equity benchmarks fell for third day in a row dragged by Reliance Industries, IndusInd Bank and Kotak Mahindra Bank.

The Sensex fell 0.5 percent or 181 points to 34,134 and the NSE Nifty 50 Index declined 0.57 percent or 58 points to 10,245.

For most part of the day, the benchmarks traded firmly higher but selling pressure intensified in last hour of the trade when IndusInd Bank cracked as much as 9.8 percent on concerns over its exposure to IL&FS.

Seventeen of 19 sector gauges compiled by BSE ended lower dragged by the S&P BSE Energy Index's 3 percent drop. On the other hand, the S&P BSE Power Index ended marginally higher.

The mid- and small-cap shares ended lower as the S&P BSE MidCap Index fell 0.7 percent and the S&P BSE SmallCap Index declined 2 percent.

State Bank of India has proposed to raise as much as Rs 20,000 crore in the year ending March 31 by selling shares via FPO/QIP/preferential allotment or rights issue, the bank said in an exchange filing.

• The mode of sale will be decided based on approvals from holders, RBI, Sebi and government.
• The board also approved issuing up to Rs 5,000 crore of tier-2 bonds in INR/USD to overseas on local investors in FY19.
• Shares of the country's largest bank fell 0.4 percent to Rs 260.15.

Number of taxpayers showing income above Rs 1 crore rises 60 percent in four years, Central Board of Direct Taxes said in a press release.

• Growth of 80 percent in number of Income Tax returns filed in last four financial years: CBDT

Shares of the Noida-based drugmaker reported higher than anticipated net profit during July-September quarter. Shares of the company swung between gains and losses after the earnings announcement.

Key earnings highlights (Q2, YoY):

• Net profit up 64 percent at Rs 210 crore.
• Revenue up 38.2 percent at Rs 2,269.4 crore.
• Ebitda up 47.2 percent at Rs 450 crore.
• Margin at 19.8 percent versus 18.6 percent.

Shares of the Mumbai-based private sector lender fell as much as 9.47 percent, the most since November 2016, to Rs 1,427.35 on heavy volumes.

Trading volume was 1.3 times its 20-day average, according to data compiled by Bloomberg.

On the National Stock Exchange 44.60 lakh shares were traded according to information on its website.

Shares of the Andhra Pradesh-based coffee manufacturer rose as much as 4.62 percent to Rs 255 after its profit increased 41 percent in July-September quarter.

Key earnings highlights:

• Net profit up 41 percent at Rs 47.18 crore versus Rs 33.34 crore (YoY)
• Revenue at Rs 290.7 crore versus Rs 296.4 crore (YoY)

The Mumbai-based paint maker fell as much as 9.33 percent to Rs 377.50 after its profit declined in July-September quarter.

Key earnings highlights:

• Net profit fell 16 percent to Rs 122 crore versus Rs 144.6 crore (YoY)
• Revenue declined 11 percent to Rs 1,293.8 crore versus Rs 1,164.3 crore (YoY)
• Ebitda down 12 percent at Rs 194.8 crore versus 221.3 crore (YoY)
• Margin at 15 percent versus 19 percent (YoY)

Shares of the Mukesh Ambani-led oil-to-telecom conglomerate declined 2 percent to Rs 1,079.60.

The stock has declined 7 percent in the last three trading sessions.

• Hathway Cable: The Mumbai-based cable television service provider fell as much as 6.59 percent to Rs 28.35. Trading volume was 7 times its 20-day average.
• Hatsun Agro: The Chennai-based dairy products maker fell 3 percent to Rs 602.55. Trading volume was 4.6 times its 20-day average.
• Alembic Pharma: The Vadodara-based drugmaker fell as much as 1.88 percent to Rs 596.55. Trading volume was 1.9 times its 20-day average.
• Shriram City Union Finance: The Chennai-based consumer finance company rose 1.15 percent to Rs 1,614. Trading volume was 4.3 times its 20-day average.

Shares of the Mumbai-based chemical maker were locked in a 20 percent lower circuit at Rs 100.80 after its profit declined in July-September quarter.

Key earnings highlights:

• Revenue up 41 percent at Rs 350 crore.
• Net profit down 33 percent at Rs 17 crore.
• Ebitda down 27 percent at Rs 28 crore.
• Margin at 7.9 percent versus 15.3 percent
• Forex loss Rs 11 crore and higher cost of goods impacted financials.

Shares of the Kolhapur-based private lender fell as much as 9.16 percent, the most in nearly two years, to Rs 459.75 after Morgan Stanley downgraded the stock to underweight for target price of Rs 450 per share.

Shares of the Mumbai-based paint maker fell 0.3 percent to Rs 1,234 ahead of its July-September quarter earnings.

Here is what to expect from the company in Q2:

• Revenues seen rising 11.9 percent at Rs 4,772 crore versus Rs 4,265 crore
• Ebitda seen up 12.8 percent at Rs 903.5 crore versus Rs 801 crore.
• Margins seen at 18.9 percent versus 18.8 percent.
• Net profit seen flat at Rs 578 crore versus Rs 576 crore.

Estimates compiled by Bloomberg on a consolidated (YoY) basis

Indian equity benchmarks held on to gains led by ICICI Bank, HDFC twins and ITC.

The Sensex rose 0.5 percent or 170 points to 34,486 and the NSE Nifty 50 Index climbed 0.47 percent or 46 points to 10,350.

Twelve of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Bankex Index's 1.3 percent gain. On the other hand, the S&P BSE Energy Index was top loser, down 1.3 percent.

The mid- and small-cap shares were mixed as the S&P BSE MidCap Index rose 0.3 percent while the S&P BSE SmallCap Index declined 0.8 percent.

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Shares of the Mumbai-based drugmaker rose as much as 6 percent to Rs 220 after the U.S. drug regulator issued Establishment Inspection Report for its Roha and Pithampura plants, Unichem said in an exchange filing.

Shares of the Kolkata-based company rose as much as 6.88 percent to Rs 29.50 after it dismissed reports of lay-offs and said that it is adding talent to its ever-expanding workforce as its businesses continue to grow profitably quarter after quarter.

Shares of the Jaipur-based private lender slumped as much as 7.25 percent to Rs 500.50 after Morgan Stanley downgraded it to ‘Equal-weight” from “Overweight”.

The stock has 10 ‘Buy’, four ‘Hold’ and one ‘Sell’ recommendation, according to Bloomberg data.

Nifty's 10,400 call option contract was the most active option contract on the National Stock Exchange.

Premium on the contract fell 11 percent to Rs 44.70. Over 4.90 lakh shares were added to the open interest which stood at over 31.65 lakh shares.

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Shares of the Anil Ambani-led power generation company rose nearly 3 percent to Rs 28.10 per share. after its subsidiary Sasan Power bagged an arbitration award against North American Coal Corporation, according to a notification to the bourses.

Shares of the Delhi-based news broadcast company fell as much as 4.76 percent, the most since Oct. 4, to Rs 32 after it received show cause notice from the Enforcement Directorate.

NDTV received show cause notice in relation to receipt of foreign direct investment of Rs 1,637 crore and overseas investments of Rs 2,732 crore, the company said in a exchange notification.

There is a definite probability of markets correcting further as elections would keep them nervous, Shyam Shekhar, chief ideator & founder of iThought told BloombergQuint in an interview.

Key highlights of the conversation:

• There is a definite probability of markets correcting further
• Markets would remain nervous in the election year
• The expectations were stretched to justify valuation
• Expect more companies to meet expectations
• Don't expect a major positive surprise
• Sugar industry in India to become more like the one in Brazil
• Expect sugar production to be lower than ISMA estimate

Shares of Indiabulls Housing Finance rose as much as 7.1 percent after the company said it plans to sell all or part of its 18.7 percent stake in in U.K.-based OakNorth Holdings.

The stake sale will depend on if valuation gives us a good exit opportunity, said Deputy Managing Director Ashwini Kumar Hooda or if they see an opportunity to buy a smaller housing finance company.

The stock snapped a three-day decline and was the best performer on the Nifty and the Sensex in early trade. It, however, is down 44 percent so far this year.

Here are key takeaways from Hooda's interview to BloombergQuint:

• Exposure to developers is 20 percent of total book.
• None of the developers have defaulted.
• Loans to top 5 Indiabulls developers are backed by rentals.
• In a worst-case scenario, at most Rs 1,500 crore worth of loans could get impacted but we have provisions of Rs 1,050 crore.
• Banks are warming up post RBI's measure on liquidity coverage.
• Expect to sell Rs 20,000 crore of worth loans in FY19.
• Value of residual stake of 19 percent in OakNorth Bank at $500 million.
• Will sell OakNorth stake if valuation gives good exit opportunity and if we see any opportunity to buy smaller HFCs.

Shares of the Pune-based IT company fell as much as 18.89 percent, its biggest single day drop since debut, to Rs 536, also its lowest level in since September 2016 after it missed Bloomberg consensus earnings estimates in July-September quarter.

Meanwhile, the company has exposure of about Rs 43 crore to indebted IL&FS Group but it has not seen any default, Anand Deshpande of Persistent Systems told BloombergQuint in an interview.

Key earnings highlights:

• Revenue up 0.2 percent at Rs 835.5 crore.
• Profit up 0.9 percent at Rs 88.1 crore.
• EBIT up 3.7 percent at Rs 103.4 crore.
• EBIT margins at 12.4 percent versus 11.98 percent.

Shares of the country's largest private sector lender by value rose as much as 2.66 percent, the most in over a week, to Rs 2,020 after it reported stable asset quality and met Bloomberg consensus earnings estimates in September quarter on Saturday.

Key earnings highlights:

• Net interest income up 20.6 percent at Rs 11,763.40 crore.
• Net profit up 20.6 percent at Rs 5,006 crore.
• Net NPA at 0.40 percent versus 0.41 percent (QoQ).
• Gross NPA unchanged at 1.33 percent (QoQ).

Meanwhile, brokerages have maintained their bullish stance on the stock with Morgan Stanley expecting 30 percent upside in its stock price from its previous closing price.

Indian equity benchmarks rose sharply led by HDFC Bank after it met Bloomberg consensus earnings estimates and reported stable asset quality in September quarter.

The S&P BSE Sensex rose as much as 1.3 percent to 34,749 and the NSE Nifty 50 Index climbed 1 percent or 105 points to 10,409.

Sixteen of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Finance Index's 1 percent gain. On the flipside, the S&P BSE IT Index was top loser, down 0.95 percent.

Indian rupee opened lower at 73.41 per dollar against Friday's close of 73.32 as oil and dollar were trading steady overseas.

Data from the RBI showed on Friday that India's FX reserves fell by the most in 7 years in the week to Oct. 12 as the central bank stepped up intervention after it surprised markets by keeping the rates unchanged.

Indian investors will be assessing the minutes of the central bank’s October policy meeting which signaled rates are likely to be on hold for some time after back-to-back hikes.

Earlier this month, the RBI’s monetary policy committee kept interest rates unchanged to ensure economic growth stayed on track, having lowered inflation forecasts for rest of the year and financial conditions tightened.

The yield on the benchmark 10-year bonds rose 1 basis point on Friday to end at 7.92 percent. That is after it having declined 6 basis points last week.

Meanwhile, the rupee is likely to start on a soft ground with both oil and the dollar trading steady overseas.

The rupee rose on Friday to end at 73.3250 per dollar and implied opening from forwards suggests pair may start trading around 73.4530 on Monday. Data from the RBI showed on Friday that India's FX reserves fell by the most in 7 years in the week to Oct. 12 as the central bank stepped up intervention after it surprised markets by keeping the rates unchanged.

On HDFC Bank

JPMorgan

• Maintained ‘Overweight’ with a price target of Rs 2400, implying a potential upside of 22 percent from the last regular trade.
• The company reported a steady performance during September quarter with a 21 percent profit growth and asset quality maintained.
• Continued to gain market share both on the asset and deposit side.
• Robust loan growth of 24 percent led by all round performance.

Edelweiss

• Maintained ‘Buy’ with a price target of Rs 2454, implying a potential upside of 25 percent from the last regular trade.
• Yet another consistent quarter with improved traction in core operating profitability.
• Sound fundamentals bolstering market share and spurring loan growth.
• Asset quality steady; Outlook stable.

Morgan Stanley

• Maintained ‘Overweight’ with a price target of Rs 2550, implying a potential upside of 30 percent from the last regular trade.
• Compounding engine continues to thrive on strong revenue growth and improving cost to income ratios.
• Net interest income and fee income growth were strong and better than estimates.
• Liquidity position is strong; Asset quality was good.

On Ultratech

Edelweiss

• Maintained ‘Buy’; cut price target to Rs 4411 from Rs 4779, implying a potential upside of 22 percent from the last regular trade.
• Inability to take price hikes despite decent volume gains is disheartening.
• With cement prices continuing to be weak, cut 2018-19 Ebitda estimates by 9 percent.
• Stay optimistic on price hikes, which would come back from January 2019.

Axis Capital

• Maintained ‘Hold’ with a price target of Rs 3,885, implying a potential upside of 8 percent from the last regular trade.
• September quarter was a weak quarter; Miss primarily on lower-than-expected volumes and higher costs.
• Higher cost was due to weak rupee, higher diesel intake and higher other cost.
• Expect positive demand momentum.

Nomura

• Maintained ‘Buy’ with a price target of Rs 5,150, implying a potential upside of 43 percent from the last regular trade.
• September quarter was a miss driven by lower volume and higher costs.
• Management believes prices to move-up in December quarter and power/fuel costs likely peaked.
• UltraTech best geared for cement cycle upturn that has begun.

On Mphasis

Morgan Stanley

• Maintained ‘Overweight’ with a price target of Rs 1,185, implying a potential upside of 11 percent from the last regular trade.
• Macro environment for spending remains robust.
• Margin band for the current financial year remains unchanged even with currency tailwinds.
• Management indicated that sustaining Direct Core business growth in mid-teens is possible.

Macquarie

• Maintained ‘Neutral’ with a price target of Rs 1,220, implying a potential upside of 14 percent from the last regular trade.
• Growth remains strong in HP business; Digital Risk business remains volatile.
• Deal win momentum remains strong, with 71 percent YoY growth at $210 million
• Top picks in midcap IT space are Larsen & Toubro Infotech and Hexaware Technologies.

• Nifty October Futures closed trading at 10303, discount of 0.35 points.
• Nifty October open interest down 3.9 percent; Nifty Bank October open interest up 15.6 percent.
• Max open interest for October series at 11,000 Call, open interest at 50.7 lakh shares.
• Max open interest for October series at 10,000 Put, open interest at 33.5 lakh shares.

Bulk Deals

• Dewan Housing: Jasmine Capital Investments sold 82.5 lakh shares at Rs 213.13 per share.
• Indiabulls Housing Finance: William Blair EM Fund sold 24.8 lakh shares at Rs 691.84 per share.
• Repco Home Finance: Taiyo Greater India Fund sold 4.3 lakh shares at Rs 312.7 per share.
• Sudarshan Chemicals: Akash Bhansali bought 55.7 lakh shares at Rs 300.2 per share.

Trading Tweaks

• Den Network in ASM framework as of Oct. 22.

HDFC Bank (Q2, YoY)

• Net interest income up 20.6 percent at Rs 11,763.40 crore.
• Net profit up 20.6 percent at Rs 5,006 crore.
• Net NPA at 0.40 percent versus 0.41 percent (QoQ).
• Gross NPA unchanged at 1.33 percent (QoQ).

SBI Life Insurance (Q2, YoY)

• Net premium income up 42 percent at Rs 7,662 crore.
• Total income up 25 percent at Rs 9,638 crore.
• Net profit up 11 percent at Rs 251 crore.
• Thirteenth month persistency ratio up 80.03 percent versus 77.48 percent.
• 61st month persistency ratio up 55.45 percent versus 51.05 percent.

ICICI Securities (Q2, YoY)

• Revenue up 0.5 percent at Rs 458 crore.
• Net profit up 2.4 percent at Rs 133 crore.
• Ebit up 2 percent at Rs 217 crore.
• Margin at 47.3 percent versus 46.7 percent.

Bhansali Engineering Polymers (Q2, YoY)

• Revenue up 41 percent at Rs 350 crore.
• Net profit down 33 percent at Rs 17 crore.
• Ebitda down 27 percent at Rs 28 crore.
• Margin at 7.9 percent versus 15.3 percent
• Forex loss Rs 11 crore and higher cost of goods impacted financials.

Persistent Systems (Q2, QoQ)

• Revenue up 0.2 percent at Rs 835.5 crore.
• Profit up 0.9 percent at Rs 88.1 crore.
• EBIT up 3.7 percent at Rs 103.4 crore.
• EBIT margins at 12.4 percent versus 11.98 percent.

Bhageria Industries (Q2, YoY)

• Revenue up 35 percent to Rs 121.6 crore.
• Net profit up 165 percent to Rs 28 crore.
• Ebitda up 86 percent to Rs 42 crore.
• Margin at 35 percent versus 25 percent.
• Lower raw material cost, depreciation, finance cost, tax expense and higher other income aid numbers.

• Asian Paints

Other Earnings To Watch

• Can Fin Homes
• CCL Products
• Glaxosmithkline Pharmaceuticals
• Hatsun Agro Product
• Hindustan Oil Exploration
• Hindustan Zinc
• Inox Leisure
• Jubilant Life Sciences
• Kansai Nerolac Paints
• Lumax Industries
• Maharashtra Scooters
• Lakshmi Machine Works
• Oberoi Realty
• Omax Autos
• Schaeffler India
• Welspun India

• Lupin Neurosciences, a specialty pharma division of Lupin Ltd., announced that the Committee for Medicinal Products for Human Use (CHMP), the scientific committee of the European Medicines Agency (EMA), has adopted a positive opinion recommending the marketing authorization of NaMuscla™ (mexiletine hydrochloride) for the symptomatic treatment of myotonia in adults with non-dystrophic myotonic (NDM) disorders.
• Biocon and Mylan announced positive CHMP opinion for Ogivri, Biosimilar Trastuzumab. The CHMP positive opinion will now be considered by the European Commission. The decision on approval is expected by the end of 2018.
• SH Kelkar & Co. said that it has undertaken price increase to partially offset higher raw material costs. See revenue growth in core fragrance division to remain healthy.
• Sasan Power, 100 percent subsidiary of Reliance Power bagged an arbitration award against North American Coal Corporation (NACC). Subsequently, Sasan Power is required to pay only Rs 17 crore towards outstanding invoices as against NACC’s claims of Rs 235 crore.
• Srei Infra dismissed reports of layoffs; says it’s false.
• Jet Airways said that the report of talks with Tata speculative.
• Tata Sponge Iron’s board to meet on Oct. 24 to discuss on growth and consequent funding options for the same.
• Piramal Enterprises refuted to have any loan exposure to developers like Aristo, Nahar, Supertech, Radius and Amrapali. Developers like Lodha, Omkar, Vatika and Embassy are part of lending portfolio but have never defaulted on any interest or repayment obligation, according to the company.
• Puravankara completed acquisition of Mumbai land from Foods & Inns worth Rs 147.5 crore. Puravankara now would also acquire additional 843 sq mt area of land from Foods & Inns worth Rs 15.5 crore.

• Small savings, the government’s big saviour?
• Oil may extend gains if U.S.-Saudi ties continue to be strained this week
• Finance Ministry extends September GST returns deadline to Oct. 25
• Mutual funds’ exposure to banks hits 3-month low in September
• ArcelorMittal picked as winning bidder for Essar Steel
• India’s top hedge fund is buying shares again
• How much has the rupee really depreciated?
• The world’s fastest growing economy has the world’s most toxic air
• Allies doubt the shifting Saudi story and even Trump is citing ‘lies’
• The company that pays its employees to get a full night’s sleep
• FPIs pull out over $4 billion in 3 weeks of October

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India was little changed at 10,316.

Asian stocks traded mixed on Monday and U.S. futures pared declines as Chinese shares built on a Friday rally after calls for calm from the country’s top finance officials. The dollar and Treasuries were little changed.

Stocks fell in Japan, Australia and South Korea, while shares in Hong Kong and Shanghai advanced after Chinese President Xi Jinping vowed “unwavering” support for the country’s private sector.

Currencies

• The yen was little changed at 112.52 per dollar.
• The offshore yuan held at 6.9391 per dollar.
• The Bloomberg Dollar Spot Index was little changed.
• The euro bought $1.1504.

Commodities

• West Texas Intermediate crude was little changed at $69.21 a barrel.
• Gold added 0.1 percent to $1,227.41 an ounce.

Here are some key events coming up this week:

• Earnings season roles on with notable highlights including Amazon.com, Alphabet, Intel, Verizon, Microsoft, Twitter, McDonald’s, UBS, Deutsche Bank, Barclays, Total, United Technologies, Caterpillar, Halliburton and Linde.
• Monetary policy decisions are due in Indonesia, Sweden and Canada.
• European Central Bank policy makers could on Thursday confirm that asset purchases will end this year, reiterating its pledge to keep interest rates at record lows through summer 2019. President Mario Draghi will hold a press conference.
• U.S. gross domestic product growth may have slowed in the third quarter, yet remained near its best pace since mid-2015, according to forecasts ahead of Friday’s release. GDP is estimated at a 3.3 percent annualized pace, less than the 4.2 percent second-quarter rate.