Nifty Falls Most In Nearly Two Years Amid Rising Crude, Falling Rupee

Indian equity benchmarks fell to their lowest level in over three months after Brent Crude rose to its highest level in four years and rupee fell to a record low of 73.82 per dollar raising concerns over widening current account deficit.

The S&P BSE Sensex fell 2.24 percent or 806 points to 35,169 and the NSE Nifty 50 index dropped 2.4 percent or 259 points to 10,599.

Large-cap stocks like Reliance Industries, HDFC Bank, TCS, Infosys and ITC led declines in today’s session. ICICI Bank rose the most in two months after its MD and CEO Chanda Kochhar stepped down amid an ongoing probe into alleged impropriety.

All sector gauges compiled by BSE ended lower dragged by the S&P BSE Energy Index’s worst single-day fall since August 2015 after the government announced to cut fuel excise duty by Rs 1.5 a litre and asked oil marketing companies to bear burden of Re 1 per litre on sales of petrol and diesel.

The mid- and small-cap shares were in line with larger peers as the S&P BSE MidCap and S&P BSE SmallCap Indexes fell 2 percent each.

The Reserve Bank of India’s monetary policy committee is expected to raise repo rate tomorrow by 25 basis points to a 2-1/2 year high of 6.75 percent. However, investors will watch whether the central bank drops a neutral stance that has been in place in its statement since February 2017.

Shares of oil marketing companies slumped after Finance Minister Arun Jaitley announced to cut fuel price by Rs 2.5 per litre.

• Government has cut excise on petrol and diesel by Rs 1.5 litre.
• Oil marketing companies have been asked to bear remaining burden of Re 1 per litre.
• Indian Oil slumped 18.24 percent
• BPCL tumbles 19 percent
• HPCL drops 22 percent

Finance Minister Arun Jaitley is briefing media on rising oil prices.

Key highlights of the briefing:

• Fuel relief steps to widen fiscal gap by 0.05 percent of GDP
• Fuel retailers healthy enough to absorb relief steps
• Not going back on fuel price deregulation
• Diesel and petrol prices to be cut by Rs 2.5 per litre
• Centre to cut excise duty on petrol and diesel by Rs 1.5/litre and OMCs will absorb burden of 1 rupee per litre
• Brent oil crossed $86/barrel, highest in last four years
• Interest rates in U.S. have increased to 3.2 percent, the highest since 2011
• Both these developments have led to a situation which has had significant impact on the markets
• Many steps have been taken by the government, borrowing has been cut by Rs 70,000 crore and allowed OMCs to raise $10 billion

Shares of the Mumbai-based airline operator rose as much as 15.18 percent, the most in over three years, to Rs 204.10 on heavy volumes.

Trading volume was 1.5 times its 20-day average, according to data compiled by Bloomberg.

Indian equity benchmarks extended decline as bluechip stocks like Reliance Industries, HDFC Bank, TCS, Infosys and Kotak Mahindra Bank came under heavy selling pressure.

The S&P BSE Sensex slumped 2.54 percent or 912 points to 35,063 and the Nifty 50 Index plunged 2.65 percent or 288 points to 10,570.

With today's fall, the Nifty has almost wiped out entire gain of the current calendar year as it has corrected 9.3 percent from the record high on Aug. 28.

For the year, Nifty is just up 0.6 percent with stocks like Tata Motors, Bharti Airtel and HPCL down over 40 percent.

Shares of the Royal Enfield maker has fallen as much as 28 percent to Rs 21,329 in the last 10 trading sessions.

In today's session alone, the stock fell as much 8.84 percent.

The current selloff in equity markets provide a 'tremendous' buying opportunity in several mid and small cap companies, Shyam Shekhar, chief ideator & founder of ithought told BloombergQuint.

I think the markets are throwing up tremendous buying opportunities in several companies in small and mid cap space which have clear earnings visibility. Some of these companies further benefit from a weaker rupee. It may be a good time to switch focus into these companies and scale up positions in high conviction ideas among them, Shekhar said.

• Gujarat Gas: The Ahmedabad-based city gas distribution company fell as much as 2.6 percent to Rs 603. Trading volume was 14 times its 20-day average.
• SH Kelkar: The Mumbai-based chemical manufacturer fell as much 4.65 percent to Rs 206. Trading volume was 8.4 times its 20-day average.
• Sadbhav Infrastructure Project: The Ahmedabad-based construction company fell as much as 9.2 percent to Rs 97.70. Trading volume was 10 times its 20-day average.
• Thermax: The Pune-based electrical power equipment maker declined as much as 2.37 percent to Rs 912.50. Trading volume was 2.3 times its 20-day average.

NSE Nifty 50 Index fell below its 200-day moving average placed at 10,779 after which selling pressure aggravated. The fear has started to creep in indicating that there can be a severe correction as investors resort to preserve capital, AK Prabhakar, head of research at IDBI Capital Market told BloombergQuint over the phone.

Shares of the Mukesh Ambani-led company extended decline and slumped as much as 7.18 percent, the most in nearly two years, to Rs 1,119 on heavy trading volumes.

Trading volume was 4.4 times its 20-day average, according to data compiled by Bloomberg.

Over 9 lakh shares changed hands on the BSE compared with an average of 4.48 lakh shares traded daily in the past two weeks.

Indian equity benchmarks extended decline and volatility rose to its highest level in over seven months of 19.45 on the back of a broad-based selloff.

The S&P BSE Sensex plunged 2.16 percent or 785 points to 35,192 and the NSE Nifty 50 Index dropped 2.3 percent or 252 points to 10,606.

The overall market breadth was extremely bearish, as over 1,700 shares were declining while a little over 500 shares were advancing on the BSE.

The current selloff can precipitate further, and markets can see increased volatility in the near term till elections, Mahesh Patil, CIO of Birla Sun Life AMC, which oversees Rs 2.49 lakh crore in assets, told BloombergQuint in an interview.

Key highlights of the conversation:

• Broader markets have corrected quite a bit and the pain in the broader markets has been extended.
• Small cap index is down 39 percent from its peak. Clearly, it's a level where the value is emerging.
• The Indian macros have been deteriorating for some time now.

• Net direct tax collections (after adjusting for refunds) rose 14 percent to Rs 4.44 lakh crore in April-September 2018.
• Net direct tax collections represent 38.6 percent of the total Budget Estimates of direct taxes of 11.5 lakh crore for 2018-19
• Advance tax collected in April-Sep at Rs 2.10 lakh crore, up 18.7 percent (YoY)

A two-judge Supreme Court panel headed by Rohinton F. Nariman ordered ArcelorMittal and VTB Capital-led consortium Numetal to clear their group bad debts before placing bids for control of indebted Essar Steel.

• Top court panel says both ArcelorMittal and Numetal were ineligible to bid as per existing laws but carves out an exception in public interest and allows them to bid for Essar Steel by clearing dues.
• Both companies to clear their dues within 2 weeks; lenders of Essar Steel to choose best bid in 8 weeks after that.
• Top court says litigation time to be excluded from India’s 270-day insolvency process deadline.
• On Oct. 3, India Top Court to Give Verdict on Bids for Essar Steel Oct. 4.

Source: Bloomberg

Indian equity benchmarks were reeling under selling pressure dragged down by heavyweights like Reliance Industries, TCS, HDFC twins, Infosys and ITC.

The Sensex slumped 1.7 percent or 603 points to 35,372 and the Nifty 50 Index tumbled 1.6 percent or 180 points to 10,677.

Sixteen of 19 sector gauges compiled by BSE were trading lower dragged by the S&P BSE Energy Index's 3.2 percent fall. On the flipside, the S&P BSE Capital Goods Index was top gainer, up 0.7 percent.

• Spicejet has 15 lakh shares change hands in a block on BSE. Stock down 0.2 percent at Rs 62.60.
• Lemon Tree Hotels has 36 lakh shares change hands in three blocks on BSE. Stock up 0.07 percent at Rs 69.95.

Buyers and sellers were not immediately known

Source: Bloomberg

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

Premium on the contract surged 65 percent to Rs 132. As many as 3.67 lakh shares were added to the open interest which stood at over 41.29 lakh shares.

Click here to see the complete options chain

Shares of the Mumbai-based toll highway developer rose as much as 16 percent to Rs 37.20.

The company informed exchanges that it had made the interest payment due on Sept. 30 on non-convertible debenture.

Shares of the Anil Ambani-led company rose as much as 6.36 percent to Rs 12.55 after it was granted relief by telecom tribunal, after it stayed the demand of bank guarantee of Rs 2,900 crore by Department of Telecommunications.

The company said it will receive Rs 975 crore from the sale of spectrum, and the proceeds thereof will be used to pay Rs 550 crore to Ericsson and Rs 230 crore to RITL minority investors.

The rupee extended decline and fell as much as 0.6 percent or 45 paise to record low of 73.80 per dollar.

Shares of the commercial vehicle financer rose as much as 4.64 percent to Rs 1,128 after it informed exchanges that corporate guarantee worth Rs 650 crore (in NCDs) had been terminated.

Guarantees were issued by SVL Ltd. Consequently, the contingent liability of the company with respect to redemption/maturity of the said NCDs stands terminated.

Shares of the Mukesh Ambani-led oil-to-telecom conglomerate fell as much as 5.07 percent, the most since December 2017, to Rs 1,144 on the back of heavy volumes.

Trading volume was 3.2 times its 20-day average, data compiled by Bloomberg showed.

Shares of the country's largest infrastructure construction company rose as much as 3.3 percent, in an otherwise weak session, to Rs 1,285 after its board approved share buyback proposal.

The company will buyback around 6.1 crore shares, representing 4.35 percent of the paid-up equity capital at a price of Rs 1,475 each, aggregating to a total consideration not exceeding Rs 9,000 crore. Oct. 15 has been set as the record date for the buyback.

• The Nifty 50 Index has plunged over 1,000 points from the record high in August.

Indian equity benchmarks witnessed steep losses on the back of a selloff across the sectors amid weak global cues.

The S&P BSE Sensex slumped as much as 1.76 percent or 634 points to 35,341 and the NSE Nifty 50 Index tumbled 1.8 percent or 195 points to 10,663.

The selling pressure was global in nature. Overnight, the benchmark U.S 10 year bond yield spiked to 3.18 percent. The U.S. Dollar index rose to 95.75 and Brent crude prices hit $86 per barrel.

All sector gauges compiled by the National Stock Exchange were trading lower dragged by the Nifty Realty Index's 2.6 percent fall. Auto, PSU Bank, Private Bank and Financial Services indexes also fell between 1.5-2 percent each.

The mid- and small-cap shares were also witnessing selling pressure as the Nifty Midcap 100 and Nifty Smallcap 100 Indexes slumped 1.85 percent each.

The overall market breadth was extremely negative as over 1,000 stocks were declining while a little over 300 shares were advancing on the BSE.

Indian rupee extended decline and fell as much as 0.53 percent or 39 paise to record low of 73.73 per dollar as a stronger dollar and higher oil prices weigh on the sentiment.

The 10-year government bond declined, and the yield rose 8 basis points to 8.19 percent compared with yesterday's close of 8.11 percent.

Rupee is likely to stay under pressure as a stronger dollar and higher oil prices weighs on the sentiment.

The implied opening from forwards suggests spot rupee may start trading around 73.8758 having ended at 73.3425 on Wednesday and after falling as much as 73.4150, an all-time low for the pair.

In a bid to ease pressure on the currency, the central bank last evening tweaked overseas borrowing norms for oil companies. The RBI also waived off mandatory hedging requirements on the borrowings. The move is unlikely to be of much help given the tighter global conditions isn't seeing many companies go abroad to raise foreign currency.

In the bond market, the yield on benchmark 10-year bonds rose 12 basis points on Wednesday, the most since Sept. 10, to 8.11 percent.

Bonds are likely to come under pressure after U.S. Treasury yields jumped by most in more than a year with the 10-year rising to its highest level since 2011.

The RBI's MPC meets for a second day today and is likely to raise rates tomorrow by 25 basis points when it announces its rate decision. It will be the third straight rate hike by the RBI which will take the repo rate to 6.75 percent.

Brokerages On Shriram Transport

UBS

• Maintained ‘Buy’ with a price target of Rs 1,550, implying a potential upside of 44 percent from the last regular trade.
• Termination of SVL guarantee key positive.
• Recent liquidity crisis to hurt growth in the third quarter but long-term impact limited.
• Preferred pick among NBFCs; Expects re-rating driven by strong EPS growth.

Credit Suisse

• Maintained ‘Neutral’ with a price target of Rs 1,250, implying a potential upside of 16 percent from the last regular trade.
• Termination of corporate guarantee takes away significant overhang on the stock.
• Remain watchful of corporate actions at the group level.
• Fares reasonably well on our ALM framework and should command reasonable pricing power.

Goldman Sachs on Adani Ports

• Maintained ‘Buy’; cut price target to Rs 414 from Rs 455, implying a potential upside of 26 percent from the last regular trade.
• Concerns: weaker rupee, potential slowdown in cargo due to trade wars and rising bond yields in India.
• Impact of the rupee depreciation significant on P&L, but no significant impact on cash flow.
• Expect second quarter to see Rs 400 crore of foreign exchange losses.

Edelweiss on SAIL

• Upgraded to ‘Buy’ from ‘Reduce’; hiked price target to Rs 87 from Rs 70, implying a potential upside of 27 percent from the last regular trade.
• Completion of modernisation and expansion plan aids profitability.
• Cost concerns receding and under control.
• SAIL is turnaround story with FY18–20 Ebitda CAGR of 35 percent.

Deutsche Bank on Indian Metals

• Depreciating rupee supports Indian steel producers' margins.
• Weaker rupee allowed steel producers to take price hikes.
• Major HRC steel producers increased prices by 2-3 percent for October 2018.
• JSW Steel is preferred pick in the sector.

Nomura on Alunorte Shutdown

• Reduced demand from Alunorte a key contributing factor in recent caustic softness.
• Shutdown further reduces U.S. export demand, likely pressuring domestic pricing.
• Shutdown implies downside risk to current caustic price forecast.

Deutsche Bank on City Gas Companies

• City Gas companies pass on increase in input gas price hike.
• Expect recent price hikes to be margin accretive for IGL and Gujarat Gas.
• IGL and Gujarat Gas trading at attractive valuations.

• Nifty October futures ended at 10,893, with a premium of 35 points.
• Nifty October open interest up 4.8 percent; Nifty Bank October open interest up 2 percent.
• Maximum open interest for October series call at 11,200 strike price call option (open interest at 28.3 lakh shares).
• Maximum open interest for October series put at 10,500 strike price put option (open interest at 37.6 lakh shares).

Insider Trades

• Apollo Tyres’ promoter Classic Auto Tubes acquired 2.5 lakh shares on Sept. 28.
• Shakti Pumps’ promoter group acquired 20,000 shares on Oct. 1.
• Welspun Enterprises’ promoters acquired 4 lakh shares from Sept. 28-Oct. 1.
• Lemon Tree Hotels’ promoter acquired 1.25 lakh shares from Sept. 28-Oct. 1.

(As reported on Oct. 3)

Trading Tweaks

• IL&FS Investment Managers price band revised to 5 percent.
• Hindusthan National Glass & Industries price band revised to 5 percent.
• JMC Projects ex-date for stock split to Rs 2 from Rs 10 per share.

Who’s Meeting Whom

• Thyrocare Technologies to meet Sundaram Mutual Fund on Oct. 5.
• Lumax Auto Technologies to meet investors on Oct. 4.
• Finolex Industries to meet Capital World on Oct. 4.

• Dinesh Engineers IPO has been withdrawn due to turbulent market conditions.

• 10:30am: Nikkei India Services PMI for September, prior 51.5.
• 10:30am: Nikkei India Composite PMI for September, prior 51.9.

• Shriram Transport Finance intimated that corporate guarantee worth Rs 650 crore (in NCDs) had been terminated. They were issued by SVL Ltd. Consequently, the contingent liability of the company with respect to redemption/maturity of the said NCDs stands terminated.
• Reliance Communications was granted relief by telecom tribunal, after it stayed the demand of bank guarantee of Rs 2,900 crore by Department of Telecommunications. The company said it will receive Rs 975 crore from the sale of spectrum, and the proceeds thereof will be used to pay Rs 550 crore to Ericsson and Rs 230 crore to RITL minority investors.
• HDFC Q2: Income from dividend at Rs 6 crore versus Rs 537 crore on a year-on-year basis (the base quarter earned Rs 433 crore from HDFC Bank). The company assigned loans amounting to Rs 6,059 crore versus Rs 3,531 crore for the second quarter. During the quarter, all loans were sold to HDFC Bank pursuant to the buyback option embedded in the home loan arrangement between the company and HDFC Bank.
• Larsen & Toubro’s board members gave nod for the buyback of equity shares. The company will buyback around 6.1 crore shares, representing 4.35 percent of the paid-up equity capital at a price of Rs 1,475 each, aggregating to a total consideration not exceeding Rs 9,000 crore. Oct. 15 has been set as the record date for the buyback.
• Federal Bank was fined Rs 5 crore by the RBI for non-compliance with certain norms. The central bank found that non-compliance was there in reporting of data CRILC (risk- based supervision), payment of compensation in ATM-related issues and KYC norms.
• IL&FS Transportation Networks defaulted in the payment of interest worth Rs 20.8 crore due on three non-convertible debentures due to insufficient funds. Former chief secretary of Rajasthan CS Rajan inducted in IL&FS board. (Bloomberg)
• Aditya Birla Capital arm received a seven-year long-term loan worth Rs 7,000 crore from the World Bank group member International Finance Corporation.
• Amara Raja Batteries signed a technology collaboration agreement with Johnson Controls. The companies will share and improve product design and manufacturing technologies for batteries. As part of this collaboration, the battery maker will license Johnson Controls’ proprietary PowerFrame grid technology.
• TVS Motor invested additional Rs 30 crore in its subsidiary company TVS Credit Services. The holding of the company will increase to 7.09 percent in its arm. The company also stated that its model TVS Apache RTR 160 4V crossed the 1 lakh sales mark within six months of its launch.
• GATI clarified on reports of sale of Kintetsu joint venture stake for Rs 2,000 crore and said that the deal had not been finalised and the management was still evaluating options.
• Reliance Industries and Hathway Cable clarified that both companies were looking at various options to grow their business and they did not want to comment on any market speculations and rumours regarding the news that Reliance was in talks to buy Hathway Cable.
• VST Tillers tractors’ September sales of power tillers were down by 38 percent at 1,152 units versus 1,855 units on a year-to-year basis. Tractor sales were down 40 percent at 801 units versus 1,341 units for the same period.
• NLC India board announced it will consider buyback on Oct. 9.
• Just Dial set Oct.12 as the record date for the buyback.
• L&T Finance Holdings to decide on issue of preference shares worth Rs 250 crore on Oct. 8.
• Bharti Airtel’s subsidiary Bharti Airtel International (Netherlands) B.V. has offered to repay outstanding EURO notes worth €1 billion which were due in Dec. 2018.
• IOCL, BPCL and HPCL in focus as RBI allows OMCs to raise ECB for working capital purposes with minimum average maturity period of three to five years. Overall ceiling for ECBs under the facility will be $10 billion. Individual limit of $750 million and hedging policy waived for this facility.
• ONGC awarded contract worth $1.69 billion to Baker Hughes, McDermott International and L&T’s unit – L&T Hydrocarbon. ONGC expects start of first gas production by Dec. 2019, first oil by March 2021 and overall project completion by August 2021, according to Bloomberg report.
• Moody’s downgraded GMR Infra- run Hyderabad International airport.

• RBI eases overseas borrowing rules for state-run oil retailers
• SFIO starts probe into IL&FS crisis
• SoftBank proposes to offer free electricity in India after 25 years
• The easy money era is over in India
• Saudis raise oil output to near-record amid pressure from Trump
• JPMorgan predicts a full-blown trade war
• India should have learned from Walter Bagehot
• India hikes wheat support price a day after farmer protest
• The IL&FS rescue – keep LIC out, say experts
• Oil’s march toward $100 is just what electric car makers need
• The chief justice of a court in turmoil
• Does India need its own version of ‘operation twist’ to protect the rupee?

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India plunged 1.15 percent or 125 points to 10,757 as of 7:57 a.m.

Asian equities and currencies sank after a spike in U.S. Treasury yields tested investors’ nerves for equity valuations as Federal Reserve monetary tightening rolls on. The yen, befitting its haven status, headed higher.

Shares in Hong Kong and South Korea retreated. Stronger-than-anticipated reports on U.S. services and private-sector payrolls helped drive 10-year Treasury yields up the most in more than a year, to the highest level since 2011.

Stocks

• Japan’s Topix Index rose 0.8 percent as of 9:01 a.m. in Tokyo.
• Futures on Hong Kong’s Hang Seng added 0.1 percent.
• Australia’s S&P/ASX 200 Index gained 0.1 percent.
• The S&P 500 Index rose 0.1 percent, having earlier been on track for a record close. Futures were down 0.2 percent.

Currencies

• The Bloomberg Dollar Spot Index is around its highest since mid-August.
• The yen was at 114.49 per dollar after falling 0.8 percent.
• The offshore yuan dipped 0.1 percent to 6.8994 per dollar.
• The euro bought $1.1476.

Here are some key events coming up this week:

• American factory orders for August are due Thursday; data on the trade balance will come Friday.
• The U.S. government’s September jobs report is also due on Friday.
• The Reserve Bank of India’s policy decision is due Friday.