Sensex, Nifty Log Worst Day Of 2019 On Rising Oil Prices

Indian equity benchmarks fell for the second straight session to register their worst fall in 2019 due to concerns over rising crude oil prices. Brent crude prices hovered near a six-month high of $74.31 per barrel.

The S&P BSE Sensex ended 1.26 percent lower at 38,645.18 and the NSE Nifty 50 was 11,594.45 at close, down 1.35 percent. The broader market index represented by the NSE Nifty 500 Index ended 1.43 percent lower.

The market breadth was tilted in favour of sellers. About 1,335 stocks declined and 445 shares advanced on National Stock Exchange.

Ten out of 11 sectoral gauges compiled by NSE ended lower, led by the NSE Nifty Realty Index’s 2.5 percent fall. On the flipside, the NSE Nifty IT Index was the only sectoral gainer, up 0.4 percent.

Vinati Organics

• Shares declined 2.7 percent intraday to Rs 1,720 apiece.
• The trading volume was more than 20 times its 20-day average for this time of the day.

Aavas Financiers

• Shares rose as much as 1.5 percent to Rs 1,162.90 per share.
• The trading volume was almost four times its 20-day average for this time of the day.

Marico

• Shares fell as much as 1.1 percent to Rs 362.10 apiece.
• The trading volume was almost four times its 20-day average for this time of the day.

Adani Gas

• Shares gained nearly 8 percent to Rs 152.30 apiece.
• The trading volume was almost three times its 20-day average for this time of the day.

Shares of the non-banking lender declined as much as 6.8 percent, the most in over two months, to Rs 746 apiece. The stock was the top loser on Nifty Index.

The stock declined 44 percent in the past 12 months compared with a 13 percent gain in the Sensex. The stock traded 31 percent below the Bloomberg consensus one-year target price.

Brent crude hovering above $75-80 per barrel could result in “some kind of nervousness” as it could trigger inflation and pause the rate cut cycle. That’s according to Mahesh Patil, Co-Chief Investment Officer at Aditya Birla Mutual Fund. However, Patil does not expect oil to stay at those levels for too long.

Here are the key highlights from the interview:

On Crude

• Crude is touching $75 per barrel, beyond which it starts to be painful.
• We are still okay in terms of macro managing on current account deficit or BOP because we've seen good capital inflow.
• If it goes above $75 or reaches $80-or so, there will be some kind of nervousness.
• Don't expect crude to stay above $75 for too long.
• One could see mild correction in the market with crude oil worries and elections.

On Earnings Growth & Sectors

• Earnings forecast shows 20 percent plus growth for 2020 driven by the banking sector.
• Looking at a 14 percent growth for the balance sectors (excluding banking), which is decent.
• Will see some recovery in auto sector going forward.
• We might see strong earnings growth despite GDP growth remaining constant or meandering around these levels.
• The liquidity-driven rally has clearly gone away.
• Market has been punishing companies with weaker management and corporate governance practices.
• Low base to aid pharma space
• Good growth coming back in consumer discretionary space
• Apart from banks, overweight on consumption discretionary, capital goods and infrastructure
• One should expect average returns from this equity market.

Shares of the private lender gained as much as 4.2 percent to Rs 210.80 apiece, its highest since June 2017.

It announced its March quarter results on Thursday.

• Net Interest Income rose 14 percent to Rs 301 crore.
• Net profit gained 50 percent to Rs 96.3 crore.
• Gross NPA stood at 1.84 percent versus 1.92 percent (QoQ).
• Net NPA stood at 0.65 percent versus 0.71 percent (QoQ).
  

Brokerage firm Spark Capital downgraded its recommendation on the stock to ‘Sell’ from ‘Reduce’. It hiked the target price to Rs 179 from Rs 167 per share, implying a potential downside of around 11 percent from previous close.

Brokerage says

• See a prolonged period of sub-optimal return metrics.
• Reduce FY20 growth estimate to 19 percent versus 25 percent led by slowdown in overall retail portfolios.
• Expect bank to raise funds in H2FY20 to support growth trajectory.

Shares of the financial services company declined as much as 13.8 percent to a two-month low of Rs 130.55 apiece.

Care Ratings downgraded the company’s long-term debt programme, subdebt and market-linked debentures to A from A+ while, Brickwork lowered its rating to A+ from AA, according to their statements.

The stock declined 68 percent in the past 12 months compared with a 13 percent gain in the Sensex, according to Bloomberg data.

Most of the software services providers were trading higher in trade helped by the weaker rupee.

Shares of the private sector failed to hold on to their opening gains to fall as much as 1.4 percent to Rs 2,261 apiece. The stock went up as much as Rs 2,325 apiece, which was Rs 7 away from its all-time high.

HDFC Bank posted a 23 percent jump in the fourth quarter boosted by a strong loan growth, while its net income climbed to Rs 5,885 crore. The stock has 51 buys, 3 holds and 1 sell, Bloomberg data show.

JM Financial

• Management attributes this to short-term loans to higher-rated corporates
• Provision coverage ratio is best in class at 71 percent; slippage or loans turning sour moderated to 2 percent
• Bank remains top picks in banking sector; maintain buy

Prabhudas Lilladher

• Bank consciously has slowed retail growth in certain segments
• Overall loan growth supported by non-retail which were largely short term
  Management tone on agri loans continues to remain cautious and continues to add to contingent provisions
• Keeping an eye on cost of funds as liabilities seem to be a challenge in near term
• Retain buy, price target raised to Rs 2,700 from Rs 2,371

ICICI Securities

• Bank is consolidating, pacing its loan growth in select retail segments
• Credit cost factoring in risks on its agriculture book
• Muted fee income growth appears temporary mainly due to base effect
• Expect 25 percent EPS CAGR over FY19-21 and return of assets touching 2 percent
• Maintain buy on stock, price target Rs 2,639

Shares of the airport operator rose as much as 11 percent, the most in two months, to Rs 8.10 apiece.

The two subsidiaries—GVK Airports Developers Ltd. and GVK Airport Holdings Ltd.—have signed a “term sheet and exclusivity agreement” with the ADIA and the NIIF, according to its stock exchange filing.

The operator of Mumbai’s Chhatrapati Shivaji International Airport said it plans to use the proceeds to reduce debt of up to Rs 5,750 crore.

Shares of the cash-strapped airline plunged close to 23.2 percent to Rs 126.65 apiece.

Rajshree Pathy and Nasim Zaidi resigned from the position of directors on the company's board, according to an exchange filing. Also, according to a PTI report, its employees have written to President Ram Nath Kovind and Prime Minister Narendra Modi seeking their intervention to recover outstanding dues as well as to expedite the process of emergency funds.

Shares of the Mukesh Ambani-led conglomerate declined close to 3 percent, its biggest intraday fall since Dec. 11, to Rs 1,345.05 per share.

While India’s most valued company reported a record quarterly profit for January to March period, spending by India’s most valued company on its telecommunications business leading to an increased debt still worries analysts.

Read more about it here

Shares of the oil retailers declined as Brent crude rose as much as 3.25 percent to 74.31 per barrel.

• Indian Oil Corporation fell as much as 4.2 percent to Rs 149.50 per share.
• BPCL declined 4.5 percent to Rs 346.50 apiece.
• HPCL declined 5.7 percent to Rs 251.50 apiece.

Indian equity benchmarks opened lower, pressured by losses in Reliance Industries and private banks.

The S&P BSE Sensex declined as much as 0.52 percent to 38,934 and the NSE Nifty 50 fell as much as 0.61 percent to 11,681.40. The broader market index represented by the NSE Nifty 500 Index fell as much as 0.75 percent.

The market breadth was tilted in favour of sellers. About 1038 stocks declined and 433 shares rose on National Stock Exchange.

Ten out of 11 sectoral gauges compiled by NSE fell, led by the NSE Nifty Realty Index’s 1.57 percent decline. On the flipside, the NSE Nifty IT Index was the only sectoral gainer, up 0.52 percent.

The Indian rupee opened lower against the U.S. dollar. The home currency weakened as much as 0.58 percent to 69.76 against the greenback.

Rising crude oil prices is likely to be a pressure point for the rupee in the session as investors remain concerned over the import bill of the country. Oil prices surged after the U.S. said it won't renew waivers to allow buyers to buy Iranian crude. Dealers expect the pair to be in a range of Rs 69.30-70 a dollar in the day.

Sovereign bonds may gain after the RBI minutes showed policymakers were worried about slowing economic growth, raising prospects of another interest rate cut in the near future. Yield on the 10-year note is seen trading in a range of 7.37 percent-7.45 percent.

F&O Cues

April Futures

• Nifty open interest up 1 percent, adds 1.2 lakh shares in open interest.
• Bank Nifty open interest down 8 percent sheds 1.5 lakh shares.
• Nifty futures premium 18.3 points Vs 37 points, closed trading at 11,771.
• Bank Nifty futures premium at 42.9 points versus 74.2 points, closed trading at 30,226.3.

Options

• Nifty PCR at 1.57 versus 1.82 (across all series).

Nifty Options Expiry 25 April

• Max open interest at 12,000 Call (31.6 lakh shares), 11,000 put (28.5 lakh shares) & 11,500 Put (28.4 lakh shares)
• Open interest addition seen for call strikes 11,800 (+6.9 lakh shares),12,000 (+6.8 lakh shares), 11,900 (+5.2 lakh)

Stocks In Ban

In Ban:

• IDBI
• Idea
• PC Jewellers
• Reliance Capital*

Out of Ban:

• Jet Airways
• Reliance Power

* New in ban

Spark Capital on DCB Bank

• Downgrade to ‘Sell’ from ‘Reduce’; hiked target price to Rs 179 from Rs 167.
• See a prolonged period of sub-optimal return metrics.
• Reduce FY20 growth estimate to 19 percent vs 25 percent led by slowdown in overall retail portfolios.
• Expect bank to raise funds in H2FY20 to support growth trajectory.

Spark Capital on RBL Bank

• Upgrade to ‘Add’ from ‘Reduce’; hiked target price to Rs 707 from Rs 524.
• Expect RBL to post industry leading loan growth.
• Positives: shift to higher yielding retail book, higher CA growth & pricing power.
• Do not expect any major asset quality issues.
  

IDBI Capital on Reliance Industries

• Downgrade to ‘Hold’ from ‘Buy’; hiked target price to Rs 1400 from Rs 1326.
• Downgrade due to price appreciation and limited upside; hiked target to reflect FY21 estimates.
• Expect higher opex due to demerger which will be offset by lower depreciation and interest.

Nomura on Reliance Industries

• Maintained ‘Buy’ with target price of Rs 1400.
• In-line but weak Q4; Transfer of Jio assets to increase cost from Q1 of FY20.
• Ramp-up of petcoke gasification over next few months and IMO regulations positive.
• Pace of growth in both Retail and Jio remains quite strong.

Motilal Oswal on Reliance Industries

• Maintained ‘Neutral’ with target price of Rs 1431.
• Better petrochem offsets poor refining performance.
• Jio growth slows down; equity value reduced by 10 percent due to higher debt.
• No thoughts on ARPU increase; focus to grow subscribers.

CLSA on ICICI Lombard

• Maintained ‘Buy’; hiked target price to Rs 1310 from Rs 1040.
• Q4: better operating results dragged down by corporate costs.
• Few headwinds and network expansion and PSU consolidation are tailwinds.
• Hike EPS estimates for FY20-21 by 1-2 percent on healthy premium growth and underwriting profits.

Nomura on Max Financial

• Maintained Buy; hiked target price to Rs 550 from Rs 492.
• Continuing to deliver well; business mix also better now.
• Axis Bank tie-up: negative outcome factored in.
• Maintain Buy on inexpensive valuations.

Emkay on HDFC Bank

• Maintain Buy with target price of Rs 2750.
• Strong Q4 led by loan growth and margins; Asset quality remains stable.
• Expect RoA/RoE of 1.9 percent/17-18 percent over FY20/21 led by superior margins and operating leverage.

BOBCAPS on HDFC Bank

• Downgrade to ‘Add’ from ‘Buy’; maintained target price of Rs 2510
• Wholesale business drives loan growth.
• Management remains cautious on agri portfolio.
• Downgrade on slowing retail growth and concerns around agri-asset quality.

Earnings Reaction To Watch

Reliance Industries (Q4 Standalone, QoQ)

• Revenue seen down 16.5 percent to Rs 83,597 crore.
• Ebitda down 5.5 percent to Rs 13,704 crore.
• Ebitda margin at 16.4 percent versus 14.5 percent.
• Net profit down 4.2 percent to Rs 8,556.
• Declares a dividend of Rs 6.5 per share.
• GRM down 7 percent to $8.2/bbl versus $8.8/bbl.

Reliance Jio (Q4 QoQ)

• Revenue up 7 percent at Rs 11,106 crore.
• Ebitda seen 6.8 percent up at Rs 4,326 crore.
• Ebitda margin flat at 39 percent.
• Net profit up 1.1 percent at Rs 840 crore.
• ARPU seen 3 percent down to Rs 126 versus Rs 130

ICICI Lombard General Insurance (Q4, YoY)

• Gross direct premium up 19.1 percent at Rs 34,85c crore.
• Net income up 7.5 percent at Rs 228 crore.
• Solvency ratio at 2.24 times versus 2.05 times.
• Declares dividend of Rs 3.5 per share.

Jay Bharat Maruti (Q4, YoY)

• Revenues flat at Rs 480 crore.
• Net profit down 38.7 percent at Rs 11.1 crore.
• Ebitda down 7.5 percent at Rs 44.5 crore.
• Margin at 9.3 percent versus 10 percent.
• Decrease in inventory of Rs 15.4 crore.
• Finance Cost up 46 percent at Rs 9.8 crore.
• Declares dividend of Rs 2.5 per share.

Alicon Castalloy (Q4 Consolidated, YoY)

• Revenues up 5.3 percent at Rs 313.4 crore.
• Net profit up 24.2 percent at Rs 15.9 crore.
• Ebitda up 1.9 percent at Rs 37.1 crore.
• Margin at 11.8 percent versus 12.2 percent.
• Declares dividend of Rs 5 per share. .

Tata Coffee (Q4 Consolidated, YoY)

• Revenue from operation up 5 percent at Rs 460 crore.
• Ebitda up 69 percent at Rs 62.3 crore.
• Ebitda margins at 13.6 percent versus 8.4 percent.
• PAT up 63 percent at Rs 10.5 crore.
• Other income down 52 percent at Rs 3.9 crore.
• Declares dividend of 1.5 per share for FY19.

• Dr Reddy’s Laboratories said the U.S. FDA classified inspection in Andhra Pradesh’s formulations plant as Voluntary Action Initiated. On Jan. 15, U.S. FDA had issued form 483 with four observations for this plant in its audit.
• Wipro clarified on the cyber-attack news stating that remedial steps to contain the incident and mitigate any potential effects of the incident had been taken and this incident does not impact the company’s ongoing critical operations.
• Bharti Airtel’s rights issue up to Rs 25,000 crore to open on May 3 till May 17. Board also approved the Letter of Offer to be filed with exchanges. Record date for the issue is set April 24.
• Asian Granito entered the sanitaryware segment with 160 SKUs in products including Wash Basins, Water Closets, Urinals, etc. The company will invest Rs 8 crore for expansion in this segment and the expects this business to have a turnover of Rs 80-100 crore over the next 4-5 years. The commercial launch is expected to be done by June across India.
• Godrej Properties clarified that Pune based developer Gera Development claimed misuse of its registered trademark by one of the company’s project. The Godrej company said in its press release that they are contesting this case before the court. Also, the company may consider raising funds by issue of securities on April 30.
• GlaxoSmithKline Consumer Healthcare board to consider and (if thought fit) approve the scheme of amalgamation with Hindustan Unilever and self on June 1.
• Mercator arm sought to defer debt owed to some creditors till it’s able to recover money owed to it and pending the outcome of proceeding with ONGC. Company’s members and unsecured creditors to meet on May 21.
• Borosil Glassworks made additional investment of Rs 5 crore its arm ‘Klasspack’.
• Finolex family dispute escalated amid several counter-allegations (Economic Times)
• Coal India to ask power plants to cut coal imports (DNA Money)
• ITC sought hike on wood imports to 10 percent. (Business Line)
• Adani Power withdrew offer to acquire KSK Mahanadi (Business Standard)
• Skootr took a 22,000 sq. ft office space on lease from DLF (Financial Express)
• Sugar Technologists Association sought hike in MSP to Rs 3600 per quintal (Financial Express)
• Airtel Payments Bank launched two-wheeler insurance in partnership with Bharti Axa General Insurance.
• VK Power & Infra arm signed an agreement with Abu Dhabi Investment Authority and National Investment & Infrastructure Fun for investment in new shares in the Group’s airports holding company equating to a 49 percent stake. Company says it has initiated a process to identify and select preferred investors to raise capital to reduce or refinance debt obligations of up to Rs 5,750 crore.
• InterGlobe Aviation clarified that the company is undergoing a DGCA audit along with the annual main base audit. The company says it has received number of show cause notices and has responded accordingly.
• SBI to examine status on long-term fund-raising plan up to $2.5 billion for financial year 2020 on April 24.
• JSW Steel said it will appeal against NCLT order on Vardhman Industries, since important reliefs sought by the company have not been granted. The company says in its press release that it has raised $500 million by allotment of fixed rate senior unsecured notes, which will be listed on Singapore Exchange Securities Trading.
• Exide Industries entered into an agreement with three SPVs to acquire a minimum of 26 percent stake in each the entities.
• Polyplex Corporation’s Thailand arm received civil monetary penalty order from regulatory authorities in connection with alleged trading violations. The penalty amounts to around Rs 12.2 crore. (Alert: Company has a market cap of Rs 1762 crore)
• SREI Infra Finance arm and Bank of Baroda announced a strategic alliance to offer joint loans for infra equipment under a co-lending arrangement (Press release)
• DHFL: Crisil downgraded commercial papers worth Rs 850 crore from ‘A2+’ to ‘A3+’, with a rating watch of negative implications. The rating agency says continued low visibility in raising funds and liquidity levels have remain subdued due to earlier expectations.
• Eclerx Services board to consider final terms and conditions of buy-back on April 26.
• Axis Bank issues five-year senior fixed rate green bonds aggregating to $40 million under its notes program.
• Jet Airways: Rajshree Pathy confirmed her resignation as Independent Director.
• Tata Sponge Iron to change name to Tata Steel Long Products.
• Cyient launched digital health care solutions for the Indian market in collaboration with Xynteo
• CCI approved L&T’s deal with Schneider and Macritchie, subject to compliance of certain modifications (Twitter).
• Dhanuka Agritech promoters to sell 0.26 percent in the open market to meet promoter shareholding SEBI norms from April 20 to May 7.
• CCI approved acquisition by PGLH (of Delaware Inc.) of 50 percent shareholding in each of DHFL Pramerica Asset Managers and DHFL Pramerica Trustees and sole control over DHFL Pramerica Mutual Fund (Twitter).
• ICRA downgraded IL&FS Wind Energy NCD rating to ‘D’ from ‘C-’ (Bloomberg News)
• Adani Enterprises Wholly owned subsidiary – Adani Defence Systems and Technologies Ltd. – acquired control of Alpha Design Technologies Pvt. Ltd. which is involved in aerospace and defence activities. The acquired entity had a turnover of Rs 218 crore in FY18.
• Shilpa Medicare Received U.S. FDA approval for Busulfan Injection which is used in the treatment of patients with chronic myelogenous leukemia. The US market for this drug in Q4CY18 was close to $ 32.8 million.
• Reliance Capital Brickwork Ratings and CARE Ratings downgrade its rating to A+ and A for long-term debt programme, market linked debentures and subordinated debt. The rating agencies stated this action is primarily due to extension of timeline for progress of planned divestments in various companies.
• Reliance Home Finance Brickwork Ratings and CARE Ratings downgrade its rating to A+ and BBB+ on long-term debt programme, market linked debentures, subordinated debt and non-convertible debentures. Downgrade due to change in parent company – Reliance Capital – rating.

• The Bank of Japan, Bank of Canada, Bank of Russia, Sweden’s Riksbank and Bank of Indonesia set monetary policy
• Germany’s IFO data is released Wednesday
• Japan’s Shinzo Abe meets leaders of the European Union Thursday before flying to the U.S. for a summit with President Donald Trump
• The initial print on first-quarter U.S. GDP Friday will be closely watched for clues as to how the economy responded to the government shutdown and fallout from to the fourth-quarter market rout

• Brent crude traded 0.86 percent higher at $72.59 per barrel.
• West Texas crude gained 0.8 percent to $64.51 a barrel.

London Metal Exchange

• Aluminium snapped its two-day blip, rose 0.92 percent.
• Copper ended a two-day rally, ended 1.22 percent lower.
• Lead ended 0.26 percent lower.
• Tin ended lower for the fourth straight day, down 0.69 percent.
• Zinc ended 1.86 percent lower.
• Nickel ended lower for the fourth straight day. down 1.71 percent.

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fell 0.27 percent to 11,777.50 as of 8:30 a.m.

Stocks in Asia traded mixed Monday as the Easter holiday weekend continued in many countries. Japanese stocks retreated and their Korean counterparts fluctuated, while U.S. futures were little changed.

Short on time? Well, then listen to this podcast for a quick summary of the article!