Sensex, Nifty Extend Decline For Second Day In A Row Led By TCS

Indian equity benchmarks declined for second day in a row led by losses in TCS after its operating margin contracted in December quarter. However, losses were capped as ITC and Infosys saw buying interest.

The S&P BSE Sensex fell 0.27 percent or 97 points to 36,010 and the NSE Nifty 50 Index declined 0.25 percent or 27 points to 10,795.

Sixteen of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Realty Index’s 1.4 percent decline. On the flipside, S&P BSE FMCG Index was top gainer, up 0.54 percent.

Mid- and small-cap stocks also witnessed selling pressure as the S&P BSE MidCap Index fell 0.13 percent and the S&P BSE SmallCap Index declined 0.19 percent.

• Bajaj Finance has 28 lakh shares change hands in a block deal. Stock up 0.1 percent at Rs 2,517.

Buyers and sellers were not immediately known

Source: Bloomberg

Shares of the Mumbai-based operator of petroleum pipelines operator fell as much as 1.2 percent to Rs 332.75 after its profit declined in December quarter.

Key earnings highlights:

• Revenue at Rs 21.18 crore versus Rs 21.13 crore (YoY)
• Net profit declines in 29 percent to Rs 1.89 crore versus Rs 2.67 crore (YoY)

U.S. stock futures held on to gains and European shares followed Asia higher at the end of a week when sentiment was bolstered by a more dovish tone from the Federal Reserve and hopes for a breakthrough on trade. The dollar slipped and Treasuries climbed.

Shares of the Mumbai-based educational services provider rose as much as 11.93 percent, the most in over three weeks, to Rs 204.

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

As many as 3.09 lakh shares changed hands on the BSE compared with an average of 51,000 shares traded daily in the past two weeks, according to information on BSE's website.

Shares of Karnataka Bank Ltd. were trading higher after the company reported a 60.6 percent rise in net profit at Rs 140.4 crore. Net interest income for the bank rose 8.1 percent at Rs 487.9 crore.

Other Key Highlights:

• Provisions at Rs 209 crore vs Rs 193.2 crore (QoQ)
• GNPA at 4.45 percent vs  4.66 percent (QoQ)
• NNPA unchanged at 3 percent (QoQ)

Shares of the Mumbai-based auto maker extended decline and fell as much as 3.23 percent to Rs 179.75 after its wholesales declined in December.

• Global wholesales fell 14 percent to 100,551 units, Tata Motors said in an exchange filing.
• Global wholesales for Jaguar Land Rover 45,474 units
• Jaguar wholesales at 14,088 units
• Land Rover wholesales at 31,386 units

Shares of the Hyderabad-based software developer rose as much as 20 percent, the most in over five months, to Rs 45.75 after it on order for standardization of telemedicine facility in various districts of Andhra Pradesh, Raminfo said in an exchange filing.

The project turnover is estimated to be around Rs. 400 crores in phase I for the first five years, the exchange filing added.

Shares of the Mukesh Ambani-led company declined as much as 1.40 percent to Rs 1,092 after it shut down one of its crude distillation units and coker unit at the Jamnagar refinery for maintenance and inspection for four weeks starting Jan. 16.

The company also stated that other crude distillation and secondary processing units are expected to operate normally.

• NTPC has 48 lakh shares change hands in two block deals. Stock up 0.17 percent at Rs 150.

Buyers and sellers were not immediately known

Source: Bloomberg

• KRBL: The Delhi-based food processing company rose as much as 13.16 percent, the most in over five months, to Rs 331. Trading volume was 30 times its 20-day average.
• AIA Engineering: The Gujarat-based chemical maker fell as much as 1.5 percent to Rs 1,646. Trading volume was more than 20 times its 20-day average.
• Caplin Point: The Chennai-based pharma company rose as much as 9.87 percent to Rs 418. Trading volume was 20 times its 20-day average.
• Laurus Labs: The Hyderabad-based drugmaker rose as much as 0.8 percent to Rs 376. Trading volume was more than eight times its 20-day average.

Expert committee on the economic capital framework may recommend that the RBI transfer its surplus capital to the government in tranches, according to a person familiar with the discussions.

Indian equity benchmarks extended declined paced by losses in TCS, Tata Motors, Larsen & Toubro and IndusInd Bank.

The Sensex fell 0.34 percent or 123 points to 35,982 and the Nifty 50 Index declined 0.33 percent or 36 points to 10,786.

Fifteen of 19 sector gauges compiled by BSE were trading lower led by the S&P BSE Realty Index's 1.35 percent decline. On the flipside, S&P BSE FMCG Index was top gainer, up 0.4 percent.

Mid- and small-cap shares were also witnessing selling pressure as the S&P BSE MidCap Index fell 0.33 percent and the S&P BSE SmallCap Index declined 0.20 percent.

Shares of the Anil Ambani-led telecom company declined as much as 1.81 percent to Rs 13.60 after the Supreme Court deferred its plea for spectrum sale clearance.

The court will hear its plea on spectrum sale after three weeks.

Shares of the Pune-based waste water treatment solution provider rose as much as 8.99 percent to Rs 150.30 after it expanded its bio-energy basket by adding compressed bio-gas technology in its portfolio.

The company said it is on track with execution of three bio-refinery projects based on proprietary 2G technology.

Nifty's 11,000 call option contract was among the most active option contracts on the National Stock Exchange.

Premium on the contract declined 8.3 percent to Rs 73. Over 6.17 lakh shares were added to the open interest which stood at over 47 lakh shares.

Shares of the country's second largest software services company declined as much as 0.49 percent to Rs 676.45 ahead of its December quarter earnings.

Here is what to expect from Infosys in December quarter (Bloomberg consensus estimates, consolidated, QoQ):

• Dollar revenue seen rising 1.3 percent to $2,958 million versus $2,921 million.
• Rupee revenue seen advancing 3.2 percent at Rs 21,262 crore versus Rs 20,609 crore.
• EBIT seen up 2.1 percent at Rs 4,997 crore versus Rs 4,894 crore.
• EBIT margins seen at 23.5 percent versus 23.7 percent.
• Profit seen up 0.6 percent at Rs 4,134 crore versus Rs 4,110 crore.

Shares of the Kolkata-based private sector lender fell as much as 2.75 percent to Rs 458.60 after Macquarie downgraded the stock to 'Underperform' from 'Neutral' and cut its target price to Rs 400 from Rs 560.

Macquarie in a note said:

• Introduce 20 percent capital allocation discount to target multiple due to overhang.
• Post Gruh acquisition, risk of another expensive or ill-conceived merger an overhang.
• Expect the stock to underperform despite strong fundamentals.

Gauge of state-run lenders declined paced by losses in Canara Bank, Bank of India and Bank of Baroda.

Nifty PSU Bank Index fell 0.7 percent to 3,167, making it the second worst gauge on the National Stock Exchange.

Shares of the battery maker rose as much as 17.2 percent, the most in nearly three years, to Rs 214.

The company’s biggest shareholder Williamson Magor has mandated Kotak Mahindra Bank for the potential sale of a 45 percent, Times of India reported quoting people directly aware of the matter.

Trading volume was 200 times its 20-day average, Bloomberg data showed. The Relative Strength Index was 73, indicating that the stock may be overbought.

Ashok Leyland’s outgoing Managing Director and CEO Vinod Dasari spoke to BloombergQuint. Here are the key highlights from the conversation:

• The sales volume during the last two months saw a temporary blip
• Have recently won orders from various state transport corporations.
• Don’t now see slowdown in demand for commercial vehicles.
• NBFC Financing issues are behind us.
• Demand from Mining, Infra sector seen strong moving ahead.
• Have already done four price hikes in 2019.
• Will protect double digit margins despite higher industry discounting.
• Have not been chasing market share on the cost of margins.
• Expect pre-buying to happen early next year due to change in emission norms.
• Have been market leaders in India for the buses segment.

Key highlights from the conversation:

• Expect 2019 to be better than 2018.
• First half to remain volatile.
• Markets will show strength post elections.
• Expect corporate earnings to grow in the high teens.
• Expect Q3 to be disappointing because of high input costs and NBFC liquidity crunch.
• Expect subdued equity flows for next couple of months.
• Private sector financials to deliver strong earnings growth.
• Autos, telecom's to see further pain.
• Positive on capital goods and IT sectors as well.
• Mid and small caps to have relatively better year.
• Consumption names facing margin pressure and moderating demand.
• Valuations for capital goods have corrected to 2002 levels.

Shares of Himachal Futuristic Communications Ltd. rose as much as 5.8 percent to Rs 24.50.

The company won optical fibre cable orders worth Rs 500 crore for BharatNet Phase II project from Larsen and Toubro and ITI-led consortium, according to its media statement on the exchanges.

Trading volume was more than eight times its 20-day average, Bloomberg data showed. The Relative Strength Index was at 71, indicating that the stock may be overbought.

Shares of Jet Airways halted a three-day decline and rose nearly 3 percent intraday to Rs 250.

The Naresh Goya-led airline carrier it said to weigh re-starting bailout talks with Tata Group, Bloomberg reported, quoting people with knowledge of the matter.

The stock has declined 11 percent so far this year compared to a 0.3 percent gain in the Sensex.

Shares of the Jaguar Land Rover owner rose as much as 1.1 percent to Rs 187.75.

Jaguar Land Rover plans to slash 4,500 jobs worldwide, as the U.K.’s biggest automobile maker responds to the sales slowdown caused by Brexit, flagging demand for diesel-powered vehicles and a downturn in China. (Read the full story here)

The stock has declined 56.9 percent over the last 12 months compared to a 6.1 percent advance in the Sensex, Bloomberg data showed.

Shares of the country’s largest IT company by market value fell as much as 1.9 percent to Rs 1,852.15.

The company struck deals worth $5 billion for the third straight quarter even as onsite hiring dragged the margin down for India’s largest software services provider.

Operating margin fell 90 basis points over the previous quarter to 25.6 percent in three months ended December, according to its exchange filing. (more details here)

Here’s what analysts had to say about TCS post its Q3 results announcement:

CLSA

• Maintained ‘Buy’; cut price target to Rs 2,460 from Rs 2,500.
• Margin miss driven by apposite trade-off in a red-hot talent market.
• Cut margin estimates by 60-70 basis points to reflect growth-margin trade-off.
• Expect TCS to fully exploit strong demand and gain share from its unique position.

Macquarie

• Maintained ‘Outperform’; cut price target Rs 2,291 from Rs 2,345.
• Results a mixed bag, with revenue meeting estimates but missing margins by 100 basis points.
• Lowering our FY19–21 EBIT margin estimates 30–50 basis points.
• Expect double digit growth in FY20 on strong growth in order book and positive commentary.

Morgan Stanley

• Maintained ‘Overweight’ with a price target of Rs 2,260.
• Q3: small beat on revenues more than offset by miss on margins.
• See downside risks to margin expectations given dismal performance in Q3.
• Margin levers will take time and could face headwinds in interim.

Indian equity benchmarks resumed rally after a one-day blip. The S&P BSE Sensex index rose as much as 0.26 percent to 36,200 and the NSE Nifty 50 Index rose as much as 0.21 percent to 10,844.80.

The market breadth was tilted in favour of buyers. Eight out of 11 sectoral gauges compiled by NSE advanced, led by the NSE Nifty FMCG Index’s 0.6 [percent gain. On the flipside, the NSE Nifty IT Index was the top sectoral loser, down 0.47 percent.

India’s rupee is set to cap its first weekly loss in four as crude oil is set for its biggest weekly gain in two years. A rebound in prices of oil, the nation’s top import, and concerns about an expensive bailout for farmers before general elections to be held by May has caused the rupee to miss out on a revival in emerging currencies.

The rupee ended at 70.4125 on Thursday, down nearly 1 percent on the week with the implied opening from forwards suggesting it may start trading at 70.48 per dollar on Friday.

For bonds, there isn't much good news in store either with traders awaiting details of any farm package to be announced by the government. The election handouts are likely to threaten India's fiscal deficit target and could see the government borrow more to bridge the gap.

The yield on the 10-year benchmark bond rose 1 basis point to end at 7.48% on Thursday, up 3 basis points so far this week.

F&O Cues

• Nifty January futures closed trading at 10,858, premium of 36 points.
• Max open interest for January series at 11,000 strike value call (open interest at 40.9 lakh shares).
• Max open interest for January series at 10,500 strike value put (open interest at 41.6 lakh shares).

Stocks In F&O Ban

• Adani Power
• Jet Airways

Put-Call Ratio

• Nifty PCR at 1.46 versus 1.43.
• Nifty Bank PCR at 0.92 versus 1.4.

On TCS

CLSA

• Maintained ‘Buy’; cut price target to Rs 2,460 from Rs 2,500.
• Margin miss driven by apposite trade-off in a red-hot talent market.
• Cut margin estimates by 60-70 basis points to reflect growth-margin trade-off.
• Expect TCS to fully exploit strong demand and gain share from its unique position.

Macquarie

• Maintained ‘Outperform’; cut price target Rs 2,291 from Rs 2,345.
• Results a mixed bag, with revenue meeting estimates but missing margins by 100 basis points.
• Lowering our FY19–21 EBIT margin estimates 30–50 basis points.
• Expect double digit growth in FY20 on strong growth in order book and positive commentary.

Morgan Stanley

• Maintained ‘Overweight’ with a price target of Rs 2,260.
• Q3: small beat on revenues more than offset by miss on margins.
• See downside risks to margin expectations given dismal performance in Q3.
• Margin levers will take time and could face headwinds in interim.

More Calls

Macquarie on Bandhan Bank

• Downgraded to ‘Underperform’ from ‘Neutral’; cut price target to Rs 400 from Rs 560.
• Introduce 20 percent capital allocation discount to target multiple due to overhang.
• Post Gruh acquisition, risk of another expensive or ill-conceived merger an overhang.
• Expect the stock to underperform despite strong fundamentals.

UBS on IGL

• Upgraded to ‘Neutral’ from ‘Sell’; hiked price target to Rs 300 from Rs 235.
• Upgrade on strong volume growth outlook and improving margins.
• Expect 11 percent volume growth in FY18-21 due to expansion in adjacent areas.
• With increase in gas costs passed through, margins could recover from the second half of the current financial year.

UBS on GAIL

• Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 335 from Rs 460.
• Earnings peaked; see downside risk from oil fall and the U.S. LNG concerns.
• Risk of losses from contracted U.S. LNG to re-emerge if Brent remains lower.
• Transmission business is benefiting from tariff hikes; volume growth to follow.

Morgan Stanley on Marico

• Maintain ‘Equal-weight’ with a price target of Rs 320.
• Copra prices for December risen 10 percent (MoM); see near term implication on Marico.
• If current copra prices sustain, 2019 prices will lower versus 2018.

Axis Securities on City Union Bank

• Initiated ‘Buy’ with a price target of Rs 228.
• Conservative lending approach to growth a key strength.
• MSME/Trader/Retail to drive loan book growth.
• Credit cost to decline with focus on lower slippages and recovery.

• Tata Investment Corporation record date for share buy-back.
• Acrysil record date for share split from Rs 10 to Rs 2 per share.
• Gruh Finance, 5paisa Capital to move into Short Term ASM Framework.

• Bliss GVS Pharma: Kotak Mahindra Investments sold 5.5 lakh shares or 0.53 percent equity at Rs 171.59 each.
• CL Educate: ICICI Lombard General Insurance sold 1.03 lakh shares or 0.73 percent equity at Rs 114.98 each.

Tata Consultancy Services (Q3 QoQ,)

• Dollar revenue up 0.7 percent at $5,250 million.
• Revenue up 1.3 percent at Rs 37,338 crore.
• Net Profit up 2.6 percent at Rs 8,105 crore.
• EBIT down 2.2 percent at Rs 9,559 crore.
• Margins at 25.6 percent versus 26.5 percent.

Nifty Earnings To Watch

• Infosys

Other Earnings To Watch

• Reliance Industrial Infrastructure
• Karnataka Bank

• Jet Airways is said to weigh re-starting bailout talks with Tata Group, Bloomberg reported quoting people with knowledge of the matter.
• Tata Motors’ JLR December sales were down 6.4 percent to 56,120 units on a year-on-year basis. The company said retail sales were down due to growing trade tension between the U.S. and China. JLR added that its going to reduce 4,500 jobs from its global workforce says as a part of its cost reduction program. It will launch a voluntary redundancy program in the U.K. first.
• Reliance Industries will shut down one of its crude distillation units and coker unit at the Jamnagar refinery for maintenance and inspection for four weeks starting Jan. 16. The company also stated that other crude distillation and secondary processing units are expected to operate normally.
• Himachal Futuristic Communication won optical fibre cable orders worth Rs 500 crore for BharatNet Phase II project from Larsen and Toubro and ITI-led consortium.
• Container Corporation of India commenced its coastal operations from Jan. 10. The company will deploy two vessels carrying a minimum of load of 700 containers and will provide transportation and handling services between Kandla Port to Tuticorin port via the ports of Mangalore and Cochin.
• Praj Industries expanded its bio-energy basket by adding compressed bio-gas technology in its portfolio. The company says it is on track with execution of three bio-refinery projects based on proprietary 2G technology.
• Lemon Tree Hotels signed a licensing agreement for 50-room resort property in Andhra Pradesh.
• Shriram EPC clarified on the news that PNB-led consortium has taken possession of its arm, stating that company has just 1.04 percent stake in the shareholding of the mentioned joint venture.
• Shakti Pumps said that there was a dispute between their Labour contractor and some workers resulting in the contractor to cancel the agreement. This led to the company shutting its operations between Jan. 9-10.
• KNR Constructions arm received financial closure from NHAI for Telangana Project worth Rs 12,340 crore.
• NBCC India secured total business worth Rs 188 crore for December.
• Mukand received no adverse letter from the exchanges for the proposed merger of its three arms with self, as to enable the company to file the scheme with NCLT.
• Welspun Enterprises arm executed an agreement with Maharashtra Public Works Department to upgrade roads in the state at a bid project cost of Rs 1,460 crore and for the first year’s operation and maintenance cost for Rs 31.5 crore.
• ICICI Securities loses its spot to Zerodha as India’s largest broker.

• The Bloomberg Commodity Index dropped 0.5 percent on Thursday.
• West Texas Intermediate crude fell 0.5 percent to $52.34 a barrel after entering a bull market on Wednesday.
• Brent crude posted its first eight-day rally since July 2017, closed 0.39 percent higher at $61.68 a barrel.
• Gold rose 0.1 percent to $1,288.23 an ounce.

• Aluminium halted a two-day decline, ended 0.46 percent higher.
• Copper ended 0.47 percent lower.
• Lead clocked its longest gaining streak since Aug. 24, ended 0.25 percent higher.
• Zinc ended 1.24 percent lower.
• Tin posted its first four-day rally since Dec. 24, ended 0.37 percent higher.
• Nickel ended unchanged after rallying for four days.

BQEdge is specially curated for BQBlue subscribers. Every day this note will offer special equity market and stock-specific insights and flag select emerging trends in the tricky-to-trade derivatives market.

On Today’s Edition:

• Can beaten-down Yes Bank sustain its recent bounce back?
• Will Infosys hurt for same reasons as TCS?

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.2 percent to 10,883 as of 8:10 a.m.

Asian equities posted modest gains Friday and were on course for the strongest week since early November, bolstered by continued signs of flexibility from the Federal Reserve and optimism over U.S.-China trade negotiations.

Shares in Tokyo led the region, with trading in Hong Kong, South Korea and Australia mostly flat.

Short on time? well, then listen to this podcast for a quick summary of All You Need To Know before the opening bell.