Rate Cut Hopes Help Sensex, Nifty Wipe Out Early 2019 Losses

Indian equity benchmarks rallied on rate cut hopes after inflation cooled down to lowest level in eighteen months in December.

The S&P BSE Sensex rose 1.30 percent or 465 points to 36,318 and the NSE Nifty 50 Index jumped 1.39 percent or 149 points to 10,887.

Consumer price inflation fell to its lowest in 18 months in December 2018 following a persistent decline in food prices and a drop in fuel costs. The easing price pressures, together with moderating growth, may prompt a rethink on interest rates when the Monetary Policy Committee meets next month.

Retail inflation fell to 2.19 percent in December compared with 2.3 percent in November, government data released on Monday showed. A Bloomberg poll of 36 economists had estimated inflation at 2.2 percent for December 2018.

All the 19 sector gauges compiled by BSE ended higher led by the S&P BSE Information Technology Index's 3 percent gain.

Mid- and small-cap shares also witnessed buying interest as the S&P BSE MidCap Index rose 0.60 percent and the S&P BSE SmallCap Index climbed 0.70 percent.

Shares of the Ludhiana-based textile maker rose as much as 7.94 percent, the most since Oct. 15, to Rs 75.45 after its profit rose 53 percent in December quarter beating Bloomberg consensus estimates.

Key earnings highlights:

• Revenue up 18 percent at Rs 1,291.39 crore versus Rs 1,094.10 crore (YoY)
• Net profit up 53 percent at Rs 112 crore versus Bloomberg estimate of Rs 99.4 crore (YoY)
• EBITDA up 21.4 percent at Rs 242.6 crore versus Rs 199.9 crore
• Margins at 18.8 percent versus 18.3 percent
• Other income at Rs 15 crore
• Announces dividend of Rs 1.20 per share

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

Premium on the contract surged 66 percent to Rs 75.10. Over 6.50 lakh shares were reduced from the open interest which stood at over 42.72 lakh shares.

Shares of the Noida-based news channel operator came off day's highs and traded 0.9 percent higher at Rs 40.25 after it reported loss in December quarter.

Key earnings highlights:

• Net loss at Rs 1.11 crore versus profit of Rs 8.14 crore (YoY)
• Revenue at Rs 1,524 crore versus 366.02 crore (YoY)
• Other income at Rs 14.03 crore

• NTPC has 34.8 lakh shares change hands in two block deals. Stock down 0.34 percent at Rs 145.05.

Buyers and sellers were not immediately known

Source: Bloomberg

Shares of the Mumbai-based television channel operator rose as much as 3.38 percent to Rs 463.25 ahead of its December quarter earnings.

Here is what to expect from Zee Entertainment in December quarter (Consolidated Bloomberg estimates YoY):

• Net profit seen coming at Rs 422 crore versus Rs 322 crore.
• Revenue expected at Rs 2,095 crore versus Rs 1,838 crore.
• EBITDA expected at Rs 692 crore versus Rs 594 crore.

Shares of the Delhi-based software developer rose as much as 5.66 percent to Rs 56 after its board approved share buyback proposal.

R Systems will buy back 37 lakh shares at Rs 65 apiece for total consideration of Rs 23.90 crore, the company said in an exchange filing.

• Gujarat Gas: The Ahmedabad-based city gas distributor rose as much as 18 percent, the most in three months, to Rs 158. Trading volume was more than 30 times its 20-day average.
• Sadbhav Infrastructure: The Ahmedabad-based construction services provider fell as much as 2.15 percent to Rs 91.10. Trading volume was 17 times its 20-day average.
• Jammu & Kashmir Bank: The Srinagar-based lender rose as much as 13.40 percent, the most in three months, to Rs 42.30. Trading volume was more than 13 times its 20-day average.
• Coffee Day Enterprises: The Bengaluru-based cafe chain operator rose as much as 6.5 percent to Rs 290.90. Trading volume was 13 times its 20-day average.

Shares of the Delhi-based broadcasting company rose as much as 4.81 percent, the most in over a month to Rs 39.25 after it reported December quarter earnings.

Key earnings highlights:

• Revenue at Rs 1,474.70 crore versus Rs 271.13 crore (YoY)
• Net profit at Rs 134.53 crore versus Rs 8.72 crore (YoY)

December quarter numbers are not comparable as Viacom18 Media Private Limited and IndiaCast Media Distribution Private Limited became subsidiaries of TV18 Broadcast with effect from March 2018, the company said in an exchange filing.

Indian equity benchmarks held on to gains paced by a rally in Yes Bank, Infosys, Reliance Industries and TCS.

The S&P BSE Sensex rose 1 percent or 357 points to 36,211 and the NSE Nifty 50 Index climbed 1.02 percent or 109 points to 10,847.

All 11 sector gauges compiled by National Stock Exchange were trading higher led by the Nifty IT Index's 2.7 percent gain.

Mid- and small-cap shares were also witnessing buying interest as the Nifty Midcap 100 Index rose 0.51 percent and Nifty Smallcap 100 Index advanced 0.72 percent.

Shares of footwear maker extended gains or the second day and rose as much as 1.2 percent to hit a new all-time high at Rs 1,176.05.

The stock traded at 45.2 time sits estimated forward earnings per share compared to 38.2 times for the two-year historical average, Bloomberg data showed.

The NSE Nifty 50 Index traded marginally above 100-day moving average of 10,843.58.

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

Premium on the contract jumped 41.57 percent to Rs 63.85. Over 2.87 lakh shares were removed form the open interest which stood at over 46.34 lakh shares.

About 12 lakh shares of Federal bank changed hands in a block deal, Bloomberg data showed. Buyers and sellers were not known immediately.

Shares of auto component maker fell as much as 4.5 percent to trade at its lowest levels since February 2017 at Rs 3,212.

Trading volume was almost five times its 20-day average, Bloomberg data showed. The stock has declined 35.2 percent compared to a 3.6 percent advance in the Sensex.

Shares of Yes Bank extended gains for the second day and rose as much as 3.6 percent to trade above Rs 200 for the first time since Nov. 22.

The stock was the second best performer on Sensex and Nifty.

Shares of the construction company halted a two-day decline and rose as much as 1.1 percent to Rs 1,348.

The company’s Hydrocarbon Consortium won EPCI order from Saudi Aramco, according to its statement on the exchanges.

The stock traded at 19 times its estimated forward earnings per share compared to a 22.2 times for the two-year historical average, Bloomberg data showed.

Shares of ICICI Securities fell as much as 8.8 percent, the most in over nine months, to Rs 254, its lowest since Nov. 14.

The company’s profit during the quarter ended December declined 33 percent on a yearly basis, according to its stock exchange filing.

Key earnings highlights (Q3, YoY)

• Total revenue down 18 percent to Rs 406 crore.
• Net profit down 33 percent at Rs 102 crore.
• Brokerage revenue down 17 percent to Rs 227 crore vs Rs 274 crore due to subdued market conditions.
• Distribution revenue down 11 percent to Rs 107 crore due to mutual fund regulatory changes.
• Investment banking revenue down 37 percent to Rs 25.6 crore due to subdued primary market.

Here’s what CLSA had to say about ICICI Securities after the company announced its quarterly results:

• Maintained ‘Buy’; cut price target to Rs 360 from Rs 380.
• Weak markets and tighter norms on mutual fund fees drag profits; cut earnings forecast.
• Growth in active client base has also moderated.
• Valuations reasonable; trades at par with global peers.

Shares of the information technology company rose as much as 2.4 percent to Rs 320.10.

The Bengaluru-based software developer is considering a proposal to issue bonus shares, the second such by the software services provider in the last two years. (more details here)

The stock was the best performer on Nifty. Trading volume was more than 10 times its 20-day average, Bloomberg data showed. The scrip has declined 2 percent in the last 12 months compared to 3.6 percent advance in the Sensex.

Indian equity benchmarks gained in open after declining for three consecutive sessions. The S&P BSE Sensex Index rose as much as 0.5 percent to 36,032 and the NSE Nifty 50 Index rose as much as 0.48 percent to 10,789.15.

The market breadth was tilted in favour of buyers. About 939 stocks advanced and 466 shares declined on National Stock Exchange.

All the sectoral gauges compiled by NSE advanced, led by the NSE Nifty Media Index’s 0.77 percent gain.

The Indian rupee opens higher against the U.S. dollar after depreciating last two days. The home currency appreciated as much as 0.27 percent to 70.74 against the greenback.

F&O Cues

• Nifty January futures closed trading at 10,770, premium of 33 points.
• Max open interest for January series at 11,000 strike value call, (open interest at 49.2 lakh shares).
• Max open interest for January series at 10,500 strike value put, (open interest at 38.4 lakh shares).

Stocks In F&O Ban

• Adani Power
• Jet Airways

Put-Call Ratio

• Nifty PCR at 1.35 versus 1.46.
• Nifty Bank PCR at 0.84 versus 0.92.

CLSA on ICICI Securities

• Maintained ‘Buy’; cut price target to Rs 360 from Rs 380.
• Weak markets and tighter norms on mutual fund fees drag profits; cut earnings forecast.
• Growth in active client base has also moderated.
• Valuations reasonable; trades at par with global peers.

Kotak on Motherson Sumi

• Maintained ‘Sell’; cut price target to Rs 140 from Rs 150.
• Global headwinds to weigh on the stock; cut FY19-21 earnings estimates by 8-10 percent.
• Key customers likely to face challenging environment in 2019.
• Despite sharp correction, believe earnings downgrade cycle is not yet over.

Emkay on Radico Khaitan

• Maintained ‘Buy’ with a price target of Rs 547.
• Plant visit reaffirms view – a solid long-term growth story.
• Molasses season in UP is progressing; expect prices to be in line with last year.
• Expect strong December quarter with 46 percent growth in earnings to be catalyst for the stock price.

Morgan Stanley on Indian IT

• Advise defensiveness and selectivity in IT service stocks as we enter 2019.
• Estimates reflect robust deal pipelines, but margins at risk.
• Weak dollar and tight labour markets spur cost inflations.
• Downgrade TCS on expensive valuations and HCL Tech due to tepid growth expectations.
• Upgrade Infosys due to favourable risk reward.

Morgan Stanley on Large Cap IT

• TCS: Downgraded to ‘Equal-weight’ from ‘Overweight’; cut price target to Rs 1,920 from Rs 2,260.
• Infosys: Upgraded to ‘Overweight’ from ‘Equal-weight’; hiked price target to Rs 775 from Rs 759.
• HCL Tech: Downgraded to ‘Underweight’ from ‘Overweight’; cut price target to Rs 905 from Rs 1,200.
• Tech Mahindra: Maintained ‘Overweight’; cut price target to Rs 830 from Rs 880.

Morgan Stanley on Mid Cap IT

• Mindtree: Downgraded to ‘Underweight’ from ‘Overweight’; cut price target to Rs 761 from Rs 1,265.
• Persistent: Downgraded to ‘Underweight’ from ‘Overweight’; cut price target to Rs 500 from Rs 760.
• Hexaware: Maintained ‘Underweight’; cut price target to Rs 350 from Rs 385.
• Cyient: Maintained ‘Overweight’; cut price target to Rs 720 from Rs 790.
• Mphasis: Maintained ‘Overweight’; cut price target to Rs 1,100 from Rs 1,185.

• Gujarat Gas ex-date for stock split from Rs 10 to Rs 2 per share.

• InfoBeans Technology: Maven India Fund sold 10 lakh shares at Rs 65.52 each.

Shakti Educational Initiatives

• Albula Investment Fund sold 1.84 lakh shares or 1.14 percent equity at Rs 138.9 each.
• Veena Investments acquired 1.84 lakh shares or 1.14 percent equity at Rs 138.9 each.

Earnings Reaction To Watch

Tata Metaliks (Q3, YoY)

• Revenue up 11.5 percent at Rs 546.4 crore.
• Net profit down 2 percent at Rs 39.6 crore.
• Ebitda up 2.8 percent at Rs 74.7 crore.
• Margin at 13.7 percent versus 14.8 percent.
• Recorded its highest quarterly sale of Ductile Iron Pipe which was up 32 percent at Rs 319.3 crore.

Indiabulls Ventures (Q3, YoY)

• Net interest income up 2.2 times at Rs 375.4 crore.
• Net profit up 2.4 times at Rs 120.6 crore.
• AUM at Rs 10,453 crore.
• Loan disbursement at Rs 1375 crore.

ICICI Securities (Q3, YoY)

• Total revenue down 18 percent to Rs 406 crore.
• Net profit down 33 percent at Rs 102 crore.
• Brokerage revenue down 17 percent to Rs 227 crore vs Rs 274 crore due to subdued market conditions.
• Distribution revenue down 11 percent to Rs 107 crore due to mutual fund regulatory changes.
• Investment banking revenue down 37 percent to Rs 25.6 crore due to subdued primary market.

Nifty Earnings To Watch

• Zee Entertainment Enterprises

Other Earnings To Watch

• Den Networks
• Hindustan Media Ventures
• Jay Bharat Maruti
• KPIT Technologies
• Multi Commodity Exchange
• Network18 Media & Investments
• Speciality Restaurants
• Trident
• TV18 Broadcast
• Tinplate Company of India
• R Systems International
• Indo Rama Synthetics

• Bio-Thera said that it had reached its licensing agreement with Cipla for bevacizumab biosimilar under which Cipla will have exclusive rights to distribute and market the cancer biosimilar drug in select emerging markets. (Bloomberg News)
• Bharti Airtel said that it had paid its due to Aircel Group companies on Jan. 10, after the Supreme Court passed orders to the effect that bank guarantees worth Rs 453 crore shall stand cancelled.
• Wipro board said it was considering a proposal of issue of bonus shares in a meeting to be held between Jan. 17-18. The decision will be reported to the exchanges on Jan. 18.
• Indiabulls Venture said it was selling its stock broking business on a slump sale basis to wholly owned arm. There is no agreement, yet. Net worth of broking business is about 15 percent to the total net worth of the company.
• The Reserve Bank of India imposed monetary penalty of Rs 1 crore on Bajaj Finance due to regulatory compliance issues. (RBI Press Release)
• Wendt said that a fire accident took place at its Electro-Plating Facility in Tamil Nadu. No significant impact on operations was reported as the company has an alternative facility to ensure no disruption.
• Welspun Corp management said that Intech Metals sold 0.11 percent stake in last three weeks as ‘public shareholder’. They also stated that Chairman BK Goenka controlled MGN Agro Properties acquired 0.34 percent stake in last 7 days.
• Post amalgamation of Vora Soaps with Godrej Industries, after post allotment and cancellation of equity shares between both the entities, promoter shareholding in the company reduced from 74.72 percent to 61.33 percent.
• ICRA upgraded the long term rating of Relaxo Footwears to ‘AA’ with stable outlook from ‘AA-’ with positive outlook for term loans worth Rs 189.7 crores.
• Tata Power said that its Singapore-based resurgent power had undergone internal restructuring but shareholding of Tata Power’s arm in the power company has remained the same at 26 percent. Recently Resurgent Power had signed a share purchase agreement to acquire 75.01 percent stake in Prayagraj Power Generation Corporation and Tata Power’s management stated that this acquisition will be completed.
• Shakti Pumps extended its production shut down till Jan. 15. The company’s operation has been shut since Jan. 9 due to labour contractor issues with the company.
• Corporation Bank revised MCLR across various tenors with effect from Jan. 15. One month MCLR is at 8.25 percent and one-year MCLR at 8.95 percent.
• Hindusthan National Glass & Industries board decided to defer its proposed fund-raising plans via private placement of debentures.
• Axiscades Engineering Technologies board approved legal actions to recover dues amounting to $934,765 against its U.S. customer. The company has already provided a 100 percent provision for the said item.
• United Spirits to sell stake in Four Seasons Wines for Rs 31.86 crore. Four Seasons had a revenue of Rs 12.6 crore and negative networth of Rs 67 crore as of previous financial year.

• India December trade balance, Bloomberg estimates at $14.5 billion deficit, prior $16.7 billion deficit.
• India December Exports YoY, prior 0.8 percent.
• India December Imports YoY, prior 4.3 percent.

• West Texas Intermediate crude fell 0.1 percent to $50.73 a barrel.
• Brent crude declined for the second straight trading session, down 2.46 percent to $58.99 per barrel.
• Gold was little changed at $1,292.47 an ounce.

London Metal Exchange

• Aluminium ended lower for the second day, down 0.44 percent.
• Lead halted a six-day rally, down 0.95 percent.
• Copper ended 0.76 percent lower.
• Tin ended higher for the sixth day, up 0.86 percent.
• Zinc ended 0.32 percent lower.

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose rose 0.5 percent to 10,823 as of 8:20 a.m.

Asian stocks steadied Tuesday, as markets recovered from the impact of weak economic data in Europe and China Monday that sparked concerns about slowing global growth.

Equities reversed losses in Japan and climbed in Australia and Hong Kong as U.S. futures rebounded. Chinese shares were little changed.