Sensex, Nifty Gain For Third Straight Day Led By ICICI Bank, Sun Pharma

Indian equity benchmarks rose for third day in a row led by ICICI Bank, State Bank of India, Axis Bank and Sun Pharma.

The S&P BSE Sensex rose 0.36 percent or 131 points to 35,981 and the NSE Nifty 50 Index climbed 0.28 percent or 30 points to 10,802.

For most part of the day, Sensex and Nifty traded on a subdued note owing to weakness in HDFC twins, Kotak Mahindra Bank and Hindustan Unilever. However, late buying in ICICI Bank and Sun Pharma lifted the benchmarks higher.

Eleven of 19 sector gauges compiled by BSE ended higher led by the S&P BSE Telecom Index's 1.34 percent gain. On the flipside, S&P BSE Utilities Index was top loser, down 0.36 percent.

Mid- and small-cap shares closed on a mixed note as the S&P BSE MidCap Index fell 0.16 percent while the S&P BSE SmallCap Index advanced 0.17 percent.

There is tremendous value in leading auto companies like Maruti Suzuki and M&M in auto space after recent correction, Ajay Bodke, CEO & Chief Portfolio Manager at Prabhudas Lilladher told BloombergQuint in an interview.

Key highlights of the conversation:

• S Chand is a value buy in education sector
• SH Kelkar will do well in fragrances space
• Ceramic companies are beaten down; Shift will happen from unorganized to organized players
• Kajaria Ceramics will benefit in this sector
• Mid- and small-cap companies are available at 6-year discount
• Fears on shrinkage of credit due NBFCs crisis is behind us
• Tremendous value in leading names like Maruti Suzuki and M&M in auto space
• Cost of credit will come down in future
• We are at the peak of interest rate cycles; expect 2 rate cuts
• Valuation in consumption and retail sectors are quite demanding
• Consumption and retail are secular growth story
• Underweight on cement sector
• Earning have bottomed down, expect 12-13 percent growth in FY19 and 20 percent in FY20
• RBI should change stance and start cutting rates
• U.S. comments are dovish; will impact emerging markets positively
• RBI governor is willing to listen to all stakeholders
• New RBI governor is more responsive to all stakeholders
• Fall in oil prices is big surprise for India

Indian equity benchmarks edged higher in last hour of trade led by ICICI Bank, State Bank of India, ITC and Sun Pharma.

The Sensex rose 0.39 percent or 140 points to 35,990 and the NSE Nifty 50 Index climbed 0.31 percent or 33 points to 10,805.

Thirteen of 19 sector gauges compiled by BSE were trading higher led by the S&P BSE Telecom Index's 1.2 percent gain. On the flipside, S&P BSE Capital Goods Index was top loser, down 0.32 percent.

Shares of the country's second largest private sector lender rose as much as 2.42 percent to record high of Rs 376.60.

ICICI Bank has advanced 20 percent in last one year outperforming the Nifty which is up 1.52 percent.

The bank has market capitalisation of 2.43 lakh crore and has 49 buy recommendations from brokerages, according to data compiled by Bloomberg.

Macquarie, NTPC & GAIL are among the companies that have expressed interest in IL&FS' renewable energy assets, reports Bloomberg.

• Macquarie Infrastructure & Real Assets is among companies interested in buying some of IL&FS' renewable energy assets.
• NTPC, GAIL are also said to have shown interest to buy the assets.

Source: People familiar with the matter

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

Premium on the contract fell 0.13 percent to Rs 77. Over 2.29 lakh shares were added to the open interest which stood at over 42.31 lakh shares.

Shares of the Bengaluru-based software developer fell as much as 1.89 percent to Rs 960 after its profit declined sequentially in December quarter.

Key earnings highlights:

• Revenue up 1 percent at Rs 407 crore versus Rs 403 crore (QoQ)
• Net profit down 20 percent at Rs 65.99 crore versus Rs 82.18 crore (QoQ)

Indian equity benchmarks were little changed as gains ICICI Bank, Sun Pharma and ITC were offset by losses in HDFC Twins, Kotak Mahindra Bank and Hindustan Unilever.

The S&P BSE Sensex rose 15 points to 35,867 and the NSE Nifty 50 Index was flat at 10,771.

Ten of 19 sector gauges compiled by BSE were trading lower led by the S&P BSE Utilities Index's 0.5 percent decline. On the flipside, S&P BSE Telecom Index was top gainer, up 1 percent.

Mid- and small-cap shares were also trading on a subdued note as the S&P BSE MidCap Index declined 0.2 percent while the S&P BSE SmallCap Index was trading on a flat note.

The overall market breadth was negative as 1,209 shares were declining while 1,065 were advancing on the BSE.

Shares of the parent of luxury car maker rose as much as 2.88 percent to Rs 180.40 after Jaguar Land Rover India sales rose in 2018.

Jaguar Land Rover sales rose 16 percent to 4,596 units in 2018 versus 3,954 units sold in 2017.

Shares of the Mumbai-based crop protection company rose as much as 13.42 percent to Rs 2,917 after it won a legal battle to own patents on genetically-modified cotton seeds in the world’s biggest producer of the fiber.

Supreme Court ruled on Tuesday that the company’s patent for Bt cotton seeds is valid, overturning a judgment by the Delhi High Court saying certain items such as seeds, plants and animals can’t be patented under Indian laws. The apex court’s two-judge bench, headed by Justice Rohinton F. Nariman, said a lower court will decide if Indian companies infringed Monsanto’s patent on Bt cotton seeds.

• Monsanto India: The Mumbai-based crop protection company rose as much as 13.422 percent to Rs 2,917. Trading volume was 110 times its 20-day average.
• Gujarat Flurochemicals: The Panchmahal-based chemical maker rose as much as 3 percent to Rs 950. Trading volume was more than 20 times its 20-day average.
• Century Plyboards: The Kolkata-based plywood and veneer maker rose as much as 2.3 percent to Rs 177. Trading volume was more than 13 times its 20-day average.
• Orient Cement: The Hyderabad-based cement maker declined as much as 2.2 percent to Rs 81. Trading volume was more than nine times its 20-day average.

Political uncertainties can keep flows at a lower level and elections will not make a big difference to long-term growth outlook for India, Mahesh Nandurkar, India strategist at CLSA told BloombergQuint in an interview.

Key highlights of the conversation:

• Current valuations slightly better than what we started 2018 with
• See more downside risks for the markets in near-term
• Expect single-digit returns from the market over the next 12-months
• Strong domestic flows keeping markets at a premium valuation
• Weakening domestic flows not a good sign
• Domestic flows at current levels are still decent
• Will be worried if flows begin to decline from current levels
• Elections do not make a big difference to long-term growth outlook
• Not worried about India's economic growth outlook
• Any form of uncertainty will have a negative impact on markets
• Capex activity unlikely to improve significantly
• Not seeing any pick-up in private capex
• Have not fully seen the impact of NBFC slowdown
• Recent auto numbers reflective of NBFC slowdown
• Crude cooling off is a very big macro relief
• Crude prices at $60-65 will bring CAD down to 2 percent of GDP
• Likely to see GST revenue shortfall of Rs 1.5 lakh crore in FY19
• Fiscal issues will continue in FY20 as well
• Sops given to farmers will further aggravate fiscal issues
• Investors expecting rate cuts instead of three hikes from Fed in 2019

Shares of the telecom equipment maker surged as much as 11.74 percent, the most in over 11 months, to Rs 23.80 after its board approved capacity expansion plan.

The board approved expanding existing manufacturing facility of optical fibre manufacturing plant at Hyderabad from 7 million fibre km to 10.5 million fibre km for Rs 35 crore.

Shares of cement manufacturers fell after brokerage firm CLSA downgraded its stock ratings and lowered its price targets.

Here’s what CLSA had to say:

• Lower energy prices are a relief, but cement prices are the key, and uncertainty prevails here.
• Yet again trim FY19-21 earnings per share estimates for the major players by 3-15 percent.
• Turn more cautious on the sector.
• India Cement: Downgraded to “Sell” from “Buy”; cut price target to Rs 75 from Rs 200.
• Dalmia Bharat: Downgraded to “Underperform” from “Buy”; cut price target to Rs 2,450 from Rs 2,550.
• Shree Cement: Downgraded to "Outperform” from “Buy”; cut price target to Rs 18,275 from Rs 20,100.

Key highlights from the conversation:

• Financing from NBFCs have come down impacting the sector.
• Rural economy is doing very well; expecting good crop this year.
• Q4FY18 was a bumper quarter.
• Expect Q4FY19 to be good.
• Rural economy is doing quite well with the consumption.
• Drop in fuel and diesel costs by 15-18 percent in the last few months will aid demand.
• Discounting has become a part and parcel for marketing strategies in the commercial vehicle segment.
• Discount levels have remained at same levels.
• On a full year basis, margins will remain healthy for the commercial vehicle industry.
• Banks have not cut down financing. The issues are with NBFCs.
• Pick up in the NBFC Funding will boost commercial vehicle sales going forward.
• Industry will revive as soon as NBFC financing is back.
• Quite optimistic that the commercial vehicle financing situation will improve.
• NBFCs will get realigned and soon should be sorted out in around three months.
• We have been performing better than the market when it comes to VECV.

Shares of the auto-parts maker rose as much as 3.2 percent to Rs 1,250.

The company’s Italian arm acquired aluminium die casting company Fonpresmetal. The acquired company has a capacity of 6,500 tonnes and the cost of acquisition was 8.16 million euros.

The trading volume was 12 times the 20-day average for this time of the day, Bloomberg data showed.

Shares of Federal Bank fluctuated between gains and losses to trade at Rs 94.80.

Brokerage and research firm Centrum intiated a new buy rating on the stock with a price target of Rs 135, implying a potential upside of 43 percent from the last regular trade.

Here’s what brokerage had to say about the lender:

• Expect asset growth driven by quality and increasing pan India presence.
• Network distribution to boost operating efficiency.
• Lower incremental stress expected; Drivers in place for NIM expansion.

Shares of the dairy-products maker snapped its two-day blip and rose as much as 6.8 percent, the most in over two months, to Rs 98.20.

The company said that it has taken preliminary steps by executing agreement with Denmark based DLG for developing two products to increase milk productivity and quality of cattle, according to its statement on the exchanges. The pilot phase will be for four-to-six months, the statement added.

The stock fell 60 percent in the past 12 months compared to 5 percent gain in Sensex.

Shares of Muthoot Finance extended gains for the third day. The stock rose as much as 3.4 percent to hit a new all-time high at Rs 531.

The scrip has returned 12 over over the past year compared to a 5.4 percent advance in the Sensex.

Shares of Gruh Finance fell as much as 14.38 percent to Rs 262.30 while Shares of Bandhan Bank fell as much as 5.5 percent to Rs 470.85 after the merger deal.

Gruh Finance is set to merge with Bandhan Bank in a share-swap deal. Shareholders of Gruh Finance will receive 568 shares of Bandhan Bank for every 1,000 shares of the housing finance company.

Here’s what brokerages had to say about Bandhan Bank post merger:

Macquarie

• Maintained ‘Neutral’ with a price target of Rs 540.
• Acquisition of Gruh from minority shareholders’ point of view is wrong decision.
• Shareholders will be paying 13 times for Gruh as against 4.5 times paid for Bandhan.
• Minority shareholders get short-changed with 26 percent dilution.
• Do not deny Gruh’s excellent franchise and growth story, but cannot ignore the price paid.

JPMorgan

• Maintained ‘Neutral’ with a price target of Rs 525.
• An expensive buy; merger synergies may be hard to come by.
• Merger allows a path for reduction of promoter shareholding, but more needs to be done.
• Combined entity will be leader in micro finance and rural housing and should attract higher valuation.

Indian equity benchmarks traded lower after a two-day rally. The S&P BSE Sensex Index fell as much as 0.25 percent to 35,760.46 and the NSE Nifty 50 Index fell as much as 0.35 percent to 10,734.10.

The market breadth was tilted in favour of sellers. Nine out of 11 sectoral gauges compiled by NSE fell, led by the NSE Nifty Financial Services Index’s 0.49 percent decline. On the flipside, the NSE Nifty Pharma Index was the top sectoral gainer, up 0.33 percent.

• How traders have positioned themselves on Tata ahead of its third-quarter earnings announcement.
• Why focus is back on sugar stocks.
• The real winner of Gruh Finance and Bandhan Bank merger.

Get the heads-up on BQEdge

The Indian rupee opened weaker halting a two-day rally. The home currency depreciated as much as 0.35 percent to 69.92 against the U.S. dollar.

India’s most traded 10-year bond is likely to fall on Tuesday after the government announced a fresh sale of the paper for later this week.

Traders typically shed the existing benchmark bond from their portfolios to make way for the new debt and that could see some selling pressure.

Add to that Governor Shaktikanta Das's comments on liquidity has led to some speculation on whether the central bank will continue with the same pace of bond purchases or not. Das said in a press conference on Monday that the infusion of liquidity through bond purchases has to be carefully considered so that there are no loose money conditions created.

The yield on the 10-year rose six basis points on Monday to end at 7.51 percent, the highest since Dec.11.

F&O Cues

• Nifty January futures closed trading at 10,803, premium of 30 points.
• Max open interest for January series at 11,000 Call (open interest at 40 lakh shares).
• Max open interest for January series at 10,500 Put (open interest at 38.5 lakh shares).

Stocks In F&O Ban

• Adani Power
• Jet Airways

Put-Call Ratio

• Nifty PCR at 1.36 versus 1.34.
• Nifty Bank PCR at 1.11 versus 1.12.

Centrum on Federal Bank

• Initiated ‘Buy’ with a price target of Rs 135.
• Expect asset growth driven by quality and increasing pan India presence.
• Network distribution to boost operating efficiency.
• Lower incremental stress expected; Drivers in place for NIM expansion.

Morgan Stanley on ICICI Prudential

• Maintained ‘Overweight’ with a price target of Rs 425.
• ICICI Pru Life reported premium growth of 3 percent for December.
• Expect muted premium CAGR of 6 percent over FY18-21, but a higher VNB CAGR of 20 percent.

CLSA on Pharma

• Expect Indian pharma sector to build on the earnings growth revival in 2018-19.
• Expect challenges to drive further consolidation in the U.S..
• Like Torrent for its strong positioning in the chronic space in India.
• Aurobindo Pharma: Upgraded to ‘Outperform’ from ‘Underperform’; cut price target to Rs 820 from Rs 840.
• Sun Pharma: Maintained ‘Buy’; cut price target to Rs 560 from Rs 700.

CLSA on Cement

• Cement price hikes a must for stock price performance.
• Lower energy prices are a relief, but cement prices are the key, and uncertainty prevails here.
• Yet again trim FY19-21 EPS estimates for the major players by 3-15 percent.
• Turn more cautious on the sector.
• India Cement: Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 75 from Rs 200.
• Dalmia Bharat: Downgraded to ‘Underperform’ from ‘Buy’; cut price target to Rs 2,450 from Rs 2,550.
• Shree Cement: Downgraded to ‘Outperform’ from ‘Buy’; cut price target to Rs 18,275 from Rs 20,100.
• Ambuja: Downgraded to ‘Outperform’ from ‘Buy’; cut price target to Rs 250 from Rs 255.
• ACC: Maintained ‘Buy’; cut price target to Rs 1,800 from Rs 1,900.
• Ramco: Maintained ‘Buy’; cut price target to Rs 775 from Rs 850.
• Grasim: Maintained ‘Sell’; cut price target to Rs 700 from Rs 790.
• Ultratech: Maintained ‘Sell’; cut price target to Rs 3,150 from Rs 3,200.

On Bandhan Bank

Macquarie

• Maintained ‘Neutral’ with a price target of Rs 540.
• Acquisition of Gruh from minority shareholders’ point of view is wrong decision.
• Shareholders will be paying 13 times for Gruh as against 4.5 times paid for Bandhan.
• Minority shareholders get short-changed with 26 percent dilution.
• Do not deny Gruh’s excellent franchise and growth story, but cannot ignore the price paid.

JPMorgan

• Maintained ‘Neutral’ with a price target of Rs 525.
• An expensive buy; merger synergies may be hard to come by.
• Merger allows a path for reduction of promoter shareholding, but more needs to be done.
• Combined entity will be leader in micro finance and rural housing and should attract higher valuation.

• A U.S. delegation is in Beijing for trade talks with Chinese officials, the first face-to-face encounter since Trump and Xi agreed to a temporary truce on Dec. 1.
• North Korea’s Kim Jong Un is visiting China ahead of a potential summit with President Donald Trump.
• Wednesday sees the release of minutes from the Fed’s Dec. 18-19 policy meeting. Powell will speak to the Economic Club of Washington D.C. on Thursday.
• Britain’s Parliament resumes a debate on the Brexit withdrawal bill, with Prime Minister Theresa May seeking to avoid defeat in a vote set for the week of Jan. 14.

• West Texas Intermediate crude advanced 0.5 percent to $48.76 a barrel.
• Brent crude ended higher for the sixth day, up 0.47 percent to $57.33 per barrel.
• Gold fell 0.1 percent to $1,288.08 an ounce.

London Metal Exchange

• Aluminium ended higher for the third day, up 0.7 percent.
• Copper ended higher for the second day, up 0.1 percent.
• Lead ended higher for the second day, up 0.15 percent.
• Tin resumed rally after a one-day blip, up 1.02 percent.
• Nickel ended higher for the second day, up 0.4 percent.
• Zinc ended higher for the second day, up 2.46 percent.

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, fluctuated between gains adn losses to trade a little changed at 10,809 as of 7:50 a.m.

Asian stocks traded mixed as investors waited to see whether the outcome of fresh talks on trade will be productive. The yen advanced and Treasuries consolidated.

Stocks advanced in Japan and Australia, though slipped in Hong Kong and Shanghai.

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