Sensex, Nifty Climb As Health Care Stocks Rally On RBI Easing

Catch key highlights from the RBI Governor speech here.

India stocks rose after the central bank unveiled measures to further support the economy as coronavirus cases continue to surge.

The S&P BSE Sensex gained 0.9% to 48,677.55, while the NSE Nifty 50 Index advanced by the same magnitude. The broader market too did well as the breadth remained in favour of the bulls. Around 1,842 stocks advanced, 1,097 declined while 173 remained unchanged on the BSE Ltd.

A gauge of healthcare stocks climbed 3% to 24,043, a record close, while the S&P BSE Bankex snapped three-day losses to add 1.9%. The benchmark 10-year yield was down 3 basis points to 5.97% as Das announced a second tranche of bond purchases for May 20. The rupee was largely steady at 73.91 to a dollar.

The benchmark Sensex had declined for the previous three sessions as coronavirus cases climb to new records. The Covid-19 wave will probably worsen before it starts to taper off sometime later this month, forecasters warn.

Shares of the tyre maker rose after its fourth-quarter net income beat the average analyst estimate.

• Net income Rs 153 crore vs. Rs 51.88 crore y/y, estimate Rs 110 crore
• Revenue Rs 2,290 crore, +46% y/y, estimate Rs 2,194 crore
• Total costs Rs 2,160 crore, +45% y/y
• Dividend per share Rs 18
• Clears additional Rs 1,210 crore investment by way of Capex

• SBI Life options volume 2.8x the 20-day average, with 21,297 calls changing hands vs 6,106 puts
  • Stock down 0.8%, volume 1.7x the 20-day average for this time of day
• ONGC options volume 2.1x the average, with 9,974 calls vs 2,417 puts
  • Stock up 1.6%, volume 1.5x the average
• Sun Pharma options volume 1.5x the average, with 33,343 calls vs 8,689 puts
  • Stock up 4.5%, volume 1.5x the average
• Nifty 50 options volume 0.5x the average, with 5.07 million calls vs 3.99 million puts; gauge up 0.7%
  • Cost of hedging as measured by the 90/110, one-month skew ranks in the 99th percentile over the past year
• Nifty Bank index options volume 0.6x the average, with 8.97 million calls vs 7.58 million puts; gauge up 1.5%
  • 90/110, one-month skew in the 48th percentile
• India VIX Index down 3%

Health care stocks including hospital and laboratory operators surged after RBI announced additional liquidity to key sectors participating in tackling the coronavirus crisis.

RBi governor said banks can provide fresh lending support to pathology labs, oxygen suppliers, vaccine makers and hospitals under the priority-sector classification of lending.

• Among gainers: Lupin +5.9%, Wockhardt +5.6%, Metropolis Healthcare+2.5%, Glenmark Pharma +1.6%, Dr. Reddy’s Laboratories +1.5%, Indraprastha Medical +1.5%

The Indian service sector remained resilient to the escalation of the Covid-19 crisis, with a further solid increase in new work supporting output expansion.

Still, panel member reports suggested that the rise in business activity was constrained by the pandemic and sentiment towards growth prospects faded.

Meanwhile, service providers noted the steepest rise in overall expenses since December 2011. Charges increased only slightly, however, as firms sought to boost sales.

Falling from 54.6 in March to 54.0 in April, the seasonally adjusted India Services Business Activity Index pointed to the slowest increase in output for three months. That said, the latest reading was indicative of a solid rate of expansion that outpaced the long-run survey average.

Although private sector activity in India continued to expand markedly in April, growth eased to the weakest in 2021 so far. The Composite PMI Output Index fell from 56.0 in March to 55.4 due to slower increases at goods producers and service providers. The upturn was generally curtailed by the escalation of the Covid-19 crisis.

Source: IHS Markit release.

Indian sovereign bonds gain after RBI Governor Shaktikanta Das said the RBI will buy Rs 35,000 crore ($4.7 billion) of debt on May 20 as part of its government securities acquisition programme.

• On-tap liquidity of Rs 50,000 crore at repo rate is being opened till March 31, 2022.
• Under the scheme banks can support entities including vaccine manufacturers, medical facilities, hospitals and also patients.
• Such lending will get priority sector classification till repayment or maturity. Banks to create a Covid loan book under the scheme.
• Such banks can park liquidity equal to Covid loan book at 40 basis points above the reverse repo rate.

Shares of Adani Group company fell as much as 3.9% after it reported net income for the fourth quarter that missed the average analyst estimate.

• Net income Rs 1,290 crore vs. Rs 334 crore y/y, estimate Rs 1,465 crore
• Revenue Rs 3,610 crore, +24% y/y, estimate Rs 3,721 crore
• Total costs Rs 2,530 crore, -18% y/y
• Other income Rs 465 crore, +5.9% y/y
• Ebitda Rs 2,287 crore, +39% y/y, estimate Rs 2,376 crore
• Dividend per share Rs 5

Other Highlights

• Adani Ports also says its CFO Deepak Maheshwari has resigned effective May 5
• Company to seek shareholders nod to raise borrowing limits
• Net debt to Ebitda improves to 3.3x in March
• Handled a cargo volume of 247 MMT in FY21, registering a growth of 11%
• FY21 container volume at 7.2 million TEUs, market share improves by 5% to 41%
• FY21 free cash flow from operations after adjusting for working capital changes, Capex and net interest cost increased by 47%
• Port Ebitda margin for FY21 increased by 100bps to 70%

FY22 Outlook

• Sees FY22 capex at Rs 3100-3,500 crore
• Sees FY22 cargo volume at 310 million tonnes-320 million tonnes
• Sees FY22 group revenue to be Rs 16,000 crore-Rs 16,800 crore
• Sees FY22 group Ebitda to be Rs 10,200 crore-Rs 10,700 crore
• Sees FY22 free cash flow at Rs 5,500 crore-Rs 6,000 crore

An unscheduled speech by the Reserve Bank of India Governor will be the focus for bond and rupee traders amid forecasts that the nation’s death toll from the coronavirus could worsen in the coming weeks.

• The address will be broadcast at 10 a.m. local time, the RBI said on Twitter, without providing further details
• Bond traders will also watch if the RBI indirectly steps in to buy bills at an auction later on Wednesday after purchasing in the previous two weeks

Good Morning!

U.S. equity futures and Asian stocks were steady Wednesday after a selloff in technology shares amid comments from Treasury Secretary Janet Yellen on interest rates that rattled markets. The dollar held gains.

S&P 500 contracts were little changed following a climb in commodity, financial and industrial sectors that helped the gauge pare losses. Holidays in key markets including Japan, China and South Korea will limit trade in Asian hours.

The Singapore-traded SGX Nifty, an early indicator of the Nifty 50 Index’s performance in India, rose 0.4% to 14,593 as of 7:45 a.m after the news of an unscheduled speech from the RBI Governor in a few hours.

Commodities rallied to the highest in almost a decade as a rebound from the pandemic in the world’s largest economies stokes demand for metals, food and energy. Treasury futures were steady, with cash markets closed in Asia.

Oil extended a rally amid declining U.S. stockpiles and reopening drives in the U.S. and Europe.

Back home, Adani Ports, RBL Bank, L&T Infotech, Adani Total, P&G Hygiene may react as the companies reported quarterly results after the market closed Tuesday. Tata Steel, Ceat, SRF, Adani Enterprises, Adani Green are among the companies scheduled to report earnings Wednesday. Foreign investors sold net Rs 1,670 crore of stocks on Monday, according to NSDL website.