Nifty Halts 7-Day Rally; Sensex Ends 220 Points Away From Record High

The S&P BSE Sensex fluctuated between gains and losses to finally end unchanged at 51,934.88, just 220 points away from its record February closing. The NSE Nifty 50 Index also closed little changed at 15,574.85, around 8 points below its record close set on Monday.

Eleven of the 19 sector sub-indices compiled by BSE Ltd. declined, led by a gauge of metal companies.

• ONGC options volume 2.7x the 20-day average, with 25,868 calls changing hands vs 4,640 puts
  • Stock up 3.9%, volume 1.6x the 20-day average for this time of day
• Bajaj Auto options volume 2.2x the average, with 16,908 calls vs 4,144 puts
  • Stock up 1.2%, volume 2.1x the average
• Adani Ports options volume 2x the average, with 42,664 calls vs 10,221 puts
  • Stock up 3.9%, volume 1.2x the average
• Bajaj Finance options volume 1.7x the average, with 84,420 calls vs 24,463 puts
  • Stock up 2.9%, volume 1.1x the average
• Reliance Industries options volume 1.5x the average, with 210,390 calls vs 77,631 puts
  • Stock up 0.7%, volume 1.3x the average

Mindtree Ltd. is higher for the ninth straight day, on track for the longest winning streak since the period ended Sept. 24, 2015.

• Low Price Target vs Comps: Consensus price target is 13.1% lower than the current stock price, vs 6.2% higher for comparable companies
• High RSI: Relative strength index at 75; stock may be overbought
• High Relative Valuation vs History: Stock is trading at an unusually high 29% premium versus peers compared to an average 8% premium over the past two years on a blended forward price-to-earnings basis.

India’s defense equipment manufacturers rise after the government’s decision to include 108 items -- such as certain complex systems, sensors, simulators, weapons and ammunition -- to be procured from local companies.

• Shares of Hindustan Aeronautics Ltd. rose as much as 4.8%, before paring gains to 1% in Mumbai
• Larsen & Toubro Ltd. trades 0.7% higher; Bharat Electronics Ltd.+1.3%; Astra Microwave Products Ltd. +1.3%

The list of 108 items, builds on 101 other items, for which a similar announcement was made last year, and production will take place in a phased manner over 2021-2025, Citi Analyst Atul Tiwari wrote in a note.

• “This continues to underline government’s focus on promoting domestic defense production,” the note says
• “This continues to underline government’s focus on promoting domestic defense production,” the note says
• The decision is a long-term structural trend even though development has been slow due to funding constraints and complicated procedures for defense procurement
• Note said concrete steps such as banning imports of items that can be manufactured domestically, along with more proactive decisions to award orders, may give a much-needed boost to domestic manufacturing
• Citi sees Bharat Electronics and L&T as benefiting the most from this decision

Tata Motors Ltd.’s passenger vehicle division sold 15,181 units in May, the company said in a statement.

Passenger vehicle sales fell 40% over last month. Year-on-year the domestic sales are not comparable because of covid led lockdown last year.

• Overall Tata Motors’ domestic sales fell 38% to 24,552 units in May from 39,530 units it sold in April.
• Total domestic commercial vehicle sales fell to 11,401 units in May, compared to 16,644 units in April.
• Commercial vehicle export too fell 8% to 2,030 units.

Catch the latest auto sales figures here

India’s rupee declined for a second day amid possible stock outflows due to rebalancing in the MSCI index. Sovereign bonds trade steady ahead of a Rs 19,550-drore ($2.7b) sale of debt by the state governments.

• USD/INR rose 0.2% to 72.7650; climbed 0.2% on Monday
• 10-year yields steady at 6.02%
• There may have been around $1.2 billion of outflows happening due to MSCI rebalancing that’s weighing on the rupee, says Amit Pabari, managing director at CR Forex
• Rupee market is awaiting for the U.S. NFPR data on Friday and our MPC committee meeting on the same day where RBI may decide on the amount of bond buying for next quarter which could give a direction for the rupee, says Anil Kumar Bhansali, treasurer at Finrex Treasury Advisors

Source: Bloomberg

The new 75% norm of trade peak margin by the Securities and Exchange Board of India (Sebi) kicked in today amid brokerage firms' plea to roll back the regulation. This is the third phase of implementing higher margin on day trading.

Between December 2020 and February 2021, traders were supposed to maintain at least 25% of the peak margin. This margin was raised to 50% between March and May and is proposed to be raised to 75% between June and August, and to 100% from Sept. 1 onwards.

Stock brokers' association Anmi has approached the finance ministry requesting the peak margin requirement should be brought back to within the band of 25% to 33.33% from the current level of 50%.

According to Anmi, the spike in peak margin will bring a change in market behaviour by shifting from future to option buying and a shift in the mindset of people gravitating more towards options trading and moving away from stock/index Futures and Stock Options.

It also pointed out that higher margins would imply prolonged carry forward of loss-making trades giving a false sense of security. Due to the shift, hedging opportunities have seen a dip due to lower volumes in the capital market and commodity markets have been greatly impacted.

(With inputs from PTI)

Shares of the energy company rose 6.6%, making them the best performer among its peers.

• Trading volume was 6.65 million shares, triple the 20-day average of 2.31 million shares for this time of day.
• Analysts have five buy, five hold, and four sell recommendations on the stock.
• The price target of Rs 92.67 represents a 26% decrease from the last price
• The relative strength index on the stock was above 70, indicating it may be overbought.

India's manufacturing activity continued to improve in May but showed a significant loss of growth momentum.

In May, the manufacturing Purchasing Managers' Index stood at 50.8 vs 55.5 in April, according to data from IHS Markit. Manufacturing PMI of above 50 indicates expansion, while a score of below 50 indicates contraction.

Pollyanna De Lima, Economics Associate Director at IHS Markit said the Indian manufacturing sector is showing increasing signs of strain as the Covid-19 crisis intensifies.

Key gauges of current sales, production and input buying weakened noticeably in May and pointed to the slowest rates of increase in ten months. In fact, all indices were down from April.

Shares of PNB Housing Finance Ltd. rose by their daily limit of 20% for a second consecutive day as brokerages upgraded the stock after the mortgage lender Monday approved a plan to raise as much as Rs 4,000 crore in capital from entities including private equity firm Carlyle Group Inc.

• The shares are up 56% in the past 5 days and rose 69% in the past 30 days.
• The relative strength index on the stock was above 70, indicating it may be overbought.
• PNB Housing trades at 10 times its estimated earnings per share for the coming year.

The announced large equity infusion should significantly improve the confidence of fixed income and equity markets and bring PNB Housing back on a growth path, according to Morgan Stanley.

• Believe this capital infusion could materially accelerate the business turnaround
• PAT forecasts go up as the free funds benefit from the higher issuance more than offset the royalty payments to PNB that will get effective as its stake falls below 30%.
• The confidence capital coming in should drive a meaningful valuation re-rating from beaten-down levels.

Risks to Upside

• Improvement in real estate sector fundamentals, driven by strong progress made by the government's real estate fund
• Asset quality improvement

Risks to Downside

• Rise in NPLs, especially retail NPLs
• Further aggressive price competition

Brokerages ICICI Securities Ltd., Investec Ltd. and JM Financial Institutional Securities Ltd. raised their ratings to buy

Bajaj Auto said it clocked total sales of 2.71 lakh units in May, the company said in an exchange filing.

Sales snapshot (Y-o-Y)

• Total domestic sales fell 54% over last month to 60,342 units in May.
• Total exports rose 142% to 2,11,032 units in May.
• Total commercial vehicle sales rose 118% to 31,308 units in May.

India’s equity benchmarks rose, in line with Asian peers, as a decline in coronavirus cases and optimism for economic recovery bolsters investor sentiment.

The S&P BSE Sensex climbed 0.4% to 52,162.16, around 0.7% away from its all-time high record on Feb. 16. Meanwhile, the NSE Nifty advanced 0.4% to 15,650.15, a record high for the index. Fourteen of the 19 sector sub-indices compiled by BSE Ltd. gained, led by a gauge of automakers.

India’s economy expansion was faster than expected last quarter, official data showed yesterday. While the period preceded a resurgence of viral infections, the economic effects of the latest wave are unlikely to be large, India’s Chief Economic Adviser Krishnamurthy Subramanian said. New virus cases have halved from a May peak to fewer than 200,000 a day.

India’s earnings season for the March quarter has been mixed with 23 of the 43 Nifty 50 companies that have posted quarterly results missing analysts’ estimates. Eighteen companies have reported results either ahead of, or in line with analyst estimates, according to data compiled by Bloomberg.

Indian bond traders will await a Rs 19,550 crore ($2.7b) sale of debt by the state governments to gauge demand.

• India’s economy expanded faster than expected last quarter before a resurgent coronavirus pandemic unleashed a new wave of challenges
• Gross domestic product rose 1.6% y/y in the three months ended March, the Statistics Ministry said Monday after close of markets. That was faster than the 1% median estimate in a Bloomberg survey of economists
• India’s budget deficit ballooned to a record last year, as the government borrowed more to spend its way out of the pandemic-induced slump
  
  • The fiscal gap for the year ended March 31 touched 9.3% of gross domestic product, data released by the Controller General of Accounts showed Monday. That’s the widest on record, and is narrower than the government’s revised 9.5% goal set in February

Asian stocks and U.S equity futures were steady as reports signalled an ongoing expansion in regional manufacturing despite Covid-19 flareups.

Japanese shares fluctuated amid lower-than-average volumes, while export growth bolstered South Korean stocks. China dipped at the open while Hong Kong equities drifted. S&P 500 and Nasdaq 100 futures were little changed following a U.S. holiday.

India’s SGX Nifty 50 Index futures for June delivery rose 0.4% to 15,645.00, while MSCI Asia Pacific Index +0.2%. The NSE Nifty 50 Index added 1% Monday to 15,582.80.

The dollar weakened against its Group of 10 peers and Asian currencies. The offshore yuan remained resilient after China forced banks to keep more foreign currencies in reserve for the first time in over a decade, its most substantial move yet to rein in a surging currency. The pound rallied to a three-year high on vaccine-led reopening optimism for the U.K.

Oil climbed as OPEC and its allies forecast that inventories will fall sharply this year if the group sticks to its current plan. Gold had its biggest monthly advance since July and most industrial metals gained.

Back home, Magma Fincorp, Honeywell Automation, Jamna Auto, Ingersoll Rand, Narayana Hrudayalaya may react as the companies reported quarterly results after the market closed Monday. ITC, Gujarat Gas are among the companies scheduled to report earnings Tuesday.

Automobile companies are releasing sales data for May today, the first day of the month. Markit India manufacturing PMI data for May to be released; IMD to forecast on 2021 Southwest Monsoon. Foreign investors bought a net Rs 421 crore of stocks on May 28, according to NSDL website.