Sensex, Nifty Close Lower For A Second Day As Banks Drag

India’s stock benchmarks declined for a second day, with HDFC Bank Ltd. leading losses after the lender’s quarterly results missed analyst estimates as it set aside more funds for bad loans.

The S&P BSE Sensex shed 1.10% to 52,553.40, and NSE Nifty 50 Index lost by a similar magnitude to 15,752.40. HDFC Bank Ltd. contributed the most to the index decline and had the largest move, decreasing 3.4%.

The broader markets fared better than their larger peers. The S&P BSE MidCap shed 0.58% while the S&P BSE SmallCap declined by 0.31%. Fifteen of the 19 sectoral indices declined with S&P BSE BANKEX index declining nearly 1.8%. Only three sectoral indices gained with S&P BSE Realty index gaining 0.23%.

The market breadth was skewed in favour of the bulls. About 1,771 stocks advanced, 1,552 stocks declined and 169 remained unchanged on the BSE.

Shares across the region dropped as investors remain concerned over the impact of a surge in coronavirus outbreaks and higher inflation on economies.

In earnings, three of the four Nifty companies that have announced results so far fell short of analysts’ estimates. HCL Technologies Ltd. is scheduled to post earnings later today.

“Sub par June quarter performance reported by HDFC Bank during the weekend along with visible stress in asset quality can weigh on overall financials,” Binod Modi, head of strategy at Mumbai-based Reliance Securities Ltd. said in a note. “Domestic equities do not look to be inspiring as of now.”

Shares of Camlin Fine Sciences Ltd. shed nearly 7.23% to Rs 209.90 apiece, snapping a four-day rally.

The chemicals company's stock has gained nearly 68% so far this year. The relative strength index on the stock is 79.63, indicating it may be overbought.

All four of the analysts tracking the company have a ‘buy’ recommendation with the consensus price target of analysts indicating a further 7% upside in the company.

On July 8, India Ratings upgraded the long-term issuer rating on Camlin Fine Sciences due to the steady improvement in the operating performance over FY18-FY21.

India’s rupee weakened with its emerging-Asian peers as concern over a virus resurgence around the world sapped demand for risk assets. The central bank will convert shorter-maturity bonds to longer ones and auction Rs 9,700 crore ($1.3 billion) of state government debt.

• USD/INR rose 0.3% to 74.7700, headed for its biggest one-day gain since July 6

• “Risk-off sentiment is prevailing as the third-wave expectations increase, while the U.K. opens completely,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors

  • The number of Covid cases in the U.K. and U.S. have increased significantly, taking the dollar index higher amid risk-aversion sentiment

• India’s benchmark 10-year yield climbed 1bp to 6.23%

Shares of HDFC Life Insurance Company Ltd. shed 2.74% to Rs 678.90 apiece after it reported net income for the April-June quarter below analyst estimates.

Net income in the June quarter slipped to Rs 302.35 crore vs Rs 451.09 crore (down 32.97% YoY) in the corresponding quarter in the previous fiscal. On a sequential basis, net income slipped 4.9% from the Rs. 317.94 crore in the quarter ended March.

Net premium income rose to Rs 7,548.48 crore vs Rs 5,721.84 crore in Q1FY20, up 31.92% YoY. Net premium income declined on a sequential basis by 41.41% from Rs 1,2868.01 crore in the last quarter of the previous fiscal (Q4FY21).

HDFC Life witnessed steep rise in death claims in the June quarter with the management stating that the peak claims in second wave was around 3-4 times of the peak claim volumes in the first wave in Q1FY21.

CEO Vibha Padalkar noted that customer engagement and interest in life insurance policies have risen over the past month as economic activity picks up gradually while cases continue to decline.

Out of the 37 analysts tracking the company, 26 maintained ‘buy’, 9 maintained ‘hold’ and 2 maintained ‘sell’ recommendations on the company. The consensus 12-month price target of analysts tracked by Bloomberg implied a upside of 14.2%.

Indian Bank reported net income for the first quarter that beat the average analyst estimate.

• Net income Rs 1,180 crore vs. estimate Rs 704 crore

• Gross non-performing assets 9.69% vs. 9.85% QoQ

• Provisions Rs 2,610 crore, +49% QoQ

• Interest income Rs 9,620 crore, -4.9% YoY

• Interest expense Rs 5,630 crore, -9.9% YoY

• Other income Rs 1,880 crore, +41% YoY

COMMENTARY AND CONTEXT

• Q1 tax gain Rs 320 crore

• Bank holds 100% provision in 12 accounts where fraud involving Rs 388 crorewas committed

• Estimated liability of Rs 230 crore for Covid interest relief yet to be refunded/adjusted

Shares of the public sector lender have gained nearly 60% in the year. Out of the 10 analysts tracking the bank, 8 maintained ‘buy’ and 2 maintained ‘hold’ recommendations. The consensus 12-month price target of analysts tracked by Bloomberg implied a upside of 26.2%.

Market regulator SEBI is investigating some Adani Group companies with regard to compliance with rules, Pankaj Chaudhary, minister of state for finance, says in a written reply to a lawmaker’s questions.

• The Directorate of Revenue Intelligence is also investigating certain entities belonging to the Adani Group under laws administered by it, according to the minister

• Holding of Foreign Portfolio Investors in six publicly-traded Adani companies is based on day to day trading of shares and thus dynamic, the minister says

Adani group shares decline

• Adani Total Gas extends decline to daily 5% limit, shares set for lowest since March 22

• Adani Power falls as much as 4.9%, most since July 2

• Adani Transmission -3.5%, Adani Enterprises -2.6%, Adani Green Energy -3.2%

• Adani Ports shares extended drop to 3.8%; they however pared some losses to trade 2.2% lower at 2:19 p.m.

Shares of DCM Shriram Ltd. gained as much as 18.4% to a record high of Rs 1,200 apiece ahead of its quarter earnings announcement on Tuesday.

The stock has risen for the seventh straight session today, gaining around 29% during the period.

• Trading volume was more than seven times the 20-day average for this time of day.

• Relative strength index at 83; stock may be overbought

• Total return is 192.3% YTD vs 10.9 for Sensex Index

• Nestle India options volume 3.1x the 20-day average, with 2,157 calls changing hands vs 75 puts

  • Stock up 0.7%, volume 0.9x the 20-day average for this time of day

• BPCL options volume 2.9x the average, with 18,525 calls vs 3,200 puts

  • Stock up 1.8%, volume 1.7x the average

• HDFC Bank options volume 2.3x the average, with 70,840 calls vs 35,250 puts

  • Stock down 3.5%, volume 1.5x the average

• HCL Tech options volume 1.9x the average, with 33,269 calls vs 11,084 puts

  • Stock down 0.7%, volume 1x the average

• Divi's Labs options volume 1.8x the average, with 13,524 calls vs 4,717 puts

  • Stock up 1%, volume 0.9x the average

• Larsen options volume 1.5x the average, with 27,528 calls vs 8,484 puts

  • Stock up 0.1%, volume 0.8x the average

• Nifty 50 options volume 0.5x the average, with 4.12 million calls vs 3.78 million puts; gauge down 1.1%

  • Cost of hedging as measured by the 90/110, one-month skew ranks in the 32nd percentile over the past year

• Nifty Bank index options volume 0.5x the average, with 8.01 million calls vs 7.55 million puts; gauge down 2.2%

  • 90/110, one-month skew in the 69th percentile

• India VIX Index up 8.6%

Indian stock exchange operator BSE Ltd. rose as much as 12% to a record high on expectations of higher volumes amid a steady increase in retail investors.

• Indian exchanges are likely to report strong Q1FY22 operational performance, driven by healthy volume growth across the board, IIFL Securities Ltd. wrote in a note

  • Upgrades FY22-23 profit-after-tax for BSE by 6%-7% given strong volume growth

• 5 buys, 2 holds, 0 sells; avg price target Rs 1,042.80: Bloomberg data

India's stock benchmarks incurred losses amid weak global cues, rise in Covid cases in parts of Asia and OPEC+ deal to inject more oil into the market to power the global economic recovery.

The S&P BSE Sensex shed 1.2% to 52,471.88, and NSE Nifty 50 Index posted losses of similar magnitude to 15,733.65.

The broader markets fared better than their larger peers. The S&P BSE MidCap shed 0.7% while the S&P BSE SmallCap slipped 0.4%. All 19 sectoral indices compiled by the BSE fell, led by the S&P BSE BankEx, down 2.2%.

The market breadth was skewed in favour of the bulls. About 1,710 stocks advanced, 1,492 declined and 168 remained unchanged on the BSE.

Europe Opens Lower

European stock benchmarks declined in trade as investors digest the OPEC+ deal, rising Covid cases, corporate earnings as well the massive flooding in Germany and Belgium. The FTSE 100 Index shed 1.32% to 6915.31, while the DAX index and the CAC 40 index posted losses of similar magnitude.

Shares of Dishman Carbogen Amcis Ltd. gained the most in nearly two months after investor Mukul Agrawal increased his stake in the company. Shares of the API and chemicals manufacturing & outsourcing company gained 6.44% to Rs 227.45 apiece after the change in shareholding.

Exchange filings showed that Mukul Agrawal increased his stake to 2.55% (40,00,000 shares) from 1.63% (25,59,246 shares) that he had on March 31, 2021 . Investor Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala both hold 1.59% of stake each in the company.

Amid the interest from veteran investors, domestic mutual funds have reduced their stake in Dishman Carbogen Amcis to 6.62% from 8.81%. Out of the two analysts tracking the company, one maintained ‘buy’ and another maintained ‘sell’ recommendation. The consensus price target of analysts tracked by Bloomberg implied an upside of 15.3%

Reliance Retail Ventures Ltd. and Just Dial on Friday announced that the Mukesh Ambani-led company has agreed to buy a majority 66.95% stake in the local search and listings firm for a sum of Rs 5,719 crore.

Reliance Retail Ventures Ltd. will acquire 25.35% via preferential allotment of 2.11 crore shares at Rs 1,022.25 apiece, totaling Rs 2,164.9 crore, according to a company filing with stock exchanges. Reliance Retail will also offer to purchase up to 26% of the public shareholding as mandated by takeover regulations. It has also agreed to purchase in a secondary transaction 1.31 crore shares or 15.6% stake from the promoters at Rs 1,020 apiece.

Brokerage firm Macquarie said post the closure of the deal, Just Dial will have around Rs 3,700 crore net cash, with Rs 1,500 crore already on its balance sheet. “Just Dial is likely to invest the cash significantly in enhancing its search & discovery and transaction capabilities in both B2C classified listings (JD app) and B2B classified listing (newly launched JD Mart),” it said in a note.

It added that the cash can also be used to invest aggressively in JD Xperts (on-demand local convenience services) and JD Omni (cloud-hosted solution for digitising businesses). ”It needs to be seen if Just Dial would increase its aggression in acquiring customers given that its horizontal platform approach (JD app) has been facing stiff competition from full-stack, vertical-focussed consumer internet companies in the last few years.”

Reliance, on the other hand, could benefit from Just Dial’s rich database of listings and unique visitors. “The transaction ties in with Reliance’s ambition to grow its retail business threefold in the next 3-5 years. Just Dial could help add B2B commerce, in addition to JioMart’s customer-facing growth ambitions,” Macquarie said.

Reacting to the deal, Jefferies said it is awaiting more details on how the exchange or integration of data between the two firms will happen. “While the stake in Just Dial is touted as a step in Reliance Retail's new commerce initiative, we await more details, given both have B2B offerings.” Jefferies also noted that there could be progress on the WhatsApp partnership, given Reliance’s deals with Facebook.

On Friday, Just Dial also posted its earnings for the first quarter of the fiscal year as well. It reported a loss of 3.52 crore, as compared to a profit of Rs 33.6 crore in the previous quarter.

Revenue was also down 6% quarter-on-quarter to Rs 165.4 crore. The company said the unpredictable second wave restrictions impacted collections during Q1FY22, which stood at Rs 142.6 crore, down 28.9% sequentially. “Traffic and monetisation should recover hereon with COVID second wave impact abating,” it said,

Shares of Just Dial fell as much as 5.25% to Rs 1016.35, the most in over a month.

Shares of rating agency companies gained anywhere between 5% and 13% in trade.

For CRISIL, the trading volume was five times the average for this time of the day with the shares advancing the most in 15 months. The rise comes a day ahead of CRISIL’s quarterly numbers for the June quarter.

The relative strength index on the stock was above 70, indicating that the company may be overbought.

Out of the six analysts tracking the company, four maintained ‘buy’ and two maintained ‘sell’ recommendations. The consensus price target of analysts tracked by Bloomberg implies a downside of 22%

Shares of ICRA gained nearly 13% to Rs 4,005 apiece, highest level in over 48 months ahead of its ex-dividend date on Friday while shares of CARE Ratings gained over 5.6% to Rs. 746.60 a piece. For the year so far, ICRA added nearly 35% while CARE Ratings gained over 40%, respectively.

Shares of HDFC Asset Management Co Ltd. fell the most in three months, snapping a five-day winning streak, even as it reported a net profit of Rs 350 crore, in line with street estimates.

Operating revenues also met forecast, up 23% to Rs 510 crore. The company’s higher employee expenses (ESOPs) and higher other income offset each other.

Jefferies maintained its ‘buy’ rating on the asset management company citing healthy SIP flows in the first quarter of the fiscal year at around Rs 980 crore despite the disruptions due to Covid-19. It said that HDFC AMC’s improved digital capabilities helped and that it expects a 16% CAGR in net profit over FY22-24. It set a target price of Rs 3,500 on the stock.

Jefferies noted that though HDFC AMC has been ceding market share, it could recoup gains through style diversification and new launches. “Management reiterated its focus on style diversification and indicated a good response to its recent new fund offerings. More NFOs (multi cap, sectoral, thematic, international) are in the pipeline and should further aid flows and help in diversification too. These measures coupled with strong distribution heft and brand pull should help in improving its market share gradually,” it said in its note.

Shares fell as much as 4% to Rs 2,971, the most since April 19, 2021. Of the 23 analysts tracking the stock, 14 have a ‘buy’ rating, seven suggest a ‘hold’ and two recommend a ‘sell’, according to Bloomberg data. The average of 12-month consensus price targets implies an upside of 5.8%.

Shares of Clean Science and Technology Ltd. surged on debut after investors piled into the initial public offering of the global chemical manufacturing and exporting company.

The stock began trading at Rs 1,784.40 apiece on the Bombay Stock Exchange, a premium of 98.2% to its issue price of Rs 900 apiece. The stock pared some of its gains thereafter.

Clean Science IPO was subscribed 95.54 times making it the seventh most subscribed IPO in India in 2021.

Shares of Angel Broking gained over 11% and hit a new all-time high of Rs. 1475.00 apiece thanks to robust quarterly earnings.

Shares of Angel Broking gained over 20% in intraday trade in Friday’s session after it reported 19% increase in consolidated net profit to Rs 121.37 crore in April-June Quarter. The stockbroking firm delivered a 94% jump in operating revenue driven by sharp uptick in client base.

For the year, Shares of Angel Broking have added over 300%. The stock has a ‘buy’ rating from 2 analysts tracking it. The consensus price target of analysts tracked by Bloomberg implied a downside of 29.2%

Shares of GR Infraprojects Ltd. surged on debut after investors piled into the initial public offering of the roads and highway construction company.

The stock began trading at Rs 1,700 apiece on the National Stock Exchange, a premium of 103.1% to its issue price of Rs 837 apiece. It touched an intra-day high of Rs 1,725.25 thereafter.

The IPO was subscribed 105.45 times, becoming the sixth most subscribed offer so far in 2021.

Shares of Rossari Biotech Ltd. gained as much as 7% to Rs 1,249 apiece after it informed the exchanges of an agreement to buy 100% of total equity share capital on a fully diluted basis of Tristar Intermediates Private Ltd. in multiple tranches from all the existing shareholders of Tristar.

Rossari Biotech has also executed a share purchase agreement with Fairplum Private Ltd. for the purchase of 1,50,000 equity shares amounting to 30% of the total equity share capital of Rossari Personal Care Products Private Ltd. and a share purchase agreement with VSTAR Family Trust for the purchase of 50,000 equity shares amounting to 10% of the total equity share capital.

Shares of the chemical manufacturing company which got listed in the bourses on June 24, 2020, has gained 69.58% since. Out of the three analysts tracking the company, two maintained ‘buy’ while one maintained ‘sell. The consensus price target of analysts tracked by Bloomberg implied an upside of 2.4%

Shares of HDFC Bank Ltd. fell the most in nearly three months after the lender missed Q1 profit estimates and reported a drop in asset quality.

The bank, which published its first quarter results on Saturday, reported a 15 basis points-rise in gross non-performing assets sequentially to 1.47% of gross advances. Net NPA ratio for the first quarter was at 0.48%, as compared with 0.4% on March 31, 2021.

The bank said the disruptions from the Covid-19 pandemic affected retail loan originations, sale of third party products and card spends, which affected business volumes and revenue.

Foreign brokerages such as JPMorgan and CLSA maintained their positive stance on the bank, but cut earnings estimates for FY22 by 2.7% and 5% respectively. India-based brokerages Nirmal Bang, Prabhudas Lilladher and Motilal Oswal also reaffirmed their bullish ratings but largely maintained their estimates.

Shares fell as much as 3.18%, the most since April 30, 2021. Of the 50 analysts tracking the stock, 45 have a ‘buy’ rating, four suggest a ‘hold’ and one recommend a ‘sell’, according to Bloomberg data. The average of 12-month consensus price targets implies an upside of 15%.

Indian equity benchmarks fell, in line with Asian peers, as investors assessed a weakish start to the quarterly earnings amid concerns about the impact of Covid-19 outbreaks and elevated inflation on economic prospects.

The S&P BSE Sensex lost as much as 1.2% to 52,506.40 while the NSE nifty 50 index slipped by a similar magnitude to 15,735.95. Both the indices are down for the second straight session.

HDFC Bank Ltd. contributed the most to the index decline and had the largest move, decreasing 2.5%. In early trading, 35 of 50 shares fell, while 15 rose.

The broader markets outperformed their larger peers. The S&P BSE MidCap declined 0.4% while the S&P BSE SmallCap advanced 0.2%. Only 6 of the 19 sectoral indices climbed, led by the S&P BSE Utilities index, up 0.45%. while the S&P BSE Finance shed 1.2%.

The market breadth was skewed neither in favour of bulls nor the bears. About 1,395 stocks advanced, 1,323 declined and 112 remained unchanged on the BSE.

The rupee could be supported by easing oil prices after the currency posted two successive weeks of gains. Bond traders will closely watch the central bank’s conversion of shorter bonds to longer maturities and the sale of Rs 9,700 crore ($1.3 billion) of state government debt

• USD/INR little changed at 74.5612 on Friday

  • Implied opening from forwards suggests spot may start trading around 74.64

• 10-year yields rose 2bps to 6.21% on Friday while shorter yields dropped as the federal government kept its borrowing plan unchanged

• India will convert Rs 10,000 crore ($1.3b) of bonds into longer-term debt via switch auction

  • Government will convert five bonds maturing in 2022, 2023 and 2024 into securities due 2033 and 2035

Asian stocks and U.S. futures fell Monday on concerns about the impact of Covid-19 outbreaks and elevated inflation on economic prospects.

Shares fell across the region, with Japan and Hong Kong underperforming. China opened with more modest losses. S&P 500 and Nasdaq 100 futures dropped after the S&P 500 fell for the first week in four. The rally in Treasuries continued, sending 10-year yields further below 1.3%.

India's SGX Nifty 50 Index futures for July delivery slipped 1.4% to 15,710.50, while MSCI Asia Pacific Index fell by a similar magnitude. The NSE Nifty 50 Index little changed Friday at 15,923.40.

Oil slipped after OPEC+ agreed to boost production into 2022, resolving an internal dispute that had shaken the alliance. The yen advanced and the dollar was steady amid cautious sentiment.

Elsewhere, the pound was generally steady with the U.K. government due to lift remaining virus curbs in England. At the same time, Prime Minister Boris Johnson agreed to self isolate after being exposed to Covid-19.

Back home, HDFC Bank, Just Dial, L&T Finance may react as the companies reported quarterly results after the market closed Friday. HCL Tech., HDFC Life, ACC, Nippon Life, Indian Bank are among the companies scheduled to report earnings Monday. HDFC Life among companies holding their annual shareholders’ meeting.

GR Infraprojects, Clean Science to debut after IPO. Foreign investors boughtnet Rs 383 crore of stocks on Thursday, according to NSDL website.